Cost Support De Minimis, Fringe Or
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County Engineers Association of Ohio ODOT Reimbursement Requirements Stephanie Wagenschein, CFE External Auditor, ODOT Topics • Options for Recovery of Direct Labor, Fringe, and Overhead • De Minimis Rate • Fringe Rate • Cost Allocation Plan (CAP) • Rate Presentation/Requirements • Compliant Timekeeping • Top Audit Findings Why the change from Safe Harbor? • 2 CFR 200 presented the option of a de minimis rate application. • The State of Ohio was the only state applying a Safe Harbor rate. • Safe Harbor provided a 30 percent fringe rate and a 38 percent overhead rate. • For all states, de minimis is a opportunity for additional recovery. • The de minimis rate application replaced Safe Harbor. • LPAs, who have an approved fringe rate, generally have a much higher recovery than Safe Harbor provided. • De minimis applies the specific LPA’s approved fringe rate and a 10 percent overhead rate. Quick Overview of Options • LPA Agreement View: LPA Agreement 15.1Options Detailed • Direct Labor – reimburses only the base labor rates paid (and documented by payroll records) to employees. • Direct Labor plus the de minimis rate – reimburses Direct labor + (direct labor multiplied by the approved fringe rate* multiplied by the indirect rate of 10%. ) • Direct Labor plus approved fringe benefit rate. – reimburses Direct labor + (direct labor multiplied by the approved fringe rate.*) • Direct Labor plus indirect cost rate* – reimburses direct labor, fringe and overhead costs. • Each LPA calculation is based upon the specific LPA’s plan. • No cost recovery of labor, fringe or overhead costs – provides no reimbursement of the LPA’s labor, fringe and overhead. * Annually, the LPA shall submit an updated rate for review and approval by the ODOT Office of External Audits. De minimis Application • De minimis was defined in 2 CFR 200 as being applied to modified total direct cost (MTDC). • MTDC was defined as all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel and subawards and subcontracts up to the first $25,000 of each subaward and subcontract. MTDC excludes equipment, capital expenditures, rental costs…. • MTDC was defined as all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel and subawards and subcontracts up to the first $25,000 of each subaward and subcontract. MTDC excludes equipment, capital expenditures, rental costs…. De minimis Costs per FHWA • Definitions: • Direct Salaries and Wages – These are the direct salaries and wages of the Local Agency’s employees charging their time to a project. • Fringe Benefits – This is the application of the the fringe benefit rate approved by ODOT.¹ • Materials and Supplies - These are the costs of materials and supplies purchased from a vendor by the local agency which are used up in the project (e.g. pens, paper, asphalt, concrete.) (This does not include project bid items or subcontracted items.)² ¹Office of External Audits ²Bid items are considered a subcontract. De minimis Costs per FHWA (continued) • Definitions: • Services - This includes work such as testing or lab work that is completed by a company. • Keep in mind that if the services are considered “capital expenditures” you would not be able to apply the de minimis rate. (Cannot include time-tracking software.) • If the work is a subaward, or contracted consultant, the costs cannot be included as MTDC. • Travel – This includes costs incurred by the local agency which is project specific (travel to a meeting on the project which may require overnight lodging.) This travel would probably include an equipment charge (vehicle mileage).* * It is generally unlikely that LPAs will have a travel cost to include as the projects are in the LPA’s geographic area. Approved Fringe Rate • An approved Fringe Rate is necessary to apply a De minimis, Fringe or CAP (overhead) rate. • The LPA must use the Fringe Rate Form found on the ODOT External Audit’s Webpage. Example of fringe rate form: All blue formula cells are protected(not accessible). Instruction Tab – General Information Fringe Sample – How does it work? LPA will update “LPA” to its agency name. Most LPAs will not be separating its costs between direct and indirect, but will simply include labor in the third row. Note: LPAs that can designate direct and indirect labor costs will most likely opt for a CAP Rate, rather than a Fringe Rate. LPAs that identify time separately must provide its data for the complete year from a project time-tracking system that systematically recorded direct and indirect time. (Example provided later with CAP Form information) Fringe Benefits - Leave Actual LPA ODOT Costs 2014 Expenses ADJUSTMENTS ADJUSTMENTS ALLOCABLE Each LPA will update The LPA populates its costs ODOT Fringe benefit per its financial support. LPA may make names to the adjustments match the fringe will populate actual expenses benefits specific and then it will populate for to the LPA. Each LPA adjustments. Adjustments unsupported can also add additional may be made for items the or ineligible benefit leave line LPA cannot support or for costs. It may items. ineligible costs. also make adjs. for Many LPAs include leave errors. time in the labor costs. We want to remove those costs as they are not work time. The costs will remain in Fringe so that the costs will be included in the fringe Rate. Fringe Benefits (other than leave) Actual LPA ODOT Costs 2014 Expenses ADJUSTMENTS ADJUSTMENTS ALLOCABLE Each LPA will The LPA populates its costs update per its financial support. LPA Fringe benefit will populate actual expenses Adjustments (as names to the and then populate any detailed on prior slide) match the fringe adjustments. Adjustments may benefits specific be made for items the LPA may be made. to the LPA. cannot support or for Each LPA can ineligible costs. also add additional benefit leave line items. Fringe Calculation The Fringe Rate is calculated using fringe costs/labor. Because of this calculation, the fringe is then applied to Labor each period. Checklist Tab Checklist Tab Checklist Tab “Fine Print” What cost support is needed to complete the form and support the costs?* • Per 2 CFR 200 Appendix VII, the following must be provided: • Rates proposed, including subsidiary work sheets – cross referenced and reconciled to the financial data noted. • The rates that the LPA is proposing must be supported by financial reporting from the same time period (fiscal year or calendar year – to match the LPAs’ audit period) • The LPA must identify how the support matches up to the Cost Allocation Plan (Excel form) • Allocated Central Service Costs will be supported by the Central Service Cost Allocation Plan • Costs that are allocated to the department/division/office must be supported. For example, Mailroom costs, IT Costs or other allocated costs must have a central cost allocation plan that identifies the rates charged - including when and how the costs were calculated. • Copy of financial data (financial statements, comprehensive annual financial report, executive budgets, accounting reports) upon which rate is based. • Since we are often working with a specific office (Engineer, Public Works, Public Safety), we can accept a cost center report – such as a cash expenditure report or general ledger. *for de minimis, fringe or CAP methods. What cost support is needed to complete the form and support the costs?* (continued) • Per 2 CFR 200 Appendix VII, the following must be provided: • Amount of direct labor base costs • Detailed support must be provided for the direct labor costs included in the plan. • Chart showing the organization structure of the agency during the period for which the costs were incurred. • This allows us to better understand the office structure and reporting of cost centers. • Signed certificate of costs. *for de minimis, fringe or CAP methods. Now about that support…. Any thoughts on the following samples of support recently received… Example 1 Example 1 Example 2 Example 2 Example 3 Example 3 We requested additional support, as the focus of this documentation is the budget and encumbrances. We are looking for detailed expenditure reporting. Example 3 LPA is able to provide actual expenditure detail to document individual payments. Verification of actual payment made to Bureau of WC. LPA is not self-insured. (Usually identified by a Transfer, rather than a payment.) LPA provides coding information to allow us to understand the report. Example 4 This is good support! Provides dates – provides bi-weekly payroll data. Specific to Engineer’s Office. This LPA had several categories of payroll data that totaled for its total labor. Example 4 Ended with 12/26 payroll. No distinction between direct or indirect costs. Total Labor Cost applied to CAP in Total Labor line. Fringe Sample – How does it work? Fringe Form amount = Supported amount CAP Rate Support Additional information needed. Most LPAs currently will not have the labor detail necessary for a CAP rate. Full Labor Detail is Required (system generated time tracking ) Labor detail must be determined to be direct or indirect based upon the project and task system determination. Examples of Indirect Costs All costs must be supported just like the fringe costs are supported – full expenditure detail. Cost Allocation Plan - Review • Ensure no project costs are included. • Ensure the LPA is not including project costs that should have been charged to an LPA, but completed work no –charge for the other LPA. • Ensure all allocated costs are equitable. • Sometimes more costs are allocated to departments that can support the costs. • Ensure no LPA costs for LPA processes are included • Snow and ice; road maintenance, street lighting, etc. Certificate of Costs Time Tracking LPA Cost Recovery Guidance provides detailed instruction. CE Invoice District Documentation • Please note as we discuss CE invoicing: • Some Districts may require full documentation with each invoice. • Some Districts may review full documentation periodically. • Some Districts may not have requested this information in the past.