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U.S. Geological Survey Manual

501.1 - Cost Distribution

8/7/06

OPR: Office of Administrative Policy and Services

Instructions: Revises SM 501.1, dated 2/21/03.  Significant changes include: revisions to the listing of Bureau Costs (Appendix A), Cost Center Indirect Costs (Appendix B) and Facilities Costs (Appendix C); addition of Cost Center Distributed Direct Costs (Appendix D); updated authority citations; revised indirect cost exceptions to include gifts of cash but not acceptance of grants or performance of collaborative projects; revised definition of a project; revision of special rate criteria to include reimbursable agreements funding for significant equipment purchases and for USGS employees on detail to a non-USGS entity when the entity is providing space and funding administrative costs for the USGS employee; affirmation of the optional use of the Leave Distribution Process; renaming 13. Cost Sharing to Reduced Rates; and changing the approval for a reduced rate from the Chief Financial Officer to the Regional Director or Associate Director.

1. Purpose.

This chapter establishes the policies, responsibilities, and procedures for accumulating and distributing costs within the USGS.

2. Authority.

A.  Department of the Interior Accounting Manual, especially Chapter 6 “Cost Accounting”.

B.  Federal Financial Statement of Accounting Standards, especially Standard Number 4 - Managerial Cost Accounting Concepts and Standards for the Federal Government.

3. Definitions.

A.  An account, in the Federal Financial System (FFS), USGS’s official accounting system, records financial data related to specific projects or tasks, or specific purposes.

B.  Bureau costs are costs that benefit the entire bureau or cannot be readily assigned to the cost centers that incurred them.

C.  Cost center is the lowest organizational level at which indirect costs are collected and managed. 

D.  Common services are costs that benefit an entire cost center or cannot be readily assigned to a project or task.

E.  Direct costs are all costs that can be specifically or readily identified with producing a specific product or providing a specific service. (Source: Department of the Interior Accounting Manual, chapter 6, item 10-30-10.)  Fee-for-service work is considered a direct cost.

F.  Facilities-related costs are costs that relate to the buildings, structures and other constructed real property improvements where USGS resources are housed to carry out mission-related work.  These buildings, structures, and improvements include office space, laboratory space, warehouse space, parking space, and related common space.  Facilities-related costs include rent paid to the General Services Administration, private lessors, and other Federal agencies, as well as operation and maintenance costs of both owned and rented facilities.  Facilities costs may include the salaries and benefits of personnel who operate and maintain facilities.  Facilities costs include the costs of deferred maintenance that are funded by the cost center.

G.  Indirect costs are those costs that cannot be specifically identified with producing a specific product or providing a specific service but that can be shown to bear some relationship to, result from, or be in support of, the product or service. (Source: Department of the Interior Accounting Manual, chapter 6, item 10-30-20.)   Indirect costs are charged to non-USGS customers through use of a bureau rate (to recover bureau, headquarters, and regional-level indirect costs) and a cost center common services rate (to recover cost center level indirect costs) applied to the direct costs incurred for providing products and services.

H.  Distributed Direct Costs are costs, including facility-related costs, that apply to more than one, but not all, projects or tasks within a cost center. These costs will be distributed, wherever possible, to the applicable projects in a consistent, equitable, and cost efficient manner. Distributed direct should not be used to distribute costs that are attributable to all projects in a cost center in the same proportion.

I.  Labor costs are the costs of salaries and benefits for Federal employees (budget object classes 11.XX and 12.XX).

J.  A project is a body of work that is tailored to fit a well-defined scientific problem or support function that is focused on a specific subject, issue, and/or geographic region.  A project should:  be of manageable size; have a well constructed work plan or set of work plans (including staffing, budget and objectives); consist of a set of inter-related tasks that relate to/support the defined problem or function; and have specific goals, measures, and well-defined outcomes.  Projects may have more than one funding source.  Financial data for projects are recorded in FFS in one or more accounts.

K.  USGS sites are locations at which USGS either owns or rents space for its own use.  These sites include space that is occupied under cooperative agreements.

4.  Policy. 

A. The USGS policies and procedures for cost distribution shall:

(1) Reflect that USGS is one corporate entity that adheres to a shared business philosophy and to standard business practices.

(2) Support the USGS mission by facilitating cooperation between and among USGS organizations; promoting partnerships with Federal agencies, other government agencies, and non-governmental organizations; and allowing USGS to provide goods and services to customers in an appropriate and equitable manner.

(3) Allow USGS to cover its costs.

(4) Be understandable and easily applied by program and administrative staff.

(5) Be capable of being implemented in a cost-efficient manner.

(6) Promote effective resource management by providing useful financial information and revealing the full costs of performing business.

(7) Comply with the applicable laws, regulations, and standards.

B. USGS will record the full costs of all projects in FFS, the Department of the Interior official accounting system.

5.  Bureau Costs.

A. Costs that benefit the entire bureau or that cannot be readily assigned to the cost centers that incurred them will be treated as bureau costs.

B. Costs that can be readily assigned to the cost centers that incurred them will be distributed to the applicable cost centers.

C. Only costs in the categories listed in Appendix A will be treated as bureau costs.

6.  Bureau Program Costs.

The USGS has identified a number of initiatives that have been identified as Bureau Program Costs.  On an annual basis, the Bureau Program Council will identify a list of Program Costs and associated funding that will be recommended to the Director for funding by the disciplines.  The disciplines will use appropriated funding to cover these costs.

7.  Work Performed at More than One Cost Center.

A. When more than one USGS cost center performs work for a project, facilities-related costs and common services indirect costs will be charged to the project in the cost centers that perform the work.

B.  When one USGS cost center performs work for another USGS cost center, facilities-related costs and common services indirect costs will be charged to the project in the cost center that performs the work.

C.  When more than one USGS cost center performs work for a project and the project is funded from reimbursements from customers or partners, the appropriate share of bureau costs will be charged to the project in the cost center that does the work.

8.  Shared Indirect Costs.

When two or more USGS cost centers share indirect costs, that is, when the indirect costs cannot be readily assigned to the cost centers (e.g. when cost centers are co-located or share administrative staff), the indirect costs will be distributed among the appropriate cost centers on a reasonable and consistent basis.  The preferred bases are as follows:

A. Facilities-related costs will be distributed in proportion to direct costs.

B. Other indirect costs (that is, costs that could be charged to a common services account) will be distributed in proportion to direct costs.

9.  Recording Costs in Cost Centers.

A. Direct Costs.  Project costs (salaries, travel, equipment, etc.), other costs, including facility-related costs, fee-for-service costs, and costs that may be considered common services indirect costs, will be charged to specific projects or tasks whenever possible.

B.  Distributed Direct Costs.  Costs, including facility-related costs and costs that may be considered common services indirect costs, that apply to more than one, but not all, projects or tasks within a cost center will be distributed, wherever possible, to the applicable projects in a consistent, equitable, and cost efficient manner. 

C.  Facilities-related Costs.  Facilities-related costs within a cost center not distributed to projects or tasks within the cost center in accordance with either (A) or (B) will be recorded in one or more facilities accounts and will be distributed to projects or tasks in proportion to direct costs incurred by the project or task; such costs will be limited to those listed in Appendix C.

D.  Common Services Indirect Costs.  All costs within a cost center not distributed to projects or tasks within the cost center in accordance with either (A), (B) or (C) will be recorded in the common services account, and will be distributed to projects or tasks in proportion to the direct costs incurred by the project or task; such costs will be limited to those in Appendix B.  Costs for the Administrative Officer, and the cost center’s Administrative Staff must always be charged as common services indirect costs. 

E.  Costs within a cost center, both direct and indirect, will be treated in a similar manner under similar circumstances during a fiscal year.

10.  Indirect Cost Exceptions.

A. Indirect costs, both facilities-related and common services, including the appropriate share of bureau costs, will not be distributed to:

(1)  Funds which Congress, a statute, or a regulation specifically exclude from the distribution of indirect costs (e.g., funding which supports Intergovernmental Personnel Act Assignments).

(2)  Donations, contributions or gifts of cash received through the bureau’s authority to accept contributions (43 U.S.C. 36(c)).  This exception does not apply when 43 U.S.C. 36(c) is used to accept either grants or funding for collaborative projects.

(3)  Funds received through a delegation of authority from the General Services Administration (GSA) for the operation and maintenance of facilities and the delegation or agreement with GSA specifically excludes the distribution of indirect costs.

(4)  The value of in-kind services provided by customers and partners, that is, services for which the cost center does not pay cash.

11.  Leave Costs.

A.  Use of the Leave Distribution process, which distributes annual, sick, and holiday leave costs for a cost center to each account based on its share of year-to-date labor costs, is optional.  Use of the Leave Distribution process is strongly recommended for cost centers that have multiple reimbursable customers and/or where over half of a cost center’s employees charge their time to two or more accounts.  Use of the Leave Distribution process is recommended for such cost centers because this process equitably allocates leave costs to all accounts with labor charges, thereby ensuring that projects with labor costs receive an equitable share of leave costs.  Cost centers utilizing the Leave Distribution process will establish a cost center leave account.  Information on establishing a leave distribution account as well as use of the Leave Distribution process is available at:  http://internal.usgs.gov/ops/finance/index.html.

B.  When recording time and attendance, employees will charge annual, sick, and holiday leave to their cost center’s leave account if their cost center is utilizing the Leave Distribution process.  In cost centers where employees charge all of their working time to one account, leave will be charged to the same account used to record working time.

C.  The cost of terminal leave may be charged to the appropriate cost center’s common services account but if appropriate, may be distributed to project accounts.  Should a cost center incur extraordinary terminal leave costs, the cost center manager (e.g. science center manager) can seek assistance from upper level management.

D.  Should a cost center incur extraordinary costs related to an employee’s extended sick leave, the cost center manager may request relief from upper level management.

12.  Special Rates.

A.   Special rates will be used to recover indirect costs only in those cases when USGS can demonstrate that indirect costs are substantially and consistently less than the full bureau and cost center rates.  USGS special rate approval criteria are as follows:

(1) Flow through or pass through funding which USGS receives from a non-USGS organization and which USGS transfers or awards to a third-party entity (e.g., a State, local, or tribal government; a U.S. Territory; an educational institution; or a non-profit organization).  Typically, the agreement between USGS and the funding non-USGS organization will cite the fact that flow through or pass through funding is included as a part of the agreement’s total funds.  Examples of flow through or pass through funding agreements for which the bureau special rate would be approved are:

(a) Funding received by the USGS from a non-USGS entity to support a grant awarded by the USGS (e.g., funds received from another Federal agency to support grants awarded for the Water Resources Research Institute program).  Specific legal authority to award a grant is required.

(b) Flow through or pass through funding which USGS receives from one or more non-USGS entities to support, under USGS’ leadership, a strategic science objective.  The agreement will generally reference the expectation that another specified party(ies) will be receiving funding and the amount.  In these situations, USGS is responsible for leading and coordinating a multi-party, scientific effort, as well as performing a significant portion of the scientific work.  In addition, USGS is responsible for providing funds to the participating third party entities through, for example, award of a cooperative agreement (e.g., a cooperative agreement with a State, local, or tribal government; a U.S.  Territory; an educational institution; or a non-profit organization) or execution of an interagency agreement with another Federal agency.  In most cases, total funding to USGS will exceed $100,000, and USGS will retain a significant portion of the funding to directly support its work.  Examples include funds received from non-USGS organizations to support the Alaska Volcano Observatory which are awarded through cooperative agreements to States and universities, and funds received from non-USGS organizations which are “passed through” USGS to other cooperators in support of CALFED.

(2) External Purchase of Data in support of The National Map

(a) Cartographic Services and Remotely Sensed Data Contracts.  When USGS receives funds from a non-USGS organization for the purpose of the customer acquiring services through the Cartographic Services or the Remotely Sensed Data Contracts, multiple-customer use of the established contracts is furthering implementation of The National Map, a USGS strategic scientific goal, by accelerating USGS access to greater volumes of data.

(b)  Purchase of Geospatial data from State and local governments.  When USGS receives funds from a non-USGS organization for the purpose of passing through the customer’s funds to State and local governments for the direct purchase of geospatial data., implementation of The National Map, a USGS strategic scientific goal, is furthered as USGS is obtaining access to greater volumes of more current geospatial data.

(3)  Equipment purchases.  When USGS receives funds from a non-USGS organization through an agreement which requires the purchase of equipment in order to collect data or conduct scientific studies for a new project, the bureau special rate may be approved.  Typically, the cost of the equipment purchases would be a significant portion of the total funds of the agreement and the equipment would be USGS property.

(4) Interagency Detail Work Assignments.  A bureau special rate to recover reduced administrative costs may be requested when a USGS employee assumes a detail work assignment at a non-USGS agency and the non-USGS agency provides the employee space and administrative support.  If the authority for the employee’s detail or assignment is the Intergovernmental Personnel Act, no indirect costs will be charged (see above item 9.A. (1)).

(5)  Biology Cooperative Research Units (CRUs).  Biology CRUs are in partnership with a state natural resource agency, the host university, and the Wildlife Management Institute, a non-governmental institution.  Significant administrative support is provided by the academic institutions where CRUs are collocated.  In recognition of the direct services support received from the non-USGS partners, CRUs recover one-half of the bureau’s full rate normally recovered from reimbursable customers.

B. A special rate request will not be approved for cooperative agreements or contracts in situations where USGS is fully and solely responsible for providing a product or service directly to the non-USGS customer funding the agreement.  In these situations, USGS is directly obtaining the services or products produced by a third-party cooperator or contractor, is responsible for the acceptance of the cooperators’/contractors’ services or products, and is using the cooperators’/contractors’ services or products to fulfill the terms of the agreement between USGS and the non-USGS customer funding the agreement (typically in combination with work performed directly by USGS).

C.  Each fiscal year the Chief Financial Officer will establish the USGS bureau special rate.

D.  The established USGS special rate will be applied to all approved and/or renewed bureau special rate requests throughout the fiscal year.

E.  Although the bureau special rate is not expected to fluctuate significantly from year to year, multi-year agreements must specify that the prevailing bureau special rate for each year will be applied to the agreement.

F.  Cost centers will apply the bureau special rate only when the Chief Financial Officer has granted written approval.  Cost centers will not charge facilities-related costs or their standard common services rate to funding approved for the bureau special rate.  If the cost center incurs administrative or other indirect costs related to the funds approved for a bureau special rate, cost centers may recover their reduced indirect (common services) costs through a cost center special rate that is no greater than the bureau special rate.

G.  The approval process for a special rate is as follows:

(1)  The responsible cost center manager shall submit a request to apply the bureau special rate through their appropriate Regional Executive and servicing Branch of Fiscal Services to their appropriate Regional Director for review and signature.  Headquarters and national capability cost centers will submit a request through their Office Chief and the Headquarters Office of Fiscal Services to their Associate Director for review and signature.

(2)  The Regional Director or Associate Director, as appropriate, shall forward the request to the Chief Financial Officer. 

H.  The requests to apply the bureau special rate shall include the following:

(1)  New Requests:  New requests will include the cost center/allocation organization name and number; customer (the non-USGS organization funding the agreement); the gross amount of the customer agreement; the gross amount of the agreement for which a bureau-level special rate is being requested; the type of third-party to whom the amount is being transferred/awarded (e.g., a university), and, if known, the name of the third party; and the type of funding mechanism being used (e.g., a grant or cooperative agreement). The request will also cite the cost center’s full indirect rate and 0% or the reduced indirect rate the cost center will apply to recover cost center level indirect costs should the bureau-level special rate request be approved. In addition, a copy of supporting documentation (e.g., a copy of the proposed reimbursable agreement) will be provided with the request.

(2)  Renewed Requests:  Requests to renew a previously approved special rate will be submitted annually.  Renewed requests will include the cost center/allocation organization number, a copy of the previously approved special rate request, a copy of the agreement (including any modifications or supplements), the gross amount of the agreement and the gross amount for which a bureau-level special rate is being requested, the third-party to whom the amount is being transferred/awarded; and the type of funding mechanism being used (e.g., a grant or cooperative agreement).  The request will also cite the cost center’s full indirect rate and 0% or the reduced indirect rate the cost center will apply to recover cost center level indirect costs should the renewed special rate request be approved.

I.  If approved by the Chief Financial Officer, the portion of the agreement for which the bureau special rate is approved will be charged the bureau special rate and a cost center rate which may not exceed the bureau special rate.  The portion of the agreement for which USGS is retaining funding and performing work will be charged the full bureau and cost center rates

13.  Reduced Rates.

A.  Department of the Interior bureaus have been granted a preferred customer rate.  The maximum rate that cost centers may charge other Department of the Interior bureaus for common services costs and bureau costs combined will be determined at the beginning of each fiscal year.  This policy does not pertain to fee-for-service or fixed price agreements that include indirect costs in the stated prices.  The USGS covers the remaining indirect costs with appropriated funds, thus “cost-sharing” DOI reimbursable projects.  In an effort to more equitably share the costs of this preferred customer rate, the USGS will migrate toward a more fair split where a certain percentage will be used to recover bureau costs and the remainder will be available to recover common service costs at the cost center.  When cost-share funds are depleted at the cost-center level, the cost-center manager will consult with the REX to determine if DOI cost share funds are available. When the REX cost-share funds are depleted, the cost center may negotiate with DOI customers on other options for reimbursable work, such as charging the full overhead rate or deferring work until the next fiscal year.

B.  Biology Cooperative Research Units shall recover 50 percent of the bureau costs normally recovered from customers or partners.

C.  USGS also participates with DOI bureaus and others in jointly funding the direct costs of projects.  For example, USGS may cover the salary cost for a principal investigator on a reimbursable project.  That is considered joint funding of direct costs and the salary costs should be budgeted and charged to the project using USGS appropriated funds.  For DOI projects, it is possible to have both cost sharing of overhead and joint funding of direct project costs.

D.  Any costs not recovered from external customers (e.g., direct costs, facilities-related costs, and common services indirect costs, including the appropriate share of bureau costs) will be funded by appropriated funds through cost share.  External customers include Department of the Interior bureaus.  Cost centers must have an approval for a reduced rate from the appropriate Regional Director or Associate Director."

E.  The approval process for a reduced rate with a customer other than DOI is as follows:

(1)  The responsible cost center manager shall submit a request to apply the reduced rate through their appropriate servicing Branch of Fiscal Services to their appropriate Regional Executive for review and approval.  Headquarters and national capability cost centers will submit a request through the Headquarters Office of Fiscal Services to their Office Chief for review and approval.

(2)  The Regional Executive or Office Chief, as appropriate, shall forward the request to the Regional Director or Associate Director for approval.

F.  The requests to apply a reduced rate to agreements with customers other than DOI shall include the following:

(1)  New Requests.  The request will identify the customer, the period of performance, the total amount of the customer agreement, the amount of cost share, the fund source for the cost share, the reason for the reduced rate request, the cost center full rate, and the reduced rate the cost center will apply to recover indirect costs. In addition, a copy of supporting documentation (e.g., a copy of the proposed reimbursable agreement) will be provided with the request.

(2) Renewed Requests.  Requests to renew a previously approved reduced rate request will include a copy of the previously approved reduced rate request, a copy of the agreement (including any modifications or supplements) and the information above.

14.  Use of a Net Indirect Cost Rate.

Rates will be stated and determined using a net method, that is, the ratio of indirect costs to direct costs.

15.  Exclusions.

A.  Agreements with reimbursable customers signed on or after October 1, 2002, will adhere to the provisions of this chapter, except as provided in 14.B, 14.C, and 14.D (see below).  In such cases, when the agreement does not cover all facilities-related costs and common services indirect costs including the appropriate share of bureau costs, the cost center will fund the difference from appropriated funds.

B. Based on a documented program need, a Regional Director (in the case of a science center or field office), an Associate Director (in the case of a national capability center), or the Deputy Director (in the case of a bureau center), may approve a cost center manager’s written request to continue a previously established cost or indirect cost rate.   

C. USGS may guarantee a customer a service or product at a firm, fixed, and published price (for example, printed maps) provided that indirect costs are included in the price.

D. An exclusion to the provisions of this chapter may be authorized when a Regional Director or Associate Director proposes a request for an exclusion, submits the request  through the USGS Chief Financial Officer, and the Director approves the request.

16.  Responsibilities.

A.  Director.  Reviews and either approves or disapproves requests for exclusions (under 15 D above) only to the provisions of the chapter.

B.  Chief Financial Officer

(1)  Determines the cost categories to be treated as bureau costs.

(2)  Determines the cost categories that may be charged to common services accounts.

(3)  Coordinates the annual operating budget request for Science Support costs, as part of the USGS annual budget process and makes recommendations regarding bureau costs to the Deputy Director.

(4)  Establishes each year the special rate charged to funding provided to other organizations.

(5)  Upon receipt of a special rate request endorsed by an Associate or Regional Director reviews special rate requests for conformity with established policies and procedures.  Returns approved and disapproved special rate requests through managerial channels to the requesting cost center manager, normally within 10 working days.  Provides a copy of signed requests to the servicing Fiscal Services office.

(6)  Provides detailed guidance regarding the application of cost distribution policies.

(7)  Monitors the implementation of cost distribution policies in USGS.

C.  Regional Directors and Associate Directors

(1)  Monitor the application of cost distribution policies in the cost centers for which they are responsible.

(2)  Review and approve the distribution of shared indirect costs among the applicable cost centers.

(3)  Review special rate requests to ensure the requests fulfill the established criteria. Associate and Regional Directors are expected to either approve the request for submission to the bureau Chief Financial Officer or to disapprove the request within 10 days of receipt. A copy of the request, annotated to reflect the action effected by Associate or Regional Director, should be sent to the servicing Fiscal Services Office.

D.  Regional Executives and Headquarters Office Chiefs

(1)  Ensure special rate requests contain the required information and fulfill the established criteria. Regional Executives and Headquarters Office Chiefs should complete their review within 10 working days of receipt of a special rate request.

E.  Cost Center Managers

(1)  Manage common services indirect costs and facility-related costs within their cost centers.

(2)  Establish each year, a common services rate and a facility rate for their cost centers.

(3)  Ensure requests for a bureau-level special rate are only submitted when indirect costs are demonstrably less at both the bureau and cost center level and the request fulfills the established criteria.  Cost center managers are responsible for ensuring that approval has been received from the bureau Chief Financial Officer prior to informing a customer of such.  Requests should be submitted promptly and as early in the fiscal year as possible.

 

signed by Karen D. Baker/_________________________________________8/7/06_________
Karen Baker                                                                                        Date
Associate Director for Administrative Policy and Services


Appendix A
Appendix B
Appendix C
Appendix D


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URL: http://www.usgs.gov/usgs-manual/500/501-1.html
Contact: APS, Office of Policy and Analysis
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