Administrativeand Indirect Costs
Define administrative costs.Describethe difference between direct and indirect costs.Describewhat an indirect cost rate agreement is and where you go to apply for one.Describethe relationship between administrative costs, program costs, direct costs and indirect costs.Trackand report administrative and indirect costs
Whythis is important?
Failure to track and report costs accurately can lead to disallowed costs.•Common Problems:–Distinguishing between Administrative and Program Costs–Distinguishing between Administrative and Indirect Costs–Inappropriate reporting of costs may lead to exceeding limitations
TwoBasic Cost Categories
Administration–Function based–Not related to direct program services–Can be both direct and indirectProgram Activities–All grant costs that relate to direct provision of services to participants and employers
Process of assigning costs to benefitting cost objectivesPlacingcosts into some category such as:–Administration, Program, Programincome, Match or leveraged resources–Or some other category as prescribed bystatute.
AdministrativeCosts - Definition
20CFR 667.220 – applies to all grants and programs receiving WIAfunds•Definition also applies to othergrants•Allocable portion of necessary and reasonable costs that are not related to direct provision of workforce services
Accounting, budgeting, financial and cash managementProcurementand purchasingPersonneland property managementPayroll, audit and general legal servicesOversightand monitoring of administrative activitiesDevelopinginformation systems and procedures related to administrative functions
Administrative Cost Limitations
Specific to each grantMeasuredat conclusion of grant periodTracked, accounted for & reported quarterlyIncludesdirect and indirect administrative costs
Oversight and monitoringGoodsand ServicesTravelInformationSystems*Itdepends on the nature of function or activity*Itis the Job Function NOT the Job Title That Dictates Cost Classification
Administrative CostsThe maximum is 5% of the total amount of administrative costs that is allowable, however a waiver may be issued by the RI Department of Education for amounts up to 10%.A copy of the administrative costs waiver must be attached to each grant submission.All administrative costs proposed must be described in the administrative costs description. (State colleges are restricted to 8%).
Direct Cost or Indirect Cost?
DirectCosts–Cost identified with a specific grantIndirectCosts–Cost shared among multiple programs–Cost shared among multiple categoriesDirectand Indirect Costs Can Be Either Administrative or Program
What are indirect costs? (It’s easier if we identify direct costs first.) Directcosts…
Thosecosts that can be readily identified with a particular cost objective. Examples: (program specific)–Salaries–programstaff–Space – sq. ft. occupied by direct staff–Supplies – used by direct staff–Communications – used by direct staff
Whatare indirect costs?
Thosecosts which are not readily identifiable with a particular cost objective.Examples:–Salaries – Executive Director, Accountant, etc.–Space – sq. ft. occupied by indirect staff–Supplies – used by indirect staff–Communications – used by indirect staff
A copy of the signed rate approval, (a fully executed, negotiated agreement), must be attached to the grant application if indirect costs are included in the budget.Cities and towns must have an approved indirect rate from the Rhode Island Department of Education (RIDE).NOTE: Federal Regulations limit the amount of indirect costs that an agency can take on any purchased service (53000 series) to the first $25,000 of the contract.Indirect costs are NOT allowable on state funds
What’san indirect cost rate agreement?
Agreement between a recipient andtheir cognizant federalagency that specifies the treatment of indirect costs.Ratiobetween the total indirect expenses and some direct cost base.Basedon indirect cost proposal and supporting documentation
Applyingfor an Indirect Cost Rate
Mustseek approval within 90 days of grant approvalWhere?CognizantAgency (determined based on Fed. Agency providing largest amount of direct Fed. Funds for non-profits; gov’t orgs assigned by OMB)
Administrative, Program, Direct and Indirect Costs
Complexand inter-connected–Not all direct costs are program–Not all administrative costs are indirect–Not all indirect costs are administrativeWIA Admin & Program Costs
GranteeIndirect Costs Example
[Approved Indirect Cost Rate of50%](hypothetical)Organization-wideDirect Salaries & Wages are$300,000•Total Indirect Costs to be spread to all fund sources are$150,000AEGrant is$550,000AE GrantDirect Salary & Wages are$150,000IndirectCosts Charged toGrantare$75,000
AdministrativeCosts vs. Indirect Costs(Example contd.)
AE Grantis $550,000AdministrativeLimit is 10%GrantAdministrative Costs are limited to $55,000 (10% x $550,000)•Indirect costs chargeable to grant are $75,000
AllAdministrative Costs–Both Direct and IndirectPLUSAllProgram Costs–Both Direct and Indirect