5101:9-1-15 Cost principles.

[This rule designated an internal management rule]

(A) The expenditure of funds received by grantees of federal funds and their sub-recipients must follow cost principles established in 2 C.F.R. part 225 and be in accordance with state and local requirements. Where federal, state, or local requirements differ, the most restrictive requirement shall apply.

(B) The following terms relate to cost principles used in this rule:

(1) "Award" is a grant, cost reimbursement contract, and/or other agreement between the government unit and the federal government.

(2) "Cognizant agency" is the federal agency responsible for reviewing, negotiating and approving cost allocation plans or indirect cost proposals developed under 2 C.F.R. part 225 on behalf of all federal agencies.

(3) "Cost" is an amount as determined on a cash, accrual, or other basis acceptable to the federal awarding or cognizant agency. It does not include transfers to a general or similar fund.

(4) "Cost allocation plan" means a central service cost allocation plan, public assistance cost allocation plan, and indirect cost rate proposal.

(5) "Governmental unit" means the state, local, or federally recognized Indian tribal government, including any component thereof. Components of governmental units may function independent of the governmental unit in accordance with the term of the award.

(C) The application of cost principles is based on the premise that:

(1) State and local governmental units are responsible for the efficient and effective administration of federal awards through the application of sound management practices.

(2) The governmental units assume responsibility for administering federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the federal award.

(3) Each governmental unit has the primary responsibility for employing the form of organization and those management techniques that are necessary to assure proper and efficient administration of federal awards.

(D) Costs may be categorized as follows:

(1) Allowable costs. These are costs that have been identified by the state or federal government as approved costs in compliance with the 2 C.F.R. part 225. The county agency may be reimbursed for a portion or for all of these costs.

(2) Costs allowable with prior approval. All costs in this category are allowable only if they have been prior-approved by the Ohio department of job and family services (ODJFS) and/or the federal agency providing the funds. The county agency may be reimbursed for a portion or for all of these prior-approved costs.

(3) Unallowable costs. These are costs that are non-reimbursable. A cost is unallowable if it is either:

(a) Prohibited as allowable by law; or

(b) Not allocable to a state or federal program. In this case, a county agency may expend funds for a particular item or activity, but the expenditure must be paid entirely with local funds.

(E) Costs must be allowable, reasonable, and allocable.

(1) A cost is allowable for federal reimbursement only to the extent of benefits received by federal awards and its conformance with the general policies and principles stated in 2 C.F.R. part 225. To be allowable under federal awards, costs must meet the following general criteria:

(a) Be necessary and reasonable for proper and efficient administration of the federal award.

(b) Be allocable to federal awards under the provisions of 2 C.F.R. part 225.

(c) Be authorized or not prohibited under state or local laws or regulations.

(d) Conform to any limitations or exclusions set forth in 2 C.F.R. part 225, federal law, terms and conditions of the federal award, or other governing regulations to types or amounts of the cost items.

(e) Be consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities of the government unit.

(f) Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost.

(g) Except as otherwise provided in 2 C.F.R. part 225, be determined in accordance with generally accepted accounting principles.

(h) Not be included as a cost or used to meet cost sharing or matching requirements of any other federal award in either the current or prior period, except as specifically provided by federal law or regulation.

(i) Be the net of all applicable credits.

(j) Be adequately documented.

(2) A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when governmental units or components are predominately federally funded. In determining reasonableness of a given cost, consideration shall be given to:

(a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the governmental unit or the performance of the federal award.

(b) The restraints or requirements are imposed by such factors as sound business practices; arms length bargaining; federal, state, and other laws or regulations; and terms and conditions of the federal award.

(c) Market prices for comparable goods or services.

(d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the governmental unit, its employees, the public at large, and the federal government.

(e) Significant deviations from the established practices of the governmental unit that may unjustifiably increase the federal award's cost.

(3) A cost is allocable to a particular cost objective if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received.

(a) All activities that benefit from the governmental unit's indirect cost, including unallowable activities and services donated to the governmental unit by third parties, will receive an appropriate allocation of indirect costs.

(b) Any cost allocable to a particular federal award or cost objective under the principles provided for in 2 C.F.R. part 225 may not be charged to other federal awards to overcome fund deficiencies, to avoid restrictions imposed by law or terms of the federal awards, or for other reasons.

(c) All costs must be allocated in compliance with the cost structures and methodologies defined in the ODJFS cost allocation plan (CAP). The CAP describes the method used to distribute and report costs to the various job and family services and workforce development programs Ohio administers and is approved by the federal cognizant agency.

(F) The total cost of a federal award is composed of the allowable direct cost of the program plus its allocable portion of allowable indirect costs, less applicable credits. Applicable credits refer to receipts or expenditure type transactions which offset or reduce expense items.

Examples of such receipts or transactions are: purchase discounts, rebates, recoveries or indemnities on losses, and adjustments of overpayments or erroneous charges.

(G) Cost principles for selected items in 2 C.F.R. part 225 are applied in establishing the allowability or unallowability of certain costs. These principles apply whether a cost is treated as direct or indirect. The fact that a particular item of cost is not mentioned in 2 C.F.R. part 225 does not imply that it is either allowable or unallowable. Determination of allowability in each case should be based on the treatment or standards provided for similar or related items of cost.

(H) The following selected items of costs address where there is more restrictive policy based on Ohio law and/or where policy clarifications have been received:

(1) "Advertising and Public Relations" - The costs of promoting the approval of a tax levy is an unallowable advertising and public relations cost.

(2) "Automatic Data Processing (ADP)" - The cost of data processing services for grant programs is allowable. This allowability does not supersede the restrictions regarding reimbursement of ADP expenditures in support of a federally approved ODJFS statewide system; e.g. client registry information system-enhanced (CRIS-E). That is, data processing costs that duplicate any statewide system functions cannot be claimed for federal reimbursement and are therefore non-reimbursable costs. In addition, acquisitions that may affect the ODJFS network, regardless of the cost or financial responsibility, must be approved by ODJFS prior to purchase. Approval can be obtained through the technology and service support policy (TSSP) request process as detailed in rule 5101:9-9-17 of the Administrative Code.

(3) "Bonding" - Costs of premiums on bonds covering employees who handle grant funds are allowable. Bonds are required as an assurance of faithful performance of duties as set forth in sections 329.01 and 5153.13 of the Revised Code. Each county department of job and family services (CDJFS) director and public children services agency (PCSA) director must post a bond prior to assuming that position.

(4) "Self-Insurance Plans" - The cost of self-insurance is allowable if included in the countywide central services cost allocation plan. Only self-insurance plans that are actuarially based are reimbursable.

(5) "County Established Workers' Compensation Reserve Funds" - The U.S. department of health and human services deems as allowable county agency contribution to these county reserve funds for self-insurance plans for workers' compensation provided that all conditions of 2 C.F.R. part 225 are met in adhering to the proper and efficient administration of federal awards, including:

(a) Reserve funds are not used for purposes other than workers' compensation claims and administrative expenses;

(b) Reserve levels are actuarially determined;

(c) Reserve levels do not exceed allowable levels for:

(i) Claims runoff amounts; and

(ii) Costs that would have been incurred had the counties chosen the base rate plan or experience rating plan, or had the counties chosen to use the actual claims paid method for charging federal programs for workers' compensation;

(d) Earned interest remains in the reserve fund to help lower contribution rates;

(e) Charges are consistent with federal and nonfederal program regulations; and

(f) Treatment of charges is consistent, whether charged as direct or indirect costs.

(I) Determination of allowability of cost not specially addressed in this rule or 2 C.F.R. part 225 should be based on the treatment or standards provided for similar or related items of cost.

Replaces: 5101:9-1-15

Effective: 01/30/2009
Promulgated Under: 111.15
Statutory Authority: 5101.02
Rule Amplifies: 309.11 , 329.01 , 329.04 , 5153.13
Prior Effective Dates: 8/24/81, 12/18/81, 7/9/82, 1/1/86 (Emer), 4/1/86, 4/2/86 (Emer), 7/1/86, 12/15/86, 1/10/87, 7/20/87 (Emer), 8/6/87, 10/16/87, 4/21/88 (Emer), 7/1/88, 1/7/89, 7/8/89, 12/30/89, 5/1/96, 7/28/96, 6/23/97, 12/1/97, 4/3/98, 8/1/98, 1/31/04