Adjustments for 2009-2010 LEA Indirect Cost Rate Certification

Mandatory Adjustments

  • Unused/Terminal Leave – Prior to 2009-2010 school year data this adjustment will be mandatory. The OMB Circular A-87, Attachment B, Paragraph 8.d(3) states “payments for unused leave when an employee retires or terminates employment are allowable in the year of the payment provided they are allocated as a general administrative expense to all activities of the governmental unit or component. From 2009-2010 school year forward, this requirement will be captured using the object code #117.
  • Sub Awards/Subcontracts in excess of $25,000 - this rule pertains to instances where an institution is contracting to obtain services, but not where the contract is for a price agreement or salaries. As a result, each entity is required to make an adjustment to remove the remaining contract balance (excess of $25,000) from the Direct and Indirect Cost Pool. (For example, if you have acontract for $100,000 in Fund 100, Function 2550, Object 300, then the amount decreased from this Fund, Function and Object above should be $-75,000. This will remove the expense from the pertinent Cost Pool.)
  • General Administration - The principles of OMB Circular A-87 exclude the Superintendent, Deputy Superintendent, Head of Sections and Board of Education costs from indirect consideration. Therefore, only if an expense is coded to a fund, function and object code with an Indirect designation, than a adjustment is necessary. A revised interpretation was received that allows some leniency for small school district administrators who, on a day to day basis, perform functions identified in the plan as indirect, provided the time and effort documented for these activities are sufficient to pass an audit. Superintendents of small school districts who wish to recover indirect cost on the business administration part of their job function will have to categorize part of their salary under Function 2510 to be eligible for indirect cost pool consideration. ODE will use the institutional organization charts and may contact the entity to verify 2500 and 2600 function code expenditures to accurately reflect in the direct costs.

Optional Adjustments

  • Insurance and Judgments - District liability insurance, district property insurance, fidelity bond premiums and worker’s compensation may be classified as indirect costs. This is a unique adjustment category. In order to reclassify expenditure item from direct (D), unallowed (U) or excluded (E) to indirectcost pool( I ) the Function Code has to allow for indirect expenditures. For example,function codes from 25XX and up do allow expenditures to be classified as “I.” In this case, to reclassify expenditures from D, U or E to an “I” (Indirect cost) is a two step process.

Step one: remove expenditure from a given function and object code using a negative entry.

Step two: re-enter expenditure amount with a different (closest) function or object code that has an indirect cost pool( I ) designation.

Example:FundFunctionObjectAmt

Step 1: 1002630650($12,465)

Step 2:1002360640 $12,465

Adjustments may also be made for unemployment compensation for employees or former employees whose costs were associated with the functions identified as indirect in this plan. You may not include judgments against the district as indirect cost.

  • Legal costs –Legal costs associated with interpretation of laws and regulations may be adjusted. Legal costs associated with time spent on preparing for court cases are not allowable in the indirect cost pool. Audit costs are allowable if no audit cost is directly charged to federal grants, if you have some that are, please make adjustments.
  • Resolution Services - ESD’s ONLY – Resolution Services expenditures will need to be subtracted from the indirect cost pool. You will need to make adjustments to your list of expendituresfor FY06. LEA Indirect Rate Certification web application until this modification is corrected in the collection survey. This should eliminate distortion of ESD Indirect Cost Rates that we have seen in the past due to large fiscal and technology expenditures associated with services to districts.
  • CharterSchool Payments – for those districts that are only passing the funds through to the charter school in their district you may choose to make an adjustment to reduce the direct cost base.
  • School Body Funds are allowed to be excluded from the indirect rate formula.