Forms are enclosed for local education agencies to complete and return to the Department of Education for use in computing indirect cost rates to be used during the 1998-1999 fiscal year. As in recent years, most of the computation will be done by the state agency using information taken from the annual financial report submitted by each local education agency for the 1996-97 school year.
The state agency has adopted a plan to assign some of the district's central office expense to the indirect cost pool for computation purposes regardless of whether Form 4 is completed or not. This will be computed by determining what percentage federal revenue is of total district revenues. That percentage will be multiplied by the total expense listed on the 1996-97 financial report for Function 232, objects 10, 30, 40, and social security arising from salaries listed in Object 10 in the operating fund and the result for indirect cost pool. As an alternative, one copy of Form 4 is included and can be used by the district to allocate time and expense of central office personnel. One form should be used for each person. Federal requirements mandate the documentation of time allocations of such employees on some consistent basis. The Department suggests that a regular time sheet be kept on a daily basis for each employee claimed on Form 4 showing the category of work. This document should be signed by the employee and retained for audit purposes. Whichever method results in the larger figure being assigned to the indirect cost pool will be used in the assignment of rates.
All districts which elect to calculate their indirect cost are requested to sign their Indirect Cost Certification and return both the certification page and the completed Form 4 to the Department by May 28, 1999.
If a district does not wish to complete Form 4, the district may utilize the indirect cost rate listed in the box on the certification page. The Department has assigned rates for each school district based on information on file at the ADE. If the district elects to use the calculated rate provided by the ADE, please sign the Indirect Cost Certification sheet, date it, and return the form to the ADE.
Please make a copy of the certification sheet for your district files to document the rates utilized in reports, grants, etc. Auditors often ask for this document to validate indirect cost calculations.
Please note, the attachments referenced in this memo will be mailed with the director's memo on May 5, 1999.