Office of School Finance - WVDE

Indirect Costs - Defined

Costs not readily identifiable with a specific federal project

Costs are incurred for the joint benefit of more than one project

Direct costs - defined

Costs that are readily identifiable to a specific project

Costs are charged directly to the project

Cannot be considered indirect if they are charged directly

Unallowed costs - defined Costs that are not allowed to be

charged to a federal project OMB Circular A-87 provides a

complete listing of unallowed costs Examples include:

Marketing Losses from uncollectible accounts

Indirect Cost Plan - defined A simplified means to determine the

fair share of indirect costs that each federal project must bear

Obtaining an indirect cost rate A rate must be determined each year Plan developed by WVDE, approved by USDE The rate is based on actual expenditures two

years earlier (FY 11 rate based on FY 09 actual)

Plan includes an adjustment between estimated and actual indirect costs two years later

Simplified, the indirect cost rate =indirect costs

unallowed costs + direct costs

You receive restricted and unrestricted indirect cost rates

Process is web-based CSBO is the contact person for

determining the rates

Two rates – which do I use? Restricted rate – use for federal

projects that contain the “supplement but not supplant” provision (that is MOST projects)

Unrestricted rate – use for all other federal projects (example: child nutrition)

How do I use the rate?

For budgeting purposes: Total amount of federal award

$200,000 Approved indirect cost rate

2.23% Budgeted direct costs

$195,637($200,000 / (1.0 + 0.0223))

Budgeted indirect costs $ 4,363

($195,637 * 0.0223)

For actual expenditures: Actual direct costs

$185,440 Approved indirect cost rate

2.23% Indirect costs charged to the project

$4,135 ($185,440 x 0.0223)

Be careful when you apply the rate You may not apply the indirect cost rate

to all actual expenditures: You cannot apply the rate to capital outlay

Equipment, buildings, land, building improvements which exceed $5,000

Some grants have a limit on total indirect cost

Title III – 2% of the grant Carl Perkins – 5% of the grant

Be careful about the time period The approved rate for FY11 is to be

used for ACTUAL expenditures from July 1, 2010 through June 30, 2011

Actual expenditures do not include outstanding encumbrances at year end

How does the federal project get charged? Calculate the actual indirect costs

based on actual expenditures at least quarterly

The CSBO will make a journal entry to charge the indirect cost amount to each federal project as an expenditure

Which projects are charged indirect costs? All Federal projects are charged the

appropriate indirect cost rate, including ARRA and SFSF

State projects are not subject to indirect costs

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