Indirect Costs and Cost Allocation Panel of State Representatives
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1 AEFFA 2013 Indirect Costs and Cost Allocation Panel of State Representatives Robin Burkhart Missouri Department of Elementary and Secondary Education JoLynn Berge Washington Superintendent of Public Instruction Peggy O Guin California Department of Education
2 AEFFA 2013 Conference Indirect Cost Presentation by Robin Burkhart
3 Organizational Chart
4 Direct Costs Costs that can be specifically identified with a particular cost objective. Program Salaries Space Costs for Program Activities Travel Equipment
5 Indirect Costs Costs incurred for common or joint purposes, benefiting more than one cost objective, and are not readily assignable to a specific cost objective. Administrative Salaries including Accounting/Budget/Human Resources/Information Technology Supplies Communication
6 Fixed with Carry Forward Computation Restricted Amount Unrestricted Amount Submit Indirect Cost proposal yearly
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11 Example of Individual Organization Information
12 Example of Program Information
13 Indirect Personnel Cost Breakdown
14 Other Items included in Indirect Cost Proposal Information Technology Separate Agency/Organization Able to track expenditures due to unique Organization number Termination Leave Federal grant salary employees termination leave is paid from Indirect ARRA American Recovery Reinvestment Act Did not have Administrative expenses
15 Other Items included in Indirect Cost Proposal Garnering Indirect Costs Missouri s financial system calculates indirect cost each month to be garnered on allowed expenditures Exception Contracts over $25,000 Manually figure the indirect cost calculation on contract expenditures as financial system is not sophisticated enough to determine if we have expended $25,000
16 Portion of Indirect Cost Agreement Portion of Indirect Cost Agreement
17 Robin Burkhart Contact Information Missouri Department of Elementary & Secondary Education PO Box 480 Jefferson City MO Phone: (573)
18 AEFFA 2013 Conference Indirect Cost Presentation by JoLynn Berge
19 Indirect Policy for School Districts School districts calculate their federal rates each year. OSPI must submit the school district methodology to U.S. Department of Education every 5 years for approval. Districts are allowed to charge a 7% indirect rate for state grants. State and federal program staff must let districts take the authorized indirect rate. K-12 Financial Resources & Governmental Relations Office of Superintendent of Public Instruction 19
20 Indirect Policy for ESDs ESDs are Educational Service Districts (ESAs in other states). OSPI annual approved the rate agreement for ESDs. WA State ESDs average their rate calculations to come up with a rate they all charge. This has been federally approved. ESDs may charge their own unrestricted rate for those federal grants that allow that rate. ESDs may charge 11% to all state grants. K-12 Financial Resources & Governmental Relations Office of Superintendent of Public Instruction 20
21 Indirect Policy for other entities OSPI passed a policy that limits all other entities to a 10% indirect rate. Higher ed indirect rates are 30-50%. Other state agencies commonly only have an unrestricted rate. K-12 Financial Resources & Governmental Relations Office of Superintendent of Public Instruction 21
22 K-12 Financial Resources & Governmental Relations Office of Superintendent of Public Instruction 22
23 K-12 Financial Resources & Governmental Relations Office of Superintendent of Public Instruction 23
24 K-12 Financial Resources & Governmental Relations Office of Superintendent of Public Instruction 24
25 School Lunch USDA indirect guidance can be found at: y-memos/2011/sp _os.pdf For school districts, there are no indirects charged to school lunch programs, it s a per meal reimbursement, however, the school district may charge their unrestricted rate when calculating total expenditures. K-12 Financial Resources & Governmental Relations Office of Superintendent of Public Instruction 25
26 School Lunch Rates must be the federally approved rate, there should not be different rates for USDA programs. Unrestricted rates are allowed to be charged by the SEA to the grant. K-12 Financial Resources & Governmental Relations Office of Superintendent of Public Instruction 26
27 Other Hot Topics Moved away from indirect costs as a line item in contracts. Ted Mueller RTTT grant issue Monitoring finding stating that no indirects could be charged to goods and services contracts (vendor transactions). OSPI excludes state provisos for training that distort state expenditures. K-12 Financial Resources & Governmental Relations Office of Superintendent of Public Instruction 27
28 Contact Info JoLynn Berge, Chief Financial Officer Washington State Office of Superintendent of Public Instruction Phone: K-12 Financial Resources & Governmental Relations Office of Superintendent of Public Instruction 28
29 AEFFA 2013 Conference Indirect Costs Peggy O Guin
30 A Real-World Indirect Cost Issue Contact Information for LEAs in California California is similar to Missouri and Washington in many respects We approve rates for LEAs annually We use a fixed with carry-forward rate Each LEA s rate is fixed in advance based on an estimate of indirect costs LEA will incur Carry-forward adjustment allows after-thefact settle-up for under- or over-recovery when LEA s actuals differ from estimates
31 A Real-World Indirect Cost Issue Contact Information for LEAs in California Generally, our indirect cost methodology and procedures are efficient and effective (and even elegant) But we are dealing with one indirect cost issue at present on which we would love having the benefit of other states experiences
32 A Real-World Indirect Cost Issue Contact Information for LEAs in California First, some fingertip facts for perspective: California is big: If it were a nation, its $1.9 trillion economy would be world s 12th largest Just behind France, Italy, and Brazil But bigger doesn t make us better Our numbers are bigger, but our problems are the same We grapple with tough educational policy issues like everyone else
33 A Real-World Indirect Cost Issue Contact Information for LEAs in California Some fingertip facts, continued: We have 1,101 LEAs (1,043 school districts plus 58 county offices of education) We have 10,300 public schools Including 1,000 charter schools We have 6.2 million K-12 students About the same as the entire populations of Indiana, or Missouri, or Washington
34 A Real-World Indirect Cost Issue Contact Information for LEAs in California Some fingertip facts, continued: Our largest district has about 700,000 students Los Angeles Unified Close to the entire populations of Wyoming or Vermont or Alaska One of our smallest districts has 12 students Bogus Elementary (honest I didn t make this up) Our total expense of education is about $61 billion
35 A Real-World Indirect Cost Issue Contact Information for LEAs in California Some fingertip facts, continued: We are highly decentralized with a strong emphasis on local control LEAs choose their own accounting systems But we do have a standardized account code structure This allows us to automate many required reports and compliance calculations Indirect cost rate calculations are automated
36 A Real-World Indirect Cost Issue The issue: Contact Information for LEAs in California Historically, we have approved only restricted rates for LEAs Restricted rates do not include certain costs such as Maintenance and Operations (M&O) But some federal grant programs allow these costs the School Lunch program for example At present, California lacks an approved methodology for LEAs to charge M&O costs to grant programs other than directly
37 A Real-World Indirect Cost Issue Contact Information for LEAs in California Solutions we ve contemplated: Approve unrestricted indirect cost rates, which include M&O Pros: Fast fix we already know how unrestricted rates work; USDE approval likely to be quick Cons: We think eligible costs is not a meaningful basis for allocating M&O costs; LEA data we tested produced wacky results
38 A Real-World Indirect Cost Issue Contact Information for LEAs in California Solutions we ve contemplated, continued: Have LEAs direct-charge M&O costs Pros: Fast fix LEAs already know the rules (time accounting for salaries, separate meters for utilities); further USDE approval not required Cons: Time accounting is burdensome and not always practical; not all cafeteria kitchens have separate meters
39 A Real-World Indirect Cost Issue Contact Information for LEAs in California Solutions we ve contemplated, continued: Establish an allocation methodology for M&O costs, separate from the indirect cost rate Pros: Could choose a meaningful allocation basis, such as square footage; USDE likely to approve a well-thought-out methodology Cons: The devil is in the details! See following
40 A Real-World Indirect Cost Issue Contact Information for LEAs in California Some examples of the details: Methodology needs to work for all LEAs, not just some Methodology needs to work for all programs, not just one Methodology needs to conform to consistent cost treatment principle Square footage is a meaningful allocation basis for M&O costs in theory, but methodology needs to specify rules for unique situations such as shared space
41 A Real-World Indirect Cost Issue Contact Information for LEAs in California There are dozens more details We continue to explore alternatives and we are inching closer to resolution But meanwhile we would love to use AEFFA as an opportunity to hear other states solutions and experiences Thank you in advance for your questions, suggestions, & ideas - let the discussions begin!
42 Contact Information Peggy O Guin Administrator School Fiscal Services Division California Department of Education Phone: poguin@cde.ca.gov
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