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CONTRACT COST PRINCIPLES AND PROCEDURES

(b) At the grantee department level in a State, a single Federal agency will have responsibility similar to that set forth in (a) above for the negotiation, approval and audit of the indirect cost proposal. Cognizant Federal agencies have been designated for this purpose. Changes which may be required from time to time in agency assignments will be arranged by the Department of Health, Education and Welfare in collaboration with the other interested agencies and submitted to the General Services Administration for final approval. A current list of agency assignments will be maintained by the Department of Health, Education and Welfare.

(c) Questions concerning the cost allocation plans approved under (a) and (b) above should be directed to the agency responsible for such approvals.

15-709.5 Negotiation and Approval of Indirect Cost Proposals for Local Governments.

(a) Cost allocation plans will be retained at the local government level for audit by a designated Federal agency except in those cases where that agency requests that cost allocation plans be submitted to it for negotiation and approval. (b) A list of cognizant Federal agencies assigned responsibility for negotiation, approval and audit of central support service cost allocation plans at the local government level is being developed. Changes which may be required from time to time in agency assignments will be arranged by the Department of Health, Education and Welfare in collaboration with the other interested agencies, and submitted to the General Services Administration for final approval. A current list of agency assignments will be maintained by the Department of Health, Education, and Welfare.

(c) At the grantee department level of local governments, the Federal agency with the predominant interest in the work of the grantee department will be responsible for necessary negotiation, approval and audit of the indirect cost proposal.

15-709.6 Resolution of Problems. To the extent that problems are encountered among the Federal agencies in connection with 15-709.4 and 15-709.5 above, the General Services Administration will lend assistance as required.

15-710 Standards for Selected Items of Cost. Paragraphs 15-711, 15-712, and 15-713 provide standards for determining the allowability of selected items of cost. These standards will apply irrespective of whether a particular item of cost is treated as direct or indirect cost. Failure to mention a particular item of cost in the standards is not intended to imply that it is either allowable or unallowable, rather determination of allowability in each case should be based on the treatment of standards provided for similar or related items of cost. The allowability of the selected items of cost is subject to the general policies and principles stated in 15-701 through 15-709.

15-711 Allowable Costs.

15-711.1 Accounting. The cost of establishing and maintaining accounting and other information systems required for the management of grant programs is allowable. This includes cost incurred by central service agencies for these purposes. The cost of maintaining central accounting records required for overall State or local government purposes, such as appropriation and fund accounts by the Treasurer, Comptroller, or similar officials, is considered to be a general expense of Government and is not allowable.

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ARMED SERVICES PROCUREMENT REGULATION

Chap.

VI

VII

VIII IX X

United States Arms Control and Disarmament Agency (Parts

600-699)
Overseas Private Investment Corporation (Parts 700-799)
Employee-Management Relations Commission (Parts 800-899)
Foreign Service Grievance Board (Parts 901-999)
Inter-American Foundation (Parts 1000-1099)
International Boundary and Water Commission, United States

and Mexico, United States Section (Part 1100-end)

XI

Title 23—Highways

I

II

Federal Highway Administration, Department of Transporta

tion (Parts 0-899) National Highway Traffic Safety Administration and Federal

Highway Administration, Department of Transportation (Parts 1200-1299)

Title 24-Housing and Urban Development

I

II

III

IV

V

SUBTITLE A-Office of the Secretary, Department of Housing

and Urban Development (Parts 0-99) SUBTITLE B-Regulations Relating to Housing and Urban Devel

opment Office of Assistant Secretary for Equal Opportunity, Depart

ment of Housing and Urban Development (Parts 100-199) Office of Assistant Secretary for Housing-Federal Housing

Commissioner, Department of Housing and Urban Develop

ment (Parts 200-299)
Government National Mortgage Association, Department of

Housing and Urban Development (Parts 300-399)
Office of Assistant Secretary for Housing Management, Depart-

ment of Housing and Urban Development (Parts 400-499) Office of Assistant Secretary for Community Planning and De

velopment, Department of Housing and Urban Development

(Parts 500-599) Office of Assistant Secretary for Community Planning and De

velopment, Department of Housing and Urban Development

(Parts 600-699)
New Community Development Corporation, Department of

Housing and Urban Development (Parts 700-799)
Low-Income Housing, Department of Housing and Urban De-

velopment (Parts 800-1299)
Office of Interstate Land Sales Registration, Department of

Housing and Urban Development (Parts 1700-1799)
Federal Disaster Assistance Administration, Department of

Housing and Urban Development (Parts 2200-2299)
Mortgage Insurance and Loan Programs Under the Emergency

Homeowners' Relief Act, Department of Housing and Urban
Development (Parts 2700-2799)

VI

VII

VIII

IX

XIII

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CONTRACT COST PRINCIPLES AND PROCEDURES

it is comparable to that paid for similar work in the labor market in which the employing government competes for the kind of employees involved. Compensation surveys providing data representative of the labor market involved will be an acceptable basis for evaluating reasonableness.

(b) Payroll and Distribution of Time. Amounts charged to grant programs for personal services, regardless of whether treated as direct or indirect costs, will be based on payrolls documented and approved in accordance with generally accepted practice of the State or local agency. Payrolls must be supported by time and attendance or equivalent records for individual employees. Salaries and wages of employees chargeable to more than one grant program or other cost objective will be supported by appropriate time distribution records. The method used should produce an equitable distribution of time and effort.

15-711.11 Depreciation and Use Allowances.

(a) Grantees may be compensated for the use of buildings, capital improvements, and equipment through use allowances or depreciation. Use allowances are the means of providing compensation in lieu of depreciation or other equivalent costs. However, a combination of the two methods may not be used in connection with a single class of fixed assets.

(b) The computation of depreciation or use allowance will be based on acquisition cost. Where actual cost records have not been maintained, a reasonable estimate of the original acquisition cost may be used in the computation. The computation will exclude the cost or any portion of the cost of buildings and equipment donated or borne directly or indirectly by the Federal Government through charges to Federal grant programs or otherwise, irrespective of where title was originally vested or where it presently resides. In addition, the computation will also exclude the cost of land. Depreciation or a use allowance on idle or excess facilities is not allowable, except when specifically authorized by the grantor Federal agency.

(c) Where the depreciation method is followed, adequate property records must be maintained, and any generally accepted method of computing depreciation may be used. However, the method of computing depreciation must be consistently applied for any specific asset or class of assets for all affected federally sponsored programs and must result in equitable charges considering the extent of the use of the assets for the benefit of such programs.

(d) In lieu of depreciation, a use allowance for buildings and improvements may be computed at an annual rate not exceeding two percent of acquisition cost. The use allowance for equipment (excluding items properly capitalized as building cost) will be computed at an annual rate not exceeding six and two-thirds percent of acquisition cost of usable equipment.

(e) No depreciation or use charge may be allowed on any assets that would be considered as fully depreciated, provided, however, that reasonable use charges may be negotiated for any such assets if warranted after taking into consideration the cost of the facility or item involved, the estimated useful life remaining at time of negotiation, the effect of any increased maintenance charges or decreased efficiency due to age, and any other factors pertinent to the utilization of the facility or item for the purpose contemplated.

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ARMED SERVICES PROCUREMENT REGULATION

CONTRACT COST PRINCIPLES AND PROCEDURES

15-711.12 Disbursing Service. The cost of disbursing grant program funds by the Treasurer or other designated officer is allowable. Disbursing services cover the processing of checks or warrants, from preparation to redemption, including the necessary records of accountability and reconciliation of such records with related cash accounts.

15-711.13 Employee Fringe Benefits. Costs identified under (a) and (b) below are allowable to the extent that total compensation for employees is reasonable as defined in 15-711.10.

(a) Employee benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, sick leave, court leave, military leave, and the like, if they are: (1) provided pursuant to an approved leave system, and (2) the cost thereof is equitably allocated to all related activities, including grant programs.

(b) Employee benefits in the form of employer's contribution or expenses for social security, employees' life and health insurance plans, unemployment insurance coverage, workmen's compensation insurance, pension plans, severance pay, and the like, provided such benefits are granted under approved plans and are distributed equitably to grant programs and to other activities.

15-711.14 Employee Morale, Health and Welfare Costs. The costs of health or first-aid clinics and/or infirmaries, recreational facilities, employees' counseling services, employee information publications, and any related expenses incurred in accordance with general State or local policy, are allowable. Income generated from any of these activities will be offset against expenses.

15-711.15 Exhibits. Costs of exhibits relating specifically to the grant programs are allowable.

15-711.16 Legal Expenses. The cost of legal expenses required in the administration of grant programs is allowable. Legal services furnished by the chief legal officer of a State or local government or his staff solely for the purpose of discharging his general responsibilities as legal officer are unallowable. Legal expenses for the prosecution of claims against the Federal Government are unallowable.

15-711.17 Maintenance and Repair. Costs incurred for necessary maintenance, repair, or upkeep of property which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable.

15-711.18 Materials and Supplies. The cost of materials and supplies necessary to carry out the grant programs is allowable. Purchases made specifically for the grant program should be charged thereto at their actual prices after deducting all cash discounts, trade discounts, rebates, and allowances received by the grantee. Withdrawals from general stores or stockrooms should be charged at cost under any recognized method of pricing consistently applied. Incoming transportation charges are a proper part of material cost.

15-711.19 Memberships, Subscriptions and Professional Activities.

(a) Memberships. The cost of membership in civic, business, technical and professional organizations is allowable provided: (1) the benefit from the membership is related to the grant program, (2) the expenditure is for agency membership, (3) the cost of the membership is reasonably related to the value of the ser

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ARMED SERVICES PROCUREMENT REGULATION

CONTRACT COST PRINCIPLES AND PROCEDURES

vices or benefits received, and (4) the expenditure is not for membership in an organization which devotes a substantial part of its activities to influencing legislation.

(b) Reference Material. The cost of books and subscriptions to civic, business, professional, and technical periodicals is allowable when related to the grant program.

(c) Meetings and Conferences. Costs are allowable when the primary purpose of the meeting is the dissemination of technical information relating to the grant program and they are consistent with regular practices followed for other activities of the grantee.

15-711.20 Motor Pools. The costs of a service organization which provides automobiles to user grantee agencies at a mileage or fixed rate and/or provides vehicle maintenance, inspection and repair services are allowable.

15-711.21 Payroll Preparation. The cost of preparing payrolls and maintaining necessary related wage records is allowable.

15-711.22 Personnel Administration. Costs for the recruitment, examination, certification, classification, training, establishment of pay standards, and related activities for grant programs are allowable.

15-711.23 Printing and Reproduction. Cost for printing and reproduction services necessary for grant administration, including but not limited to forms, reports, manuals, and informational literature, are allowable. Publication costs of reports or other media relating to grant program accomplishments or results are allowable when provided for in the grant agreement.

15-711.24 Procurement Service. The cost of procurement service, including solicitation of bids, preparation and award of contracts, and all phases of contract administration in providing goods, facilities and services for grant programs, is allowable.

15-711.25 Taxes. In general, taxes or payments in lieu of taxes which the grantee agency is legally required to pay are allowable.

15-711.26 Training and Education. The cost of in-service training, customarily provided for employee development which directly or indirectly benefits grant programs is allowable. Out-of-Service training involving extended periods of time is allowable only when specifically authorized by the grantor agency.

15-711.27 Transportation. Costs incurred for freight, cartage, express, postage and other transportation costs relating either to goods purchased, delivered, or moved from one location to another are allowable.

15-711.28 Travel. Travel costs are allowable for expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business incident to a grant program. Such costs may be charged on an actual basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied to an entire trip, and results in charges consistent with those normally allowed in like circumstances in nonfederally sponsored activities. The difference in cost between firstclass air accommodations and less-than-first-class air accommodations is unallowable except when less-than-first-class air accommodations are not reasonably available.

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ARMED SERVICES PROCUREMENT REGULATION

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