B. Public Comments and Responses
Basic Circular
Comment: The policy subsection states that "no provision for profit or
increment above allowable cost is intended." This statement is currently
contained in the Circular, but it is different from that contained in other OMB
cost principles circulars and is literally incorrect. This seems to say no
profit or increment above cost is permitted.
Response: This sentence was changed to conform with the other OMB cost
principles circulars. There is no policy change intended by this change.
General Principles for Determining Allowable Costs - Attachment A
Comment: The requirement in the basic guidelines that "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 a Federal award as an
indirect cost" appears to be too expansive and should be clarified.
Response: There is no policy change intended from that in the existing
Circular. The wording in the consistency provision was changed to make it
clear that all costs incurred for the same purpose in like circumstances are
either direct costs only or indirect costs only with respect to final cost
objectives (e.g., grants). No final cost objective shall have allocated to it
as an indirect cost any cost if other costs incurred for the same purpose, in
like circumstances, have been included as a direct cost of that or any other
final cost objective. For example, a grantee normally allocates all travel as
an indirect cost. For purposes of a new grant proposal, the grantee intends to
allocate the travel costs of personnel whose time is accounted for as direct
labor directly to the grant. Since travel costs of personnel whose time is
accounted for as direct labor working on other grants are costs which are
incurred for the same purpose, these costs may no longer be included within
indirect cost pools for purposes of allocation to any other grant.
Comment: The Circular lists the market price of comparable goods or services as
one test of reasonableness. This statement may cause problems for State
agencies that are required to make purchases from State-wide contracts.
Response: OMB recognizes that market fluctuations may result in a State paying
higher prices on State-wide contracts. However, significant differences
between State prices and market prices should be analyzed. For example,
Federal awards should not be paying higher prices for State awards based on
geographical preferences.
Comment: The prohibition against shifting costs allocable to a particular
Federal award or other cost objective to other Federal awards needs to be
clarified. Governmental units should not be precluded from shifting allowable
cost in accordance with program agreements.
Response: This section was expanded to recognize that there are instances when
it may be appropriate for governmental units to transfer costs from one cost
objective to another cost objective.
Comment: It is not logical to require governmental units to allocate indirect
costs to all activities including donated services.
Response: The Circular is designed to provide that Federal awards bear their
fair share of costs. If non-Federal activities use donated services that
require a substantial amount of support costs, it would be inequitable to
charge these costs to Federal awards.
Comment: The section on applicable credits needs to be clarified.
Response: The language in this section has been revised to remove inappropriate
examples of applicable credits and references to program income which are
covered by the grants management common rule.
Selected Items of Cost - Attachment B
Advertising and Public Relations Costs
Comment: Clarify the allowability of certain public relations type costs, such
as job fairs and activities to promote ridership on public transportation.
Response: The allowability of these types of costs depends upon the
circumstances surrounding the individual case. In determining whether Federal
awards should participate in these types of costs, the recipient should
consider how similar types of costs are charged, and whether there is a direct
benefit to Federal awards resulting from these costs.
Audit Services
Comment: The Circular limits the allowability of audit costs to single audits
and does not provide reimbursement for audits of a less comprehensive nature.
Response: This section was revised to allow the costs of other audits.
Automatic Electronic Data Processing
Comment: The requirement for governmental units to amortize the costs
associated with the development and testing of automated systems would impose
an unreasonable financial and administrative burden on the governmental
units.
Response: OMB eliminated the requirement for governmental units to amortize the
costs of developing and testing automated systems until a uniform Federal
policy covering all types of recipients of Federal awards can be developed.
Compensation for Personnel Services
Comment: The potential paperwork burdens associated with accounting for
employee leave payments and accruals could be substantial.
Response: This section was simplified by modifying many of the prescriptive
accounting rules for leave.
Comment: Interest cost associated with pension contributions should be allowed
if the governmental unit's contributions are delayed.
Response: References to interest payments were deleted. However, language was
inserted into the Circular to make it clear that Federal reimbursement of
pension cost must be adjusted when the governmental unit's payments to the fund
are late. The adjustment should compensate for the additional cost because of
the timing of the charges to the Federal Government and the governmental unit's
contribution to the pension fund.
Comment: Governmental units should not be required to use separate cost
allocation procedures for classes of employees that experience different
actuarial gains and losses (e.g., police and fire departments).
Response: This requirement was deleted from the Circular.
Comment: The requirement that a governmental unit obtain Federal approval for
changing its method for determining pension and post-retirement health benefit
costs should be deleted.
Response: This requirement was deleted. Pension costs and post- retirement
health benefit costs determined in accordance with Generally Accepted
Accounting Principles (GAAP) and the provisions of the Circular will be
allowable. For contracts covered under Cost Accounting Standards (CAS), CAS
412 and 413 promulgated by the Cost Accounting Standards Board shall establish
the allocability of pension costs.
Comment: The current principles applicable to support of personnel costs have
worked well and require no change.
Response: OMB believes additional guidance is necessary. Federal agencies have
found that the absence of sufficient guidance on documentation to support
salaries charged to Federal awards has caused numerous audit findings and
resulted in endless wasted hours of negotiation between Federal agencies and
governmental units. Based on the comments received, OMB made a number of
changes to the requirements in this section of the Circular to clarify and
simplify Federal requirements for documenting salaries charged to Federal
awards.
Defense and Prosecution of Criminal and Civil Proceedings, and
Claims
Comment: OMB proposed to substantially amend the provisions on the allowability
of legal and related expenses. In the 1981 version of the Circular, this
provision is found at Attachment B, section 16 (46 FR 9552). In the latest
proposal, the proposed revisions were at Attachment B, section 14 (58 FR
44222).
State and local governments contended that the proposed revisions on the
allowability of legal and related expenses would be unfair and would deny them
due process.
State and local governments also objected to the specific proposed revisions
dealing with legal proceedings based on the Major Fraud Act and the Federal
Acquisition Regulation (48 CFR 31.205-47) in Attachment B, sections 14.a.
through f. State and local governments contended that those provisions are
ambiguous, inconsistent and overly broad. In addition, these commenters argued
that the provisions were designed for commercial contractors and should not be
applied to grants.
Response: After reviewing the comments on the proposed revisions, OMB decided
not to amend the current provision on the allowability of legal and related
expenses. In the revised Circular, this provision is now found at section
14.b.
In this revision, OMB has added a provision at section 14.a. This provision,
which was in the proposal, simply restates the currently-applicable, statutory
restrictions in 10 U.S.C. 2324(k).
Depreciation and Use Allowances
Comment: It is unclear if a use charge can be charged while an asset is in
service.
Response: The Circular now provides that a reasonable use allowance may be
negotiated for fully depreciated assets; therefore, OMB believes a reasonable
use allowance could be negotiated for an asset for as long as the asset is in
service.
Comment: It is not clear whether accelerated depreciation is allowed.
Response: The preferred method of depreciation is the straight line method.
However, other methods may be used when there is evidence that an asset will be
used up faster in the earlier portion of its useful life.
Comment: The estimated useful lives of equipment and buildings used to compute
use allowances should be shortened.
Response: No changes were made. Governmental units have the option of claiming
depreciation which is usually based on the actual life of the asset.
Comment: It is not clear why classes of assets needed to be determined on a
State-wide, local-wide, or Tribal-wide basis.
Response: This section was amended to say classes of assets shall be determined
on the same bases used for the governmental unit's financial statements.
Equipment and Other Capital Expenditures
Comment: The capitalization level for equipment seems to be arbitrarily low.
The criterion of $25,000, which is recognized by the Department of Health and
Human Services (HHS), might be more appropriate.
Response: The $5000 criterion is in line with capitalization levels used by
government contractors and others. The HHS criterion is limited to equipment
used on a few very large programs where equipment purchases are a very small
percentage of total program costs. For CAS-covered contracts subject to "full
coverage", the threshold for equipment is $1500 as established under CAS 404.
Comment: Clarify the term "article" as used in the definition of equipment.
The Circular defines equipment "as being an article of nonexpendable property."
Response: The definition of "capital expenditure" was added to further define
the term "equipment." However, if further guidance is needed in this area,
governmental units should follow their own accounting practices when defining
equipment.
Comment: It is not clear what is meant by "The total acquisition costs are not
allowable as indirect costs during the period acquired."
Response: This section was clarified. It now says that capital expenditures
which are not authorized to be charged directly to an award may be recovered
through use allowances or depreciation.
Comment: The impact of depreciation as proposed in the Circular would shift
costs to the governmental unit, not make any provision for the time value of
money, increase administrative costs to track resulting depreciation schedules,
and erode the partner relationship between Federal agencies and governmental
units.
Response: The accounting treatment for depreciation as prescribed by the
Circular is based on GAAP. Further, the provisions ensure that the Federal
Government pays its fair share of costs, including interest on financing.
Fund Raising and Investment Management Costs
Comment: It is not clear whether costs related to raising funds from
employees within an organization for charitable activities, such as the United
Way, would be allowable since the Circular disallows fund raising costs.
Response: Generally, the prohibition on fund raising activities covered by the
Circular is for those activities where the governmental unit raises funds for
its own use. Incidental fund raising from an organization's own employees for
charitable organizations, such as the United Way, is considered part of normal
operating expenses and, therefore, allowable.
Gains and Losses on Disposition of Depreciable Property and Other
Capital Assets and Substantial Relocation of Federal Programs
Comment: The provisions which would require governmental units to reimburse the
Federal Government when Federal awards were relocated from facilities where the
Federal Government participated in the financing is inappropriate.
Response: This section was amended. It now requires governmental units to
obtain prior approval from the cognizant agency for substantial relocations of
Federal awards from buildings for which the Federal Government participated in
the financing.
Insurance and Indemnification
Comment: It is not apparent why provisions for liabilities, which do not become
payable for more than one year after a self insurance provision is made, are
limited to the discounted value of the liability.
Response: This requirement is designed to cover only those cases where the
amount of the liability is firm or reasonably certain. This provision helps to
avoid excessive reserve balances for the current fiscal year. It limits
current year premiums to the present value of the future (known or reasonably
certain) liability. When that future liability becomes due, prior years
premiums plus earnings (i.e., interest or investment income) from those
premiums will be available to satisfy that debt.
Comment: The Circular states that self-insurance reserves must be based on
sound actuarial principles using the most likely assumptions. This seems to be
an attempt to limit sound actuarial principles.
Response: This language was not intended to restrict sound actuarial
principles. The language was changed to clarify that sound actuarial
assumptions should recognize actual past, as well as probable future, events
when determining premiums and reserve levels.
Interest
Comment: Interest expense should be allowable not only for building
modifications, as provided in the 1981 revision of Circular A-87, but also for
acquisitions of equipment made prior to the issuance date of the revised
Circular. The proposed provision is objectionable because it would require
dual records and impose an unreasonable and unnecessary administrative burden
on State and local governments.
Response: The provision was rewritten to allow interest expense paid or
incurred on or after the revised Circular's effective date to be charged to
Federal awards for existing as well as newly-acquired equipment.
Historically, OMB has not allowed interest on debt issued prior to the
effective date of an interest policy revision (pre-revision debt). In 1980,
OMB allowed State and local governments interest on debt issued to acquire
buildings, but not on pre-revision debt (45 FR 27363). In 1982, in a revision
to Circular A-21, "Cost Principles for Educational Institutions," OMB allowed
interest on debt issued to acquire buildings and equipment, but not on
pre-revision debt (47 FR 33658). In 1994, in a proposed revision to Circular
A-122, "Cost Principles for Non-Profit Organizations," OMB proposed to allow
interest debt issued to acquire buildings and equipment, but not on
pre-revision debt (59 FR 49091).
In view of the fact that pre-revision debt was incurred with full knowledge of
the cost policy that was in effect at that time, OMB does not believe that
grantees should expect the Federal Government to allow interest on this debt
without such a decision being cost-justified from the Federal Government's
perspective. OMB believes the Federal Government should only allow interest on
pre-revision debt when the cost of maintaining dual records on pre-revision and
post-revision assets and related debt (all or a portion of these recordkeeping
costs are chargeable to the Federal programs as administrative costs) is less
than the interest cost on pre-revision debt.
With respect to debt incurred to purchase buildings, OMB believes that the cost
of maintaining dual records is cost-justified in view of the limited number of
buildings and debt issues for which separate records would have to be
maintained, and the substantial interest cost associated with long term debt
used to finance buildings. Thus, as OMB has previously explained, "[a]applying
the new rules to old buildings would appear to provide a windfall recovery, and
might drive up overhead costs of federally assisted programs" (47 FR 33658,
also see 45 FR 27363).
Equipment acquired by State and local governments (except computers), while
substantial in terms of the number of pieces, is relatively nominal in cost and
has a relatively short life span. As a result, the outstanding interest on
debt issued to finance this equipment is relatively nominal. Moreover, State
and local governments would still bear the major share of the financing costs,
even if pre-revision debt were allowable. By contrast, the cost of maintaining
dual records for a large number of items and related debt would likely be
substantial. Given the different balance between administrative and interest
costs, OMB has decided that, in this instance, the administrative costs
associated with maintaining separate records to track pre-revision and
post-revision debt is not cost-justifiable from the Federal Government's
perspective.
The basis for the allowance of pre-revision debt for equipment of State and
local governments is consistent with the basis for OMB's treatment of such debt
for educational institutions (in 1982) and OMB's proposed treatment of such
debt for non-profit organizations (in 1994). The cost of equipment acquired by
educational institutions and non-profit organizations through debt financing
can be significant (e.g., over $650,000 for x-ray crystallography equipment,
$348,000 for a vantage flow cytometer for high speed cell analysis, and
$265,000 for an electron microscope). Equipment of this type and related debt
has a longer life, and in turn, significantly higher interest cost. Moreover,
as with buildings, there are only a limited number of pieces of such equipment,
which reduces the administrative costs of dual records. Given the amount of
interest involved in the financing of these assets compared with the relatively
nominal administrative burden associated with maintaining dual records, OMB
believes the cost of maintaining dual records is justifiable.
Comment: The requirement for a governmental unit to document, as part of its
decisionmaking process, that capital leasing is the most economical option does
not belong in Circular A-87.
Response: The requirement for lease analysis as part of the governmental
unit's decisionmaking process and its proper documentation is addressed in the
Grants Management Common Rule under Section __.36(b)(4). This requirement is
not addressed in Circular A-87.
Comment: Governmental units would not recover their full costs because of
provisions in the Circular which provide that a credit is due the Federal
Government when Federal payments for interest, depreciation, use charges and
other contributions for building use exceed the interest and principal payments
made by the government (positive cash flow).
Response: OMB deleted the provisions in the Circular which would require
credits under the conditions described above. However, governmental units will
be required to negotiate the amount of allowable interest whenever cash
payments (interest, use allowances, depreciation and contributions) exceed
governmental unit cash payments and other governmental unit contributions. OMB
will study this matter further to ensure fair and equitable policies are
established for the States and the Federal Government.
Memberships, Subscriptions, and Professional Activities
Comment: Membership costs in some civic and community organizations should be
allowable when the purpose is to promote services provided by the Federal
award.
Response: The language has been revised to allow memberships in civic and
community organizations as a direct cost with the prior approval of the Federal
awarding agency.
Professional Service Costs
Comment: Simplify the section on professional service costs by eliminating the
factors to consider in determining the allowability of professional service
costs.
Response: Eight subsections listing the factors were deleted.
Proposal Costs
Comment: It is not clear why proposal costs should normally be treated as
indirect costs and allocated to all activities. Such costs should be treated
as direct costs if they can be identified with a specific award.
Response: OMB added a provision to allow governmental units to charge proposal
costs directly to a Federal award with the prior approval of the Federal
awarding agency.
Taxes
Comment: If OMB adopts the proposed revision affecting sales tax
reimbursement, the revision should become effective at some later date to allow
time to change State and local laws.
Response: OMB agrees that there should be a phase-in period. The Circular
allows governmental units three years to phase-in the change.
Comment: If the sales tax proposal were adopted, it would become a burden to
separately account for State sales taxes paid on Federal grant purchases.
Response: The Circular allows reasonable approximations to be used where the
identification of the actual amount of unallowed taxes would require an
inordinate amount of effort.
Comment: State sales taxes should be allowable when a governmental unit is in
a position that makes exclusion administratively impossible, i.e., when
employees in travel status must pay sales taxes upon receipt of goods and
services.
Response: States should attempt a reasonable approximation.
Comment: Some State and local governments and Indian Tribal governments would
lose substantial amounts of revenue if sales taxes were not chargeable to
purchases made in connection with federally-funded programs.
Response: The intention of the tax provision is to address State or local
government taxes, or changes in tax policy, that disproportionately affect a
federally-funded program. Under the Circular, such taxes are unallowable. (As
explained in the next comment-and-response, where a Federal statute prescribes
a different treatment for taxes, that statute controls.)
For example, a tax would disproportionately affect a Federal program if the
tax were defined or applied so that it was imposed only in connection with that
program, or only in connection with Federal programs generally. Another
example would be if a sales tax were imposed on a good or service that in
practice is used solely or disproportionately in connection with Federal
programs. These examples are for illustration, and are not meant to be
exclusive. Whether a particular tax, or change in tax policy, would
disproportionately affect a Federal program will have to be determined based on
a review of the tax and the Federal programs in question.
When a governmental unit pays a tax to itself, that self-assessed tax is not a
true cost to the governmental unit. Especially where a self-assessed tax
disproportionately affects a Federal program, it is not appropriate for the
governmental unit to be able to characterize that tax as a "cost" of its
participation in the Federal program. If such disproportionate, self-assessed
taxes were treated as allowable, even though they disproportionately affect
Federal programs, governmental units could define or apply taxes in such a way
that their net impact would largely be to increase the Federal Government's
contribution, rather than to raise revenues from the taxpayer. To the
extent that making such taxes unallowable would result in a loss of Federal
assistance awards, the Circular allows three years for governmental units to
phase-out any existing taxes that disproportionately affect Federal programs.
(For the larger formula grant programs, the disallowance of such taxes would
not result in any loss of Federal assistance awards; the funds which are now
used to pay self-assessed taxes could be used to further the objectives of the
Federal assistance.)
Comment: The proposed revision on sales taxes is directly contrary to the
legislative intent of Public Law 102-234, "Medicaid Voluntary Contributions and
Provider Specific Tax Amendments of 1991." The proposal should be revised to
preclude its application to broad-based health care related taxes paid by
public entities.
Response: The Circular would not take precedence over a statute. If any
statute specifically prescribes policies and specific requirements that differ
from the Circular, the statute will govern.
Comment: State sales taxes collected by another level of government should be
exempt from the provisions of the Circular.
Response: As noted above, the Circular's disallowance is directed at
self-assessed taxes. Thus, if a local government receives an award directly
from the Federal Government, and pays a State sales tax on purchases made in
connection with that award, the tax is an allowable cost. (However, as
previously noted, the Circular does not restrict the authority of Federal
agencies to identify taxes where Federal participation is inappropriate.)
However, if the local government does not receive the award directly from
the Federal Government, but instead receives the award indirectly by virtue of
a State pass-through, then the sales tax that the local government pays the
State is in reality a self-assessed tax, which would be unallowable if the tax
disproportionately affects a Federal program.
Comment: It is not clear whether the prohibition on payment of sales taxes
applies to out-of-state sales tax.
Response: Since they are not self-assessed, taxes assessed by other States, or
political subdivisions of other States, are not unallowable under the Circular.
(However, as previously noted, the Circular does not restrict the authority of
Federal agencies to identify taxes where Federal participation is
inappropriate.)
Travel Costs
Comment: Airfare costs in excess of the lowest available commercial discount
fare are unallowable. With today's confusing array of super savers and fare
wars, the burden involved in proving the lowest airfare would be
considerable.
Response: The travel provisions were changed to say travel costs in excess of
the customary standard (coach or equivalent) airfare are unallowable.
State/Local-Wide Central Service Cost Allocation Plans - Attachment C
Comment: Working capital reserves in many cases should not be limited to 60
days cash expenses. Time consuming collections, uneven usage levels, and
unanticipated demand for services are some of the reasons for authorizing a
larger reserve.
Response: OMB believes the 60 day reserve should provide the flexibility
required by most funds to operate from one billing cycle to the next. However,
the Circular was amended to provide for a larger reserve in exceptional cases
when approved by the cognizant Federal agency.
Comment: The Circular should not restrict governmental units from engaging an
accounting firm to prepare an indirect cost proposal and then engaging the same
firm to make subsequent audits.
Response: This provision was deleted from the Circular. This issue will be
addressed as part of OMB policy changes to other OMB grants management
circulars.
Comment: What are the criteria OMB uses for making cognizant assignments and
for defining "major governments"?
Response: OMB is in the process of reviewing the cognizant assignments for
governmental units. Only governmental units receiving substantial amounts of
direct Federal assistance will be assigned a Federal cognizant agency and be
required to submit plans to those cognizant agencies. Because the mix of
Federal awards has changed so much since the last list was issued, OMB needs to
develop a new dollar criterion for defining "major."
Comment: States and other prime grantees should not be required to monitor
subrecipient cost allocation plans and/or negotiate sub-recipient indirect
costs.
Response: The grants management common rule requires governmental units to
monitor subawards to assure compliance with applicable Federal requirements.
These requirements include compliance with the cost principles. In those cases
where the subrecipient does not receive any Federal awards directly from the
Federal Government, Federal agencies would not have any direct responsibility
for negotiating indirect costs.
Comment: Attachment C, Section E states that "The documentation requirements in
this section may be modified, expanded, or reduced by the cognizant agency on a
case-by-case basis." This specific sentence might allow a Federal cognizant
agency to unreasonably and unilaterally expand the documentation requirements.
Response: Federal agencies should have the flexibility to obtain additional
data, when necessary. However, OMB agrees that this type of request should be
the exception rather than the rule.
Comment: Documentation for internal service funds seems excessive since these
areas are audited. This documentation is more appropriately included in a
State or local government's financial statements and work papers for the fiscal
year rather than in the entity's cost allocation plan.
Response: OMB amended this section to require only the largest funds to submit
data. If the required data are included in the governmental unit's financial
statements, submission of the financial statements to the Federal cognizant
agency will meet the requirements of the Circular.
Comment: OMB proposed to add provisions requiring the certification of cost
allocation plans and of indirect cost rates (see preamble (58 FR 44218);
Attachment C, Section E.4 (58 FR 44229); Attachment D, Section D.3 (58 FR
44230-31); and Attachment E, Section D.3 (58 FR 44233)). States objected to
the inclusion of the phrase "under penalty of perjury" in the proposed
certification. They contended that the phrase is unnecessary.
Response: OMB has decided to amend the Circular to add the proposed
certifications, but OMB has accepted the commenters' suggestion that the phrase
"under penalty of perjury" not be included in the certifications. OMB believes
that, when the Federal Government is dealing with State and local governments,
it is unnecessary to require that the certifying government official sign a
certification stating that it is made "under penalty of perjury." State and
local officials should not conclude, however, that the omission of the phrase
"under penalty of perjury" means that no potential legal liability is
associated with a certification's submission. In this regard, note the
provision in Federal law imposing criminal penalties for "false, fictitious or
fraudulent statements or representations" (18 U.S.C. 1001). The Department of
Justice is responsible for enforcing this provision (and other laws regarding
false statements and claims). OMB expresses no opinion concerning the
potential legal liabilities that are associated with making the certifications
in the revised Circular.
Comment: Restricting the authority to reopen Central Service Plans to the
Federal cognizant agency is inequitable.
Response: This section was changed to state that agreements may be subject to
reopening only if the agreement is subsequently found to violate a statute or
the information upon which the plan was negotiated is later found to be
materially incomplete or inaccurate.
Comment: GAAP for State and local governments do not require internal service
activities to be accounted for and reported in proprietary accounts.
Response: The requirement for internal service activities to be accounted for
in proprietary accounts was deleted.
Comment: Remove the requirement that a carry forward adjustment is not
permitted for a central service activity that was not included in the approved
plan.
Response: The carry forward technique was intended to permit adjustments for
differences between actual and estimated costs of services included in a cost
allocation plan. It was not intended to shift the entire cost of an activity
excluded from the year of the plan to a future year. There may be
circumstances where a change to the plan should be considered (e.g., the
service did not exist when the plan was established and was initiated during
the year covered by the plan). This type of amendment should modify the plan
itself and would not be handled through a carry forward adjustment.
Comment: Adjustments of billed services do not provide a workable
solution for the larger central services of the States. The dollar limitation
of $50,000 for making adjustments through allocated central services is too
low.
Response: This section was rewritten to provide governmental units more
options and flexibility in making adjustments to Federal awards.
Public Assistance Cost Allocation Plans - Attachment D
Comment: The public assistance cost allocation plans are narrative descriptions
of cost allocation procedures rather than allocations of actual costs. The
provisions dealing with refunds or adjustments related to unallowable costs and
the certification of cost allowability do not appear appropriate.
Response: The certification and the provisions dealing with refunds and
adjustments were deleted.
State and Local Indirect Cost Rate Proposals - Attachment E
Comment: The Circular is silent on the time period for use of predetermined
rates.
Response: The Circular was amended to encourage the use of indirect cost rates
for a period of two to four years.
Comment: Governmental units should notify the Federal Government of any
accounting changes that might make it necessary to renegotiate the
predetermined rate.
Response: A provision was added to the certification which requires the
governmental unit to notify the Federal Government of any accounting changes
that would effect the application of the predetermined rate.
