Attached are the restricted indirect cost rates for fiscal year 2011-2012 for Arkansas school districts, education service cooperatives, and open-enrollment charter schools. This information is attached as a separate listing for each group. Also attached to this memo is a description of the approved methodology used to calculate these rates. In addition, a file detailing the calculations and source data is posted to the ADE website (http://arkansased.org/about/reports.html) in the “Other Reports” section at the bottom of the page. This file is listed there as “Indirect Cost Rate Detail 2011-2012.” Once the file is open, select the appropriate LEA number from the drop-down list at the top of the page to view the specific details of the 2011-12 indirect cost rate. For information regarding the federal regulations, refer to the “Cost Allocation Guide for State and Local Governments” published by the U.S. Department of Education available at http://www2.ed.gov/about/offices/list/ocfo/fipao/guideigcwebsite.pdf as well as the Office of Management and Budget (OMB) Circular A-87 available at http://www.whitehouse.gov/omb/circulars_a087_2004/.
The fiscal year 2011-2012 rates have been calculated using fiscal year 2009-2010 data. Open-enrollment charter schools that were not in operation in fiscal year 2009-2010 have been assigned the statewide average indirect cost rates for fiscal year 2011-2012. Indirect cost rates are calculated using a carryforward method that adjusts individual rates according to actual data. The carryforward compares the rates calculated for the second preceding year to the actual indirect costs realized in that year’s expenditure data. Any differences between these figures are then accounted for by adjusting the current year’s indirect cost rates. This adjustment will lower indirect cost rates when an “over recovery” has occurred and will raise the indirect cost rates when an “under recovery” has occurred. Indirect cost rates that have a negative value after the carryforward adjustment are assigned a rate of zero.
The methodology for calculating the restricted indirect cost rate requires reclassification of indirect expenditures in some 2300, 2500, and 2600 function codes. Also, the methodology allows only the first $25,000 of purchased service contracts are to be included in the amount to which the indirect cost rate is applied. Therefore, the federal program’s total direct expenditures, less capital outlay and purchased service contracts, will be provided on the federal Cognos report. LEAs will be able to add to this total the first $25,000 of each purchased service contract to arrive at the total direct cost of the program. The indirect cost rate will be applied to that total. LEAs must retain supporting documentation relating to the first $25,000 of each purchased service contract. Please refer to the “Methodology” attachment for complete details of the current methodology approved by the federal indirect cost group of the U.S. Department of Education.