Indirect Cost Rates

Phil Boone: MDE - Office of State Aid & School Finance

04/19/232

What is an Indirect Cost Rate?

• A ratio representing the proportion of district expenditures used for “overhead” as opposed to direct costs of programs.

04/19/233

How is an indirect cost rate used?

• Adjusting grant revenue to include indirect costs.

• $100,000 grant with 5% rate.

• Program costs: $95,238

• $95,238 x 5% = $4,762

• $95,238 + $4762 = $100,000

04/19/234

Types of Rates

• Special Education

• Restricted

• Unrestricted

• Medicaid

04/19/235

Special Education Rate

• Report RO416

• ISD rate is weighted average

• Based on FID data

• No district input needed

• Published in April for current year

• Capped at 15%

04/19/236

Restricted Rate

• Applicable to most federal education grants

• Does not include ops/maint, Chief Executive Officer (CEO)

• “Supplement vs. Supplant”

• Capped at 15%

04/19/237

Unrestricted Rate

• Applicable to federal School Lunch grants

• Includes ops/maint, CEO costs

• Capped at 15%

04/19/238

Medicaid Rate

• Applies to Medicaid School Based Services grants

• Includes ops/maint, CEO costs

• Capped at 25%

04/19/239

How are the rates calculated?

• Costs are drawn from district’s FID, published to MDE website as report RO418A

• Preliminary rates are calculated on report RO418

04/19/2310

RO418A

04/19/2311

RO418

04/19/2312

What should the district do?

First Step: Reconcile the R0418 to your expenditure trial balance/FID

submission.Note: R0418 Total Expense column does not

include any function codes 49x and later

Or to look at it another way:

R0418 Total Expense column only includes function codes 1xx through 45x

04/19/2313

Cost adjustments

• Spreadsheet form DS-4513

• Exclusions on 1st page

• Re-classifications on 2nd page

• Limited window

• Due June 1

04/19/2314

Automatic Exclusions

R0418A automatically excludes all costs from the following funds:

Debt Service Funds

Capital Project Funds

Internal Service Funds

Other Funds (District Wide Reporting, Capital Assets, and Long Term Liability Funds)

04/19/2315

Automatic Exclusions

MDE will have already identified these exclusions:

• Capital Outlay (6xxx)

• Cost of food (56xx)

• Interest (72xx)

• Claims and Judgments (75xx)

• Taxes Abated and Written Off (76xx)

04/19/2316

Requesting additional exclusions

• Amount of contracted service in excess of $25,000.– See $25,000 rule document on MDE website

• Fines and penalties

• Interest expenses

04/19/2317

DS-4513 exclusions

04/19/2318

Automatic Reclassifications

• State codes 2XX-8XX

• Indicates grant funded activity

• If indirect, must reclassify as direct cost

04/19/2319

Requesting additional reclassifications

• Legal and Audit expenditures

• CEO costs

• Any grant funded indirect costs not identified by State code

04/19/2320

DS-4513 reclassifications

04/19/2321

Final RO418

• Costs adjusted by DS-4513

• Posted to web

• Alert to district via monthly State School Aid UPDATE

04/19/2322

Final RO418

04/19/2323

Questions?

• boonep2@michigan.gov

• 517-335-4059