[Federal Register Volume 65, Number 153 (Tuesday, August 8, 2000)]
[Notices]
[Pages 48566-48576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-19653]



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Part III





Office of Management and Budget





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OMB Circular A-21, Cost Principles for Educational Institutions; Notice

  Federal Register / Vol. 65, No. 153 / Tuesday, August 8, 2000 / 
Notices  

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OFFICE OF MANAGEMENT AND BUDGET


OMB Circular A-21, ``Cost Principles for Educational 
Institutions,''

AGENCY: Office of Management and Budget, Executive Office of the 
President.

ACTION: Final revision.

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SUMMARY: The Office of Management and Budget has revised Circular A-21, 
``Cost Principles for Educational Institutions,'' to add a standard 
format for submitting facilities and administrative rate proposals by 
educational institutions. This form will be shown as Appendix C in the 
Circular. The standard format will assist institutions in completing 
their proposals more efficiently and help the Federal cognizant agency 
review each proposal on a more consistent basis. In addition the 
standard format will help the Federal Government collect important data 
regarding facilities and administrative costs and rates at educational 
institutions.

DATES: This revision is effective on September 7, 2000.

FOR FURTHER INFORMATION CONTACT: Gilbert Tran, Financial Standards, 
Reporting and Management Integrity Branch, Office of Federal Financial 
Management, Office of Management and Budget, at (202) 395-3993. Non-
Federal organizations should contact the organization's cognizant 
Federal agency.

SUPPLEMENTARY INFORMATION:   

A. Background

    Office of Management and Budget (OMB) Circular A-21, ``Cost 
Principles for Educational Institutions,'' establishes principles for 
determining costs applicable to Federal grants, contracts, and other 
sponsored agreements with educational institutions.
    On September 10, 1997, (62 FR 47721) OMB proposed the use of and 
solicited input on the use of a standard format for submitting 
facilities and administrative rate proposals by educational 
institutions. The standard format would assist institutions in 
completing their proposals more efficiently and help the Federal 
cognizant agency review each proposal on a more consistent basis. In 
addition the standard format would help the Federal Government collect 
important data regarding facilities and administrative costs and rates 
at educational institutions. OMB received 35 comments from Federal 
agencies, universities and professional organizations in response to 
the proposal. All commenters were in favor of the development of such a 
form. OMB, with assistance from Federal agencies and universities, 
developed the standard form for inclusion in Circular A-21.
    On August 12, 1999, (64 FR 44062) OMB proposed to revise Circular 
A-21 to incorporate the new form. OMB received 40 comments from 
universities, Federal agencies and professional organizations. All 
comments were considered and incorporated, where appropriate, in the 
final revision. On May 9, 2000 (65 FR 26859), OMB published a notice in 
the Federal Register notifying the public it had submitted the 
information collection form entitled ``Standard Form for Facilities and 
Administrative Rate Proposals,'' listed as Appendix C on Circular A-21, 
to the Office of Information and Regulatory Affairs (OIRA), OMB, for 
review under provisions of the Paperwork Reduction Act of 1995. OMB 
received three comments in response to this notice. The comments 
applauded OMB's responsiveness to concerns expressed by the university 
community, particularly OMB's action in the final revision to eliminate 
or modify many proposed data items that may present difficulty for 
universities. The commenters, however, requested further clarifications 
on some data items in the standard form. The clarifications are 
provided in the next section.
    This Form was approved by the Office of Information and Regulatory 
Affairs and given OMB Control No. 0348-0058. Consequently, OMB is 
adopting, without change, the revisions shown to Circular A-21 in the 
Federal Register notice of May 9, 2000 (65 FR 26859).
    Circular A-21, as amended by this revision, consists of the 
Circular published in 1979 (44 FR 12368; February 26, 1979), as amended 
in 1982 (47 FR 33658; July 23, 1982), in 1986 (51 FR 20908; June 9, 
1986), in 1986 (51 FR 43487; December 2, 1986), in 1991 (56 FR 50224; 
October 1, 1991), in 1993 (58 FR 39996; July 26, 1993), in 1996 (61 FR 
20880; May 8, 1996), in 1998 (63 FR 29786; June 1, 1998), in 1998 (63 
FR 57332; October 27, 1998), and in this notice. A recompilation of the 
entire Circular with all its amendments, including this amendment, is 
available in electronic form on the OMB Home Page at http://www.whitehouse.gov/omb.

B. Comments and Responses

    Comment: Should a university provide explanation for significant 
decreases in an overhead rate component, as well as explanation for 
significant increases, as required in Part II, General Information, 
item 4?
    Response: No, Part II, General Information, item 4 only requires 
that the university provide explanations for rate component that 
exceeds the prior negotiated rate by 10 percent.
    Comment: How are cross-allocations of an overhead pool to another 
overhead pool reported in Part I, Schedule A, item i? If cross-
allocations are not included, the percentages will not total to 100%. 
Can cross-allocations be reported under the ``other'' column?
    Response: Based on the comments received previously on the cross-
allocation amounts, OMB has deleted this data request in the last 
proposed standard format. For simplicity, cross-allocation of an 
overhead pool to another overhead pool is excluded from item i of 
Schedule A. The Schedule will only report the allocation percentage of 
overhead pool to major direct functions. Accordingly, the ``other'' 
column should not be used to report cross-allocations.
    Comment: In part I, Schedule B, Composition of Rate Base, the 
``research training awards'' category should be combined with the 
``other awards (not based on negotiated rates)'' category. In addition, 
one commenter questions the value for the breakout between awards based 
on negotiated rates and awards not based on negotiated rates.
    Response: In accordance with section B.1.b of Circular A-21, 
``Organized research,'' research training activities at universities 
may either be classified as instruction or organized research. A 
separate line for the research training awards in the composition of 
rate base on schedule B serves to identify the university's treatment 
of the research training activities in the F&A rate proposal. The 
breakout between the awards based on negotiated rates and awards not 
based on negotiated rates is useful for the Federal reviewers to 
estimate the value of Federal dollars associated with each percentage 
point on the F&A rate.
    Comment: The standard format should apply only to F&A rate 
proposals utilizing base years on or after July 1, 2001.
    Response: The standard format requirement is applicable for F&A 
rate proposals submitted on or after July 1, 2001, for the purpose of 
establishment of F&A rates.

    Issued in Washington, DC, July 21, 2000.
Joshua Gotbaum,
Executive Associate Director and Controller.
    Circular A-21 is revised to add the following section G.12 and 
Appendix C.
    1. Add Section G.12 to read as follows:

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    12. Standard Format for Submission. For facilities and 
administrative (F&A) rate proposals submitted on or after July 1, 2001, 
educational institutions shall use the standard format, shown in 
Appendix C, to submit their F&A rate proposal to the cognizant agency. 
The cognizant agency may, on an institution-by-institution basis, grant 
exceptions from all or portions of Part II of the standard format 
requirement. This requirement does not apply to educational 
institutions which use the simplified method for calculating F&A rates, 
as described in Section H.
    2. Add Appendix C (shown below):
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Part II

Introduction

    This Part contains the standard documentation requirements that are 
needed by your cognizant agency to perform a review of your 
institution's F&A rate proposal. This documentation supports the 
development of proposed rates shown in Part I and will be submitted 
with your F&A rate proposal.
    This listing contains minimum documentation requirements. 
Additional documentation may be needed by your cognizant agency before 
completing a proposal review. If there are any questions about these 
requirements, please contact your cognizant agency.
    Documentation requirements would be cross-referenced to appropriate 
schedule(s) within the submitted F&A rate proposal.

General Information

Reference:

____1. Copy of audited financial statements including any affiliated 
organizations. The statements must be reconciled to the F&A base year 
cost calculation. Copy of most recently issued Circular A-133 audit 
reports
____2. Copy of relevant data supporting the financial statement, 
including a reconciliation schedule for each cost pool and rate base in 
the F&A base year cost calculation. A reconciliation schedule will show 
each reclassification and adjustment to the financial statements to 
arrive at the cost pools and rate bases in F&A base year cost 
calculation. Each reclassification and adjustment must be explained in 
notes to the reconciliation schedule
____3. Cost step-down schedule showing allocation of each F&A cost pool 
to the Major Functions and other cost pools
____4. Explanation for each proposed organized research rate component 
which exceeds the prior negotiated rate component by 10%
____5. Schedules clearly detailing composition and allocation base(s) 
of each F&A cost pool in base year cost calculation. If the institution 
has filed a Disclosure Statement (DS-2) submission, specific references 
(rather than narrative descriptions) from the DS-2 may be used
____6. Narrative description of composition of each F&A cost pool and 
allocation methodology. If the institution has filed a DS-2 submission, 
specific references (rather than narrative descriptions) from the DS-2 
may be used
____7. Narrative description of changes in accounting or cost 
allocation methods made since the institution's last F&A submission. If 
the institution has filed a DS-2 submission, specific references 
(rather than narrative descriptions) from the DS-2 may be used
____8. Copy of reports on the conduct and results of special studies 
performed under Section E.2.d, when applicable
____9. Copy of the following:
    (a) The Certificate of F&A Costs
    (b) Lobbying Certification
    (c) Description of procedures used to ensure that awards issued by 
the Federal Government do not subsidize the F&A costs allocable to 
awards made by non-Federal sources (e.g., industry, foreign 
governments)
    (d) Assurance Certification--for those institutions listed on 
Exhibit A--concerning disposition of Federal reimbursements associated 
with claims for depreciation/use allowances
    (e) Assurance statement that institution is in compliance with 
Federal awarding agency limitations on compensation (e.g., NIH salary 
limitation, executive compensation)
____10. If applicable, reconciliation of carry-forward amounts from 
prior years used in the current proposal
____11. Transmittal letter stipulating the type(s) of rates proposed, 
the fiscal year(s) covered by the proposal and the base year used

Rate Proposal Summary by Major Function

____1. Summary of F&A base year rates calculated by Major Function and 
special rates (e.g., vessel rates) if applicable by component. These 
would be grouped by Administrative Components and Facilities 
Components. Total base year calculated rates would be disclosed, as 
well as allowable rates after the 26 percent limitation on 
Administrative Components
____2. A breakout of Modified Total Direct Cost (MTDC) rate base 
figures for each major function (and special rates, if applicable) by:
    (a) On-Campus and Off-Campus amounts
    (b) Federal awards

    --Based on Negotiated Rates--On-Campus
    --Based on Negotiated Rates--Off-Campus
    --Research Training Awards
    --Other Awards (not based on negotiated rates)

    (c) Non-Federal Sources
____3. Miscellaneous Statistics including:
    (a) Cost Sharing in the Rate Base
    (b) Assignable Square Feet (ASF) by Major Function
    (c) Percentage of ASF which is financed (by Major Function)
    (d) A breakout of MTDC by Direct Salaries and Wages/ fringe 
benefits and non-labor costs by major functions
____4. Future rate adjustments, if necessary, related to material 
changes since the base year. A clear description of the justification 
for each of the following:
____(a) Changes by cost pool by year
    (b) Changes in MTDC base by year
    (c) Changes in F&A rates for future years
____5. Summary of future F&A rates, if necessary, by Major Function and 
special rates (e.g., vessel rates) which lists each administrative and 
facilities component by year

Building Use Allowance and/or Depreciation

____1. Reconciliation of building cost used to compute use allowance 
and/or depreciation with the financial statements. If depreciation is 
claimed in the F&A proposal and disclosed on the financial statements, 
provide a reconciliation of depreciation amounts with the financial 
statements

    Note: If an institution's financial statements do not disclose 
depreciation expense (e.g., those subject to GASB), a reconciliation 
of claimed depreciation expense to the financial statements is not 
possible.

____2. A schedule showing amount by building of use allowance and/or 
depreciation distributed to all functions
____3. If a method different from the standard allocation method, 
described in section F.2.b, was used, describe method. Provide 
justification for its use and a schedule of allocation. If the 
institution has filed a DS-2 submission, claimed allocation methodology 
may be referenced to specific section of the DS-2
____4. If depreciation is claimed, describe what useful lives by group 
and component have been used

Equipment Use Allowance and/or Depreciation

____1. Reconciliation of equipment cost used to compute use allowance

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and/or depreciation with the financial statements. If depreciation is 
claimed in the F&A proposal and disclosed on the financial statements, 
provide a reconciliation of depreciation amounts with the financial 
statements

    Note: If an institution's financial statements do not disclose 
depreciation expense (e.g., those subject to GASB), a reconciliation 
of claimed depreciation expense to the financial statements is not 
possible.

____2. A schedule showing amount by building of use allowance and/or 
depreciation distributed to all functions
____3. If a method different from the standard allocation method, 
described in section F.2.b, was used, describe the method. Provide a 
justification for its use and a schedule of allocation. If the 
institution has filed a DS-2 submission, claimed allocation methodology 
may be referenced to specific section of the DS-2
____4. If depreciation is claimed, describe what useful lives by asset 
class and component have been used

Interest

____1. Reconciliation of interest cost used in the F&A base year 
calculation to the financial statements
____2. A schedule showing amount of interest cost assigned to each 
building and a distribution to all benefitting functions within each 
building for each proposed ``Major Function''

Space Survey

____1. A summary schedule of square footage by school, department, 
building and function
____2. The same schedule should then be sorted by school, building, 
department, and function
____3. Copies of space inventory instructions, forms, and definitions

Operation and Maintenance (O&M)

____1. A summary schedule of each major activity (or subpool) in O&M 
cost pool. It must show the costs by S&W/fringe benefits and all non-
labor cost categories
____2. A schedule showing amount of O&M costs distributed to all 
functions

General Administration (G&A)

____1. A summary schedule of each activity (or subpool) in the G&A cost 
pool
____2. A schedule of costs in the modified total costs (MTC) allocation 
base
____3. If a method different from the standard MTC allocation method 
was used, describe the method. Provide a justification for its use and 
a schedule of allocation. If the institution filed a DS-2 submission, 
claimed allocation methodology may be referenced to specific section of 
the DS-2

Departmental Administration (DA)

____1. Schedules of the DA summary by school, department and allocated 
to Major Functions by department
____2. Schedule identifying costs by S&W/fringe benefits and non-labor 
costs by department for the following functions:
    (a) Direct (Major Functions)

    --Instruction
    --Organized Research
    --Other Sponsored Activities
    --Other
    (b) Departmental Administration (excluding Deans)
    (c) Dean's office
    (d) Other, as appropriate
S&W/fringe benefits shall be further identified as follows:
    (a) Faculty and other professional
    (b) Administrative (e.g., business officers, accountants, budget 
analysts, budget officers)
(c) Technicians (e.g., lab technicians, glass washers)
    (d) Secretaries and clerical
____3. Complete description of allocation method, bases and allocation 
sequences (e.g., direct charge equivalent, 3.6 percent allowance). If a 
method different from the standard MTC allocation method was used, 
describe the method. Provide a justification for its use and a schedule 
of allocation. If the institution filed a DS-2 submission, claimed 
allocation methodology may be referenced to specific section of the DS-
2
____4. Show a detailed example (i.e., illustration of your Direct 
Charge Equivalent (DCE) methodology) of the allocation process used for 
one department which has Instruction and Organized Research functions 
from each of the following schools: Medicine, Arts & Sciences and 
Engineering, as applicable

Sponsored Projects Administration (SPA)

____1. A summary schedule for each activity (or subpool) included in 
SPA cost pool
____2. A schedule of the sponsored projects direct costs in the MTC 
allocation base
____3. If a method different from the standard sponsored projects MTC 
allocation method was used, describe method. Provide justification for 
its use and a schedule of allocation. If the institution filed a DS-2 
submission, claimed allocation methodology may be referenced to 
specific section of the DS-2

Library

____1. A summary schedule for each activity included in library cost 
pool. It would show costs by salaries and wages, books, periodicals, 
and all other non-labor cost categories
____2. Schedule listing all credits to library costs
____3. A schedule of Full Time Equivalents (FTE) and salaries and wages 
in the bases used to allocate library costs to users of library 
services
____4. If the standard allocation methodology was not used, describe 
the alternative method and provide justification for its use. Provide 
schedules of allocation statistics by function. If the institution 
filed a DS-2 submission, claimed allocation methodology may be 
referenced to specific section of the DS-2

Student Services

____1. If the proposed allocation base(s) differs from the stipulated 
standard allocation methodology provide:
    (a) Justification for use of a nonstandard allocation methodology;
    (b) Description of allocation procedure; and
    (c) Statistical data to support proposed distribution process
    If the institution filed a DS-2 submission, claimed allocation 
methodology may be referenced to specific section of DS-2

[FR Doc. 00-19653 Filed 8-7-00; 8:45 am]
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