Text Version: Cost Principles Webinar for DOE Grant Recipients
Following is a text transcript of the April 2011 Cost Principles Webinar for DOE Grant Recipients.
Title Slide: Cost Principles Webinar for DOE Grant Recipients
U.S. Department of Energy
Office of Energy Efficiency and Renewable Energy
Golden Field Office
Narration: The following webinar can be used as a reference tool for recipients of Federal grants to better understand cost principles and how they are incorporated into the award.
Slide 1: Cognizance & Review Thresholds
Cognizant Federal agency is defined by 48 CFR 2.101 as the Federal agency that, on behalf of all Federal agencies, is responsible for establishing final indirect cost rates and forward pricing rates, if applicable, and administering cost accounting standards for all contracts in a business unit.
DOE Golden Field Office would be Cognizant for:
- For-Profit or Non-Profit Recipients who receive the preponderance of their Federal funding from DOE, only if they have not received prior Federal Funds as a Prime Recipient from another Government source.
DOE is not Cognizant for State/Local Government entities, Tribal, or Educational institutions.
Narration: The Cognizant Federal agency is in charge of administering cost accounting standards for the award. Furthermore, it is important to note that DOE is the cognizant agency for any non-university recipient receiving their first award and those now receiving the preponderance of funding from DOE.
Slide 2: Federal Cost Principles
The Office of Management and Budget (OMB) establishes federal grant management policies and cost principles through OMB circulars and common rules. These policies and cost principles are then incorporated into each relevant agency's applicable Federal regulations in the Code of Federal Regulations (CFR).
Federal cost principles are intended to establish a uniform approach for determining costs and promoting effective program delivery, efficiency, and better relationships between grant recipients, subrecipients, and the Federal government.
The principles are promulgated to determine allowable costs, enforce compliance with Federal grant requirements, and ensure that the Federal Government bear its fair share of costs except where restricted or otherwise prohibited by law.
Narration: Policies and cost principles established by the Office of Management and Budget are incorporated into each relevant agency's applicable Federal regulations. More specifically, the Department of Energy has taken the administrative requirements of OMB Circulars A-102 (State and Local Governments) and A-110 (Educational Institutions, Non-Profit Organizations, Hospitals, and Commercial Organizations) and implemented them in 10 Code of Federal Regulations (CFR) 600. This information is important for recipients in determining a streamlined policy for establishing costs, and overall compliance with the Special Terms and Conditions of the award.
Slide 3: Cost Principles: Organization Types
2 CFR Parts 215 and 220: Cost Principles for Educational Institutions (OMB Circular A-21)
2 CFR Part 225: Cost Principles for State and Local Governments (OMB Circular A-87)
2 CFR Part 230: Cost Principles for Non-Profit Organizations (OMB Circular A-122)
48 CFR Chapter 1, Part 31: Contract Cost Principles and Procedures
Narration: Here is a breakdown of the cost principles by organizations. Federal cost principles are applied by all Federal agencies in determining costs incurred by state governmental units under performance of a federal award. These principles are likewise applicable to all subawards and affiliated subrecipient organizations. All four cost principles contain similar allocability, reasonableness, consistency, and documentation. Each OMB circular contains allowability determinations for Federal cost items, most of which remain uniform across all three circulars. Finally, if an organization receives a subaward from any recipient type then the same cost principles requirements apply.
Slide 4: Indirect Rate Proposals (IRP) & Incurred Cost Proposals (ICP)
IRP = Actual costs + Projections
Sample IRP form: https://www.eere-pmc.energy.gov/Forms.aspx
ICP = Fiscal Year (FY) end incurred (actual) costs
For the entire organization, not just DOE award or Federal awards. The ICP submission should tie to the Recipient's General Ledger.
Narration: Indirect rate proposals are determined in order to obtain an estimated rate for projecting budgeted costs. A sample indirect rate proposal is provided for further detail at the following website. Incurred cost proposals are only requested when the DOE is cognizant. Their purpose is to obtain a final rate agreement for fiscal year end, and award closeout. Recipients are required to submit per specific provisions found in the 10 CFR 600, which can be found in the Special Terms and Conditions of the award.
Slide 5: Cost Principles: Unallowable Costs
Recipients must exclude unallowable costs from the Fringe/Indirect Base when submitting an IRP to DOE.
Cost Principles defined by organization-type in the CFR (OMB/FAR) describe what costs are allowable or unallowable for reimbursement.
Costs must be: reasonable; allocable; given consistent treatment in accordance with generally accepted accounting principles (GAAP); and must conform to any award limitations or exclusions.
Narration: It is the responsibility of the award recipient to adhere to the applicable Cost Principles for their organization and determine which costs are allowable or unallowable for reimbursement. Costs must be in accordance with the generally accepted accounting principles, or GAAP.
Slide 6: Generally Unallowable Costs
- Alcoholic beverages
- Meals in your home town/not traveling, including working lunches
- Unauthorized airfare upgrades
- Auto expenses, when already being reimbursed for mileage
- Car washes
- Most expenses for which receipts are not provided
- Pre-award costs not previously approved in writing by DOE Contracting Officer
- Cost of fines paid
- Cost overruns incurred on other Federal awards
- Contributions or donations, including cash, property, and services
- Goods or services above market prices
- Fee or profit for award recipients
- Direct Expenses not related to the Federal project
- Expenses not ordinary and necessary for the performance of the Federal award
Narration: Here is a list of generally unallowable costs. Please note that fees or profit and any direct expenses not related or necessary to the Federal project are considered unallowable costs.
Slide 7: Generally Unallowable Business Costs
- Overtime that should be compensated as regular time
- Advertising and public relations costs not related to the performance of the Federal award
- Bad debt, and related collection and legal costs
- Cost incurred for an organized fund raising activity
- Contributions or donations, including cash, property, and services
- Interest on borrowings
- Merger & Acquisition costs
- Lobbying expenses
- Certain patent expenses not required by the Federal award
Narration: In addition, here is a list of generally unallowable business costs. Please note that interest on borrowings and merger and acquisition costs are considered unallowable costs.
Slide 8: Cost Principles: Travel and Per Diem
Federal Travel Regulations: Statutory requirements and Executive branch policies for traveling at government expense:
GSA Per Diem Rates by Locale:
Narration: In order to ensure that recipients understand what travel costs are considered reasonable and allowable, each recipient is responsible to review the regulations applicable for your organization if travel costs are included in your DOE project budget. When using government- approved rates, please provide the DOE with a copy of the approved rate you are utilizing.
Slide 9: Frequently Asked Questions
Q: How should recipients invoice DOE for fringe and indirect costs as their rates change over the life of the project?
A: Recipients should invoice indirect costs (including fringe) at the actual costs being incurred, truing up their billing as their project progresses. This will alleviate the project being over or under billed at the end of the period of performance. It is the recipients responsibility to inform the Government if they are running significantly under or over the provisionally approved rates. After the recipient submits an incurred cost proposal, the proposal is audited, and the final (annual) rate agreement is issued, the associated fiscal year will be closed.
Note: Check the Terms and Conditions for specific indirect ceilings.
Narration: Here are a few frequently asked questions. The first question addresses how recipients should invoice DOE for fringe and indirect costs as their rates change over the life of the project. This is accomplished by invoicing at the actual costs being incurred and truing up their billing as the project advances. Please note that it is the recipient's responsibility to inform the government if any significant changes occur to the approved rates, and to check the Terms and Conditions for specific indirect ceilings.
Slide 10: Frequently Asked Questions
Q: When are recipients' incurred cost proposals due to the cognizant agency?
A: Incurred cost proposals are due to the cognizant agency within 180 days after the recipient's fiscal year end.
Narration: The second question answers when recipient's incurred cost proposals are due. Remember that incurred cost proposals are defined as fiscal year end incurred actual costs. These proposals are due within 180 days after the recipient's fiscal year end to the cognizant agency.
Slide 11: Frequently Asked Questions
Q: What is the preferred format or method for submitting the required annual incurred cost proposals to DOE?
A: The DCAA ICE Model available at http://www.dcaa.mil/ is the ideal format for incurred cost proposals. While not a requirement, it meets the needs for reconciliation and certification. See Information for Contractors, Chapter 6, available at http://www.dcaa.mil/ for detailed information.
Narration: The last question answers what is the preferred method for an incurred cost proposal submission. The preferred method is the Defense Contract Audit Agency (or DCAA) Incurred Cost Electronically, or ICE Model, which can be found at the following website.
Slide 12: Resources
DOE Guide to Financial Assistance
Narration: Please refer to the following websites for more detailed guidance, or contact your DOE award administrator or project officer for further questions about cost principles.