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AN INTRODUCTION TO 2 CFR 220 OMB CIRCULAR A21

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A-21 Cost Principles for Educational Institutions has been around a long time ... 'research and instruction inextricably intertwined, especially at the graduate level' ... – PowerPoint PPT presentation

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Title: AN INTRODUCTION TO 2 CFR 220 OMB CIRCULAR A21


1
AN INTRODUCTION TO 2 CFR 220 (OMB CIRCULAR A-21
)
  • OGCA Research Administration Education Program,
    2009

2
BACKGROUND
  • A-21 Cost Principles for Educational Institutions
    has been around a long time
  • 1947 ONR Blue Book
  • 1958 BOB reissued as A-21
  • 1973 Transferred from BOB to OMB
  • 1973 Transferred from OMB to GSA
  • 1979 Transferred from GSA to OMB
  • More than 20 revisions since that date
  • 2006- Codified in the Code of Federal Regulations
    (CFR) became 2 CFR 220

3
A-21 ISSUED AS PRINCIPLES
  • Marked difference between the earlier documents
    and current versions
  • Supposed to be principles
  • research and instruction inextricably
    intertwined, especially at the graduate level
  • but is actually a curious mixture of principles
    and processes
  • Once codified, the principles and processes
    became regulation.

4
APPLICABILITY
  • To assistance awards
  • Grants and cooperative agreements
  • Via authority of OMB to issue instructions to the
    agencies
  • To procurement awards
  • Contracts
  • Via incorporation as Part 31.3 in the
  • Federal Acquisition Regulations
  • Not to Other Transactions

5
GRANT
  • The appropriate agreement to be used whenever
  • The principal purpose is the transfer of money,
    property, services or anything of value to the
    recipient in order to accomplish a public purpose
  • No substantial involvement anticipated between
    the government and the recipient

6
COOPERATIVE AGREEMENT
  • The principal purpose is the transfer of money,
    property, services or anything of value to the
    recipient in order to accomplish a public purpose
  • Substantial involvement anticipated between the
    government and the recipient

7
CONTRACT
  • The appropriate agreement to be used whenever
  • The principal purpose is to acquire services for
    the direct benefit of the government
  • Substantial involvement is anticipated between
    the government and the recipient

8
PURPOSE AND EFFECT OF OMB CIRCULARS
  • Purpose
  • Instruction to federal agencies
  • Agencies required to implement
  • Not directly applicable to recipients only
    applicable through agency implementation
  • Effect
  • Provide guidance
  • Maximum requirements for government
  • Minimum standards for institutions

9
WHICH CIRCULARS APPLY TO WHICH ORGANIZATIONS?
10
2 CRF 220 OVERVIEW
  • Establishes principles for determining costs
    applicable to federal grants, contracts, and
    other sponsored agreements with educational
    institutions
  • Defines often-used terms
  • Defines methods of FA cost calculation
  • Defines allowable and unallowable costs (the
    J-section)
  • Includes cost accounting standards
  • Examples of major project for
    clerical/administration charging

11
2 CFR 220 SECTIONS
  • Purpose and scope
  • Definition of terms
  • Basic considerations
  • Direct costs
  • FA Costs
  • Identification and Assignment of FA Costs
  • Determination and Application of FA Cost Rate or
    Rates
  • Simplified Method for Small Institutions
  • General Provisions for Selected Items of Cost
  • Certification of charges
  • Exhibits and Appendices

12
KEY DEFINITIONS
  • Major functions of an institution
  • Instruction
  • Including departmental research
  • Sponsored instruction and training
  • Departmental research
  • Organized research
  • Includes research training
  • University research
  • Other sponsored activities
  • Other institutional activities

13
BASIC CONSIDERATIONS
  • Costs must be
  • Reasonable
  • Allocable
  • Note Section C.4.d
  • Consistently treated

14
REASONABLE COSTS
  • Reasonable and necessary
  • Prudent person rule
  • Is cost necessary for performance of project?
  • Are costs incurred consistent with institutional
    policies?

15
ALLOCABLE COSTS
  • Are costs
  • Assignable to a cost objective in accordance with
    benefits received
  • Incurred to advance work under the project
  • Remember C.4.d

16
CONSISTENT COSTS
  • Are costs consistently treated?
  • In other words, costs cannot be treated in some
    circumstances as direct costs and, in like
    circumstances, also treated as indirect (FA)
    costs

17
COST ACCOUNTING STANDARDS
  • 501. Consistency in estimating, accumulating,
    and reporting costs
  • 502. Consistency in allocating costs incurred
    for the same purpose
  • 505. Accounting for unallowable costs
  • 506. Cost accounting period

18
Potential CAS Problem (501)
  • Cost sharing
  • Effort included in proposal as research
    (estimate) but recorded in accounting system as
    instruction (actual)
  • Inconsistent use of terminology
  • Research proposal budgets chemicals but
    accounting system charges materials and supplies

19
Potential CAS Problem (502)
  • Department charges costs directly that are also
    in the FA rate (administrative and clerical)
  • Issue of telephone equipment costs
  • .normally charged indirectly

20
THE ISSUE OF COST SHARING
  • OMB Clarification Memo on Cost Sharing
  • Mandatory
  • Voluntary committed
  • Voluntary uncommitted
  • www.whitehouse.gov/omb/memoranda/m01-06.pdf

21
The Issue of Administrative and Clerical Costs
(F.6.b)
  • Particularly problematic in ensuring that costs
    incurred for the same purpose in like
    circumstances are treated alike. Example given
    in regulations identifies examples of
  • Direct costs technical salaries, laboratory
    supplies, travel
  • Normally indirect administrative and clerical
    salaries (except for major projects), office
    supplies, postage, local telephone costs

22
FA COST CALCULATION (Direct)
  • Direct costs research base (funds spent on
    research)
  • Total direct costs expenditures on all organized
    research programsmust include
  • Externally sponsored research projects
  • Internally sponsored research projects
    (separately budgeted and accounted for)
  • Cost sharing (mandatory and voluntary committed)

23
FA COST CALCULATION (Indirect)
  • Prescribed pools
  • Facilities (building and equipment
    depreciation/use allowance, operations and
    maintenance, interest)
  • Administration (general admin, department admin,
    sponsored projects admin) (limited to 26 points
    in the rate)
  • Library

24
FA RATE CALCULATION
  • FA Expenses Divided by Original Research Base
  • FA Rate (expressed as )
  • Example
  • FA 34 million
  • Base 65 million
  • RATE 52

25
DISTRIBUTION BASE
  • Modified total direct costs (MTDC) all salaries
    and wages, fringe benefits, materials and
    supplies, services, travel and subawards up to
    the first 25,000 of each
  • Excluded from base equipment, capital
    expenditures, patient care, tuition remission,
    rental costs, scholarships, fellowships and
    subawards in excess of 25,000

26
RATE TYPES
  • Predetermined
  • Fixed rates with carryforward provisions
  • Provisional rates
  • Fixed rates for the life of the sponsored
    agreement

27
The Issue of Fixed Rate for Life of Award
  • Federal agencies shall use the negotiated rates
    for FA costs in effect at the time of the
    initial award throughout the life of the
    sponsored agreement
  • Life means each competitive segment of a
    project.
  • If negotiated rate agreement does not extend
    through life of agreement at time of initial
    award, negotiated rate for last year of sponsored
    agreement shall be extended through the life of
    that agreement.

28
WHO NEGOTIATES THE RATES?
  • DHHS OR ONR depending on which agency provides
    more funds to the educational institution for the
    most recent three years

29
THE J SECTION Selected Items of Cost
  • Total of 54 items identified
  • Items for discussion
  • J3 Alcoholic beverages
  • J10 Compensation for personal services
  • Entertainment
  • Equipment
  • Memberships, subscriptions, professional
    activities

30
THE J SECTION Selected Items of Cost
(continued)
  • Selected items of cost
  • J32 Meetings and conferences
  • J38 Proposal costs
  • J45 Scholarships and student aid costs
  • J47 Specialized service facilities
  • J53 Travel costs

31
WHERE ARE THE AUDIT VULNERABILITIES?
  • Effort Reporting
  • Cost Sharing
  • Cost Transfers
  • Subawards

32
QUESTIONS?
  • Contact information
  • Maren Boyack
  • Grant Management Officer
  • 474-6073
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