GAAP: Understanding It and the 10 Key Principles

The specific requirements and responsibilities of Federal agencies and non-Federal entities are set forth in this part. Federal agencies making Federal awards to non-Federal entities must implement the language in subparts C through F of this part in codified regulations unless different provisions are required by Federal statute or are approved by OMB. Subpart F of this part is issued pursuant to the Single Audit Act Amendments of 1996, (31 U.S.C. 7501–7507).

(b) All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. (b) When the non-Federal entity is notified in writing by the Federal awarding agency, cognizant agency for audit, oversight agency for audit, cognizant agency for indirect costs, or pass-through entity to extend the retention period. Inquiries concerning this part may be directed to the Office of Federal Financial Management Office of Management and Budget, in Washington, DC. Non-Federal entities’ inquiries should be addressed to the Federal awarding agency, cognizant agency for indirect costs, cognizant or oversight agency for audit, or pass-through entity as appropriate. Where an organization’s indirect costs benefit its major functions in varying degrees, indirect costs must be accumulated into separate indirect cost pools. Each indirect cost pool must then be allocated individually to benefitting functions by means of a base which best measures the relative benefits.

Financial Transformation: University Streamlines Operations for Sustainability

Establish the total amount of salaries and wages paid to all employees of the institution. Current values of both the EUIs and the REUI will be posted on the OMB website. (ii) “Effective square footage” allocated to research laboratory space must be calculated as the actual square footage times the relative energy utilization index (REUI) posted on the OMB Web site at the time of a rate determination.

Liabilities promised on the full faith and credit of the organization but not recorded anywhere constitute accounting fraud. While affiliations will not affect a legal status, they may be taken into consideration by legal proceedings as an indication of purpose. Most countries have laws that regulate the establishment and management of NPOs and that require compliance with corporate governance regimes. Most larger organizations are required to publish their financial reports detailing their income and expenditure publicly.

Changes to the Established Indirect Cost Rate Methodology

(a) The recipient must submit, no later than 120 calendar days after the end date of the period of performance, all financial, performance, and other reports as required by the terms and conditions of the Federal award. A subrecipient must submit to the pass-through entity, no later than 90 calendar days (or an earlier date as agreed upon by the pass-through entity and subrecipient) after the end date of the period of performance, all financial, performance, and other reports as required by the terms and conditions of the Federal award. The Federal awarding agency or pass-through entity may approve extensions when requested and justified by the non-Federal entity, as applicable. If the Federal awarding agency obtains the research data solely in response to a FOIA request, the Federal awarding agency may charge the requester a reasonable fee equaling the full incremental cost of obtaining the research data.

If that event does not occur, a final rate will be established and upward or downward adjustments will be made based on the actual allowable costs incurred for the period involved. Final rate means an indirect cost rate applicable to a specified past period which is based on the actual costs of the period. Except where a special rate(s) is required in accordance with section B.5 of this Appendix, the indirect cost rate developed under the above principles is applicable to all Federal awards of the organization.

Indirect Cost Proposal Checklist for First Time NICRA

Where a non-Federal entity’s indirect costs benefit its major functions in varying degrees, such costs must be accumulated into separate cost groupings. Each grouping must then be allocated individually to benefitted functions by means of a base which best measures the relative benefits. (b) the costs of central governmental services distributed through the central service cost allocation plan (as described in Appendix V to this part) and not otherwise treated as direct costs. State public assistance agencies will develop, document and implement, and the Federal Government will review, negotiate, and approve, public assistance cost allocation plans in accordance with Subpart E of 45 CFR Part 95. The plan will include all programs administered by the state public assistance agency.

The information described in this section must be provided for all billed central services, including internal service funds, self-insurance funds, and fringe benefit funds. Agency or operating agency means an organizational unit or sub-division within a governmental unit that is responsible for the performance or administration of Federal awards or law firm bookkeeping activities of the governmental unit. Establish the total costs incurred by the institution for the base period. In the absence of the alternatives provided for in Section A.2.d, the expenses included in this category must be allocated first on the basis of primary categories of users, including students, professional employees, and other users.

When the American Institute of Certified Public Accountants released its nonprofit audit standards (Statements of Audit Standards – SAS) in 2006, it has had a profound affect on nonprofit organizations and the software they use for their financial management. In the past, you may have seen the terms “reportable condition” and “material weakness” in your audit reports. The term “material weakness” will still be used, but its definition has changed. Based on their evaluation of these risks, auditors should be able to develop a plan for addressing them in order to minimize any potential impact on the operations of the nonprofit organization. This will involve creating controls or procedures to ensure that corrective action is taken should any issues arise during future audits.

However, the non-Federal entity must be able to account for funds received, obligated, and expended. (3) Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation.

What Are the Generally Accepted Accounting Principles (GAAP)?

(1) If certain items or categories of expense relate solely to one of the major functions of the institution or to less than all functions, such expenses should be set aside as a separate cost grouping for direct assignment or selective allocation in accordance with the guides provided in subsections b and d. Other sponsored activities means programs and projects financed by Federal and non-Federal agencies and organizations which involve the performance of work other than instruction and organized research. Examples of such programs and projects are health service projects and community service programs. However, when any of these activities are undertaken by the institution without outside support, they may be classified as other institutional activities. (1) Sponsored instruction and training means specific instructional or training activity established by grant, contract, or cooperative agreement.

• (2) The requirement for the non-Federal entity to return any funds due as a result of later refunds, corrections, or other transactions including final indirect cost rate adjustments.
• (1) Where space is devoted to a single function and metering allows unambiguous measurement of usage related to that space, costs must be assigned to the function located in that space.
• These records, among other conditions disclosed in this section, must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; and are incorporated into the official records of the non-Federal entity.
• Indirect cost rates identified in the NICRA apply to all cost reimbursable awards that incorporate provisional indirect rates.
• Nonprofit financial audits are performed by outside public accounting firms to verify that nonprofits comply with federal tax laws and regulations.
• An asset cost includes (as applicable) acquisition costs, construction costs, and other costs capitalized in accordance with GAAP.