June 26" 2007 Special Session
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June 26" 2007 Special Session
LEGISLATIVE RESOLUTION NO. LRO7-04
INTRODUCED BY THE LEGISLATIVE BRANCH
LEGISLATATIVE RESOLUTION OF THE CROW TRIBAL
LEGISLATURE’ENTITLED:
é
“ADOPTION OF THE CROW.TRIBE OF INDIANS “FINANCIAL
MANAGEMENT SYSTEM, POLICIES AND PROCEDURES.”
WHEREAS, The Crow Tribe Executive Branch has adopted and approved the
‘Financial Management System, Policies and Procedures, on March 31, 2006, and
WHEREAS, the Crow Legislature desires to establish a “Financial Management
System, Policies and Procedures for the Legislative Branch which will provide the necessary
and required procedures for operation of the Legislature’s Financial System, and
WHEREAS, it is the goal of the Legislative Branch to establish a separate system
from the Executive Branch, and
WHEREAS, the Crow Tribal Legislature has reviewed the Crow Tribe’s “Financial
Management System, Policies and Procedures, and
WHEREAS, the Crow Tribal Legislature has concluded after careful review that the
Crow Tribal “Financial Management System, Policies and Procedures” are adequate and
appropriate at this time.
NOW, THEREFORE, BE IT RESOLVED BY THE CROW TRIBAL LEGISLATURE.
THE CROW LEGISLATURE HEREBY THIS ACTION
OFFICIALLY ADOPTS THE CROW FINANCIAL MANAGEMENT
SYSTEM, POLICIES AND PROCEDURES, PAGES 1 - 82, APPROVED
BY THE EXECUTIVE BRANCH MARCH 31, 2006, WHICH IS
ATTACHED, INCORPORATED BY REFERENCE AND MADE A PART
HEREOF AS IF STATED HEREIN. THE POLICIES AND
PROCEDURES CONTAINED THEREIN SHALL BE FOLLOWED AT
ALL TIMES BY ALL LEGISLATIVE EMPLOYEES, OFFICERS AND
June 26" 2007 Special Session
LR ADOPTING THE TRIBE’S FINANCIAL MANAGEMENT SYSTEM, POLICIES AND
PROCEDURES, PAGE 1 -82, ESTABLISHED AND APPROVED MARCH 31, 2006.
Page 1 of 2
LEGISLATORS. COMPLIANCE WITH THESE POLICIES AND
PROCEDURES IN THIS ADOPTED “FINANCIAL MANAGEMENT
SYSTEM, POLICIES AND PROCEDURES” SHALL BE STRICTLY
CONSTRUED BY THE LEGISLATIVE ENFORCEMENT AUTHORITY
OR THE PROPER CIVIL/CRIMINAL COURT.
CERTIFICATION
Thereby certify that this Legislative Resolution entitled “ADOPTION OF THE
CROW TRIBE OF INDIANS “FINANCIAL MANAGEMENT SYSTEM,
POLICIES.AND PROCEDURES.” was duly enacted by the Crow Tribal Legislature
with a vote of _14_in favor _0_ opposed, and _0_ abstaining and that a quorum was present
on this 26", day of June “Special Session”, 2007.
Speaker of the House
Servant of the Apsaalooke People
Crow Tribal Legislature
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June 26" 2007 Special Session
LR ADOPTING THE TRIBE’S FINANCIAL MANAGEMENT SYSTEM, POLICIES AND
PROCEDURES, PAGE 1 -82, ESTABLISHED AND APPROVED MARCH 31, 2006.
Page 2 of 2
Bill or Resolution Number. l Bit (6) Lbs Introduced by Lani Date of Vote June 262007
Representative: Yes No Abstained
\
L. Plain Bull
O. Costa
V. Crooked Arm
M. Not Afraid
R. Iron
B. House
E. Fighter
L. Costa
VK AA AA
L. Hogan
S. Fitzpatrick
K. Real Bird
M. Covers Up
L. Not Afraid
B. Shane
J. Stone
D. Wilson
R. Old Crow
Secretary of the House
D. Goes Ahead
Speaker of the House
TV AVI A
O O
Not Passed Tabled Veto Override
Signature orticer( Sy Vee. $I era ln Date: b ‘dG -© ' Z
Totals:
Result of Vote:
CROW TRIBE OF INDIANS
FINANCIAL MANAGEMENT SYSTEM
POLICIES AND PROCEDURES
Established and Approved: March 31, 2006
CROW TRIBE OF INDIAN
FINANCIAL MANAGEMENT SYSTEM
TABLE OF CONTENTS
CHAPTER _ INDEX SUBJECT PAGE NUMBER
1 INTRODUCTION 1-4
01.100 GENERAL 1-2
01.200 GOALS OF THE TRIBE 2
01.300 ACCOUNTING CONCEPTS 2
01.301 FUND ACCOUNTING 2-3
01.302 TYPES OF FUNDS 3
01.400 CENTRALIZED FINANCIAL MANAGEMENT 4
01.500 AMENDMENTS TO THE POLICIES 4
01.600 COMPONENT UNITS 4
2 STAFF RESPONSIBILITIES 5-8
02.100 PURPOSE 5
02.200 ELECTED OFFICIALS 5
02.201 CPA 6-7
02.202 FINANCE DIRECTOR/CONTROLLER 7-8
3 ALLOWABLE EXPENDITURE OF FEDERAL FUNDS9-33
03.100 GENERAL GUIDELINES 9
03.200 EXPENDITURES FOR 638 CONTRACTS 9-10
03.300 OMB A-87 EXPENDITURES 10-33
4 GENERAL FEDERAL GUIDELINES 34-35
04.100 OVERVIEW
34
04.200 FEDERAL FINANCIAL STANDARDS 34-35
CHAPTER INDEX SUBJECT PAGE NUMBER
5 INDIRECT COSTS 36-42
05.100 INTRODUCTION AND OVERVIEW 36-37
05.200 EFFECT ON PROGRAMS 37-38
05.300 TYPES OF COSTS TO BE INCLUDED IN
INDIRECT COST BUDGET 38
05.400 TERMINOLOGY USED FOR INDIRECT
COST PROPOSALS 38-39
05.500 DIRECT BASE COSTS 39-40
05.600 INDIRECT COST RATE METHODS 40
05.700 TYPES OF INDIRECT COST AGREEMENTS 40-41
05.800 THE INDIRECT COST PROPOSAL PACKAGE 41-42
05.900 OIG SPECIAL CONSIDERATION CERTAIN COSTS 42
6 THE ACCOUNTING CYCLE 43-53
06.100 PURPOSE OF THE ACCOUNTING SYSTEM 43
06.200 ACCOUNTING SYSTEM-GENERAL DESCRIPTION 43-44
06.201 STRUCTURE OF MIP FUND ACCOUNTING SYSTEM 44
06.202 DATA ENTRY 44
06.203 FINANCIAL REPORTING 44-45
06:204 FUND ACCOUNTING MODULES 45-46
06.300 CPA 46
06.400 OVERVIEW OF RECORDING AND ACCEPTING
RECEIPTS 46
06.401 GENERAL POLICIES REGARDING CASH RECEIPTS 46-47
06.402 DETAILED PROCESS OF ACTUAL RECEIPTING
OF CASH 47-48
06.500 OVERVIEW OF CASH DISBURSEMENTS 48
06.501 DETAILS ON CASH DISBURSEMENT PROCESS 48-49
06.502 LOST/STOLEN CHECKS 49
06.600 PAYROLL COMPONENT OF THE ACCOUNTING
CYCLE 49-50
06.601 DETAILS OF PAYROLL 50-51
06.602 TIMESHEETS 51
06.603 PAYROLL DEDUCTIONS 31-52
06.700 OVERVIEW OF CAPITAL ASSETS 52
06.701 RECORDING CAPITAL ASSETS 52
06.800 CREDIT LOANS 53
7 TRAVEL 54-60
07.100 OFF-RESERVATION TRAVEL 54
CHAPTER INDEX SUBJECT PAGE NUMBER
07.101 USE OF PRIVATE VEHICLES — MILEAGE
ALLOWANCE 54
07.102 USE OF PERSONAL OR TRIBAL VEHICLES:
ELECTED OFFICIALS EXCEPTION 54
07.103 USE OF TRIBAL VEHICLES — MILEAGE
ALLOWANCE 54
07.104 COMMERCIAL TRAVEL COSTS VS PERSONAL
VEHICLE 55
07.105 DIRECT ROUTE 55
07.106 OFFICIAL TRAVEL — COMMUTING 36
07.107 INSURANCE COVERAGE AND DRIVERS LICENSE 56
07.108 LODGING AND PER DIEM/OVERNIGHT TRAVEL — 56-57
07.109 OTHER TRAVEL EXPENSES 57
07.110 ENTERTAINMENT 57
07.111 NON-EMPLOYEE TRAVEL 57-58
07.200 TRAVEL ADVANCE FORM 58
07.300 TRAVEL RECONCILIATION FORM 59
07.400 ON-RESERVATION TRAVEL 60
07.500 VEHICLE RENTALS 60
8 MISCELLANEOUS EXPENDITURES POLICIES 61-63
08.100 PURPOSE 61
08.200 EMERGENCY ASSISTANCE 61
08.300 FOOD COSTS 61
08.400 BURIAL FEEDS 61
08.500 DONATIONS 61
08.600 COMMITTEE MEETINGS 61-62
08.700 CREDIT CARDS 62
08.800 CELL PHONES 62
08.900 TELEPHONE USAGE 62
08.1000 LOANS : 62
08.1100 FUEL PURHCASE/MILEAGE REIMBURSEMENTS 62-63
08.1200 COMPUTER EQUIPMENT/PERIPHIALS PURCHASES 63
08.1300 SENIOR BENEFITS 63
9 RECORDS RETENTION 64-65
09.100 RESPONSIBILITIES 64-65
09.200 CATALOGUE OF RECORDS 65
Til
CHAPTER INDEX SUBJECT PAGE NUMBER
10 PROCUREMENT & PURCHASING POLICIES 66-73
10.100 POLICIES AND OBJECTIVES 66-67
10.110 STANDARDS OF CONDUCT 67
10.200 RESPONSIBILITY OF THE PROCUREMENT OFFICER 67-68
10.300 PURCHASE REQUISITIONS 68
10.400 PURCHASE ORDER CLERK: INITIATION OF
PURCHASE ORDER 68-69
10.410 VENDOR PURCHASE AGREEMENTS (VPA) 69
10.420 OPEN PURCHASE ORDERS 69
10.430 SIGNATURE AND REVIEW REQUIREMENTS 70
10.500 SELECTION OF SUPPLIERS 710-72
10.510 PREPARING A SOLICITATION OR BID 72
10.600 LEGISLATURE EXCEPTIONS B
il PROPERTY, PLANT AND EQUIPMENT
PROCEDURES 74-77
11.100 DEFINITION OF PROPERTY, PLAN AND
EQUIPMENT 74
11.200 PP&E ACQUISITIONED 74
11.300 RECORDKEEPING OVER PROPERTY, PLANT
AND EQUIPMENT 75
11.400 DEPRECIATION 75-16
11.500 INVENTORY OF PROPERTY, PLANT AND
EQUIPMENT 16
11.600 DISPOSAL OF PROPERTY, PLANT AND
EQUIPMENT 16-77
12 INTERNET USAGE POLICY 78-80
12.100 POLICY OVERVIEW 78
12.200 DETAILED INTERNET POLICIES 78-80
13 DISASTER RECOVERY 81-82
13.100 OVERVIEW 81
13.200 EMERGENCY CONTACTS 81-82
13.300 EMERGENCY PROCEDURES TO SAFEGUARD
COMPUTER SYSTEM 82
13.400 STEPS FOR CONTINUING OPERATIONS OF
FINANCIAL SYSTEM 82
Iv
CHAPTER INDEX
SUBJECT
PAGE NUMBER
14
14.100
14.200
14.300
COMPUTER WORKSTATION BACKUP
POLICY OVERVIEW
WHERE DO YOU BACKUP?
WHEN DO YOU BACKUP?
83
83
83
83
CHAPTER ONE
INTRODUCTION
01.100 GENERAL
The Crow Tribe of Indians (The Tribe) is recognized by the United States Government as
eligible for the special programs and services provided by the United States to Indians
because of their status as Indians. The Tribe receives a substantial amount of its total funds
by entering into contracts with the Bureau of Indian Affairs and the Indian Health Service
under the provisions of Public Law 93-638, The Indian Self-Determination and Education
Assistance Act. As permitted by this law, the Tribe provides maximum participation by the
people in these contracts that enable the Tribe to administer its own governmental programs.
Other sources of funds are primarily from other departments within the Federal Government
and the State of Montana.
General management of the Tribe falls under the responsibility of an elected Chairman,
Vice-Chairman, Secretary, and Vice-Secretary. These four officers hereinafter referred to as
the elected officials, hire employees to assist in the administration of the Tribe. Key
employees are the cabinet heads/members. The Chief Executive Officer leads the cabinet
members. The Controller and/or Finance Director is a cabinet member delegated the
authority of administering the financial management system. General duties of some of the
key employees in regards to the financial management of the Tribe are explained in Chapter
Two of this manual.
The Chairperson hires a Certified Public Accountant, hereinafter referred to as the CPA, to
act as Controller and/or Finance Director for the Tribe. Certain designated accounting staff
assists the CPA and may perform some of the CPA’s duties as assigned. The CPA provides
on-site monitoring and oversight for all components of the financial management system.
The CPA generally performs all controllership functions for the Tribe. General duties of the
CPA are explained in Chapter Two of this manual.
The Tribe utilizes monies from both unrestricted and general purposes and from the Federal
Government and other governments for restricted programs. Unrestricted funds (general
fund) may be used at the discretion of the Tribe with little or no binding requirements other
than to follow the financial management policies and procedures as established by the
Tribe's elected officials. However, the Federal Government restricts expenditures on
programs funded by it only for purposes, and in amounts, approved by it and in accordance
with procedures detailed in Federal Law. Whether the administration of the Tribe agrees that
the constraints imposed by the Federal Government promote wise management of resources,
or feel that wise management is hindered, is beside the point. The constraints are binding,
the Tribe has no choice but to operate within them; the financial management system and
the accounting system must enable the elected officials to comply with legal constraints.
This need to demonstrate compliance with legal requirements led to the development of the
Tribe's fund accounting system.
01.200 GOALS OF THE TRIBE
The Tribe has developed the financial management system in order to assist in achieving the
following goals and objectives:
1. To provide efficient administrative support to all programs in order to assist those
programs in providing maximum services to program participants and recipients.
2. To provide a good use of the Tribe's limited resources.
3. To centralize all financial management support services within the operational control of
the Tribe’s elected officials in order that policies are standardized for all programs.
4. T o assure expenditure of federal and state funds are made according to grant and contract
guidelines.
5. To provide meaningful and accurate financial data to programs and external agencies in a
timely manner.
01.300 ACCOUNTING CONCEPTS
The Tribe utilizes generally accepted accounting principles as applied to governmental
entities.
01.301 FUND ACCOUNTING
The word FUND has a special technical meaning in the non-business sector. A fund is
defined as a fiscal and accounting entity with a selfbalancing set of accounts recording cash
and other financial resources, together with all related liabilities and residual equities, or
balances, and changes therein, which are segregated for the purpose of carrying on specific
activities or attaining certain objectives in accordance with special regulations, restrictions
or limitations.
The dual meaning of fund should be noted. A fund is an accounting entity; it is also a fiscal
entity created, in most instances, by operation of law. The term law is used in its most
general sense. The accounting and financial reporting of the Tribe is prescribed by
provisions of grants and contracts from Federal or other governmental agencies and may be
prescribed by state laws, agreements with employees, and agreements with individuals or
private organizations which have donated assets to be used for specific purposes. The Tribe
is also bound by administrative regulations of agencies of higher jurisdictions.
nN
Another distinctive characteristic of the Tribe's accounting system is the formal recording of
the legally approved budget in the accounts of funds operated on an annual basis. This is a
result of the need to demonstrate compliance with laws governing the sources of revenues
available and the laws governing the utilization of these revenues. Briefly: Budgetary
accounts are opened as of the beginning of each fiscal year and closed as of the end of each
fiscal year; therefore they have no balances at year-end. During the year, however, the
budgetary-accounts of a fund are integrated with its proprietary accounts. Proprietary
accounts generally refer to asset, liability, net worth, revenues, and expense accounts. A
general summary of the Tribe's accounting system is that it has the accounting and reporting
capability to make it possible both: a) To present fairly and with full disclosure the financial
position and results of financial operations of the funds and account groups in conformity
with generally accepted accounting principles; and b) to determine and demonstrate
compliance with finance related legal and contractual provisions.
01.302 TYPES OF FUNDS
The Tribe utilizes the following types of funds within its accounting system.
1, General fund. The general fund is the operating fund of the Tribe. It is used to account for
all financial resources except those required to be accounted for in another fund. The
indirect cost charges collected from other funds are accounted for as a separate component
of the general fund.
2. Special Revenue Funds. The special revenue funds are used to account for the proceeds of
specific revenue sources that are legally restricted to expenditures for specified purposes.
” These funds are grant/contract funds from Federal or state agencies that represent the
activities of various programs which are disbursed by the Tribe and over which the Tribe
exercises fiscal and administrative control.
3. Capital Projects Fund. The receipt and disbursement of all financial resources to be used
for the acquisition of capital facilities, other than those financed by economic ventures, is
accounted for by the capital projects fund.
4. Enterprise Funds. Enterprise funds are used to account for operations that are financed
and operated in a manner similar to private business enterprises where the intent of the
governing body is that the costs (expenses, including depreciation) of providing goods or
services on a continuing basis be financed or recovered primarily through user charges or
enterprise revenues.
5. Internal Service Funds. Internal service funds are used to account for the financing of
goods or services provided by one department to other departments of the Tribe and to other
governmental units, on a cost reimbursement basis. For example, rental income and
expenses related to the rental of equipment to programs by the Tribe is reported in the
internal service fund when Tribal programs are renting the equipment.
01.400 CENTRALIZED FINANCIAL MANAGEMENT
The Crow Tribe of Indians has adopted a centralized financial management all accounting
system as provided in 25 Code of Federal Regulations. The Tribe utilizes a centralized
financial management system whereby the elected officials retain control over the use of any
funds under the management of the Tribe. All funds are accounted for through the
centralized financial management system. Any individual or entity that utilizes the name of
the Crow Tribe of Indians to gain funding, either formally or informally, agrees to utilize the
centralized financial management system.
Exception: Currently, the Abandoned Mine Lands Program maintains a separate financial
management system. It is monitored by the Crow Tribe and is included in the Tribe’s
Financial Audit. Other programs may be granted this exception if special circumstances
warrant. These programs will generally follow the same policies as the Tribe, but may have
their own policies that override the Tribe’s.
01.500 AMENDMENTS TO THE POLICIES
Amendments to the policies stated in this manual will be attached at the beginning of the
appropriate chapter. The amendment will refer to the paragraph of the policy changed, if
applicable. The amendment must be dated and signed by the elected Chairman.
01.600 COMPONENT UNITS
There are currently three Component Units operating under the Crow Tribe of Indians.
They are the Awe Kualawaache Care Center, Apsaalooke Housing Authority and Apsaloka
_.Casino Enterprise. These Component Units should have their own financial policies
established. If a particular policy is not addressed within their policies, than they should
adopt the Tribe’s policies in those circumstances.
CHAPTER TWO
STAFF RESPONSIBILITIES
02.100 PURPOSE
The following financial management and accounting job duties have been assigned as
designated to maximize separation of duties and provide better internal administrative and
accounting controls.
02.200 ELECTED OFFICIALS
GQ
The elected officials have general oversight responsibility for the financial stability of the
government. Specific duties are listed below.
. Assists in the development and implementation of plans of operation to meet local! needs.
Ensures that the needs of the citizens are met as far as possible with available Tribal
resources.
Selects the external auditor to perform an annual audit as required by the Single Audit Act
of 1984 and approves the audit report prior to it being submitted to funding agencies.
Reviews and approves the annual indirect cost proposal prior to its submission to the
Department of the Interior, Office of Inspector General.
Participates in federal funding grant and contract negotiations, with final signature authority.
Participates in legal and settlement issues involving potential monetary and land reclamation
for the benefit of the Tribe.
Participates in the negotiated settlement of other legal disputes.
With assistance from the Tribe's legal staff, negotiates major contracts to. be performed by
outside firms.
Serves as signers on checks for disbursement of funds. Two signatures are required on all
checks.
02.201 CPA
w
ACCOUNTING
. Assists with the financial planning, investment, and procurement of Tribal funds.
. Analyzes financial records to forecast future financial position, cash flow and
subsequent budget requirements.
. Assists the finance director with the budgeting process. Responsible for budget
modifications as deemed necessary. The elected officials will receive notification of any
major budget modifications.
. Responsible for preparing Trial Balances and all financial reports. Reviews for
reasonableness-and resolves any discrepancies.
. Responsible for the overall accounting functions. Reconciling the bank accounts and
prepating all journal entries.
. Assists the auditors as necessary in completing their fieldwork and preparing the
financial-audit report.
PAYROLL
. Receives timesheets, computes earnings and deductions, and computes annual and sick
leave for all employees.
. Prepares payroll listing by program.
. Processes payroll and maintains employee earnings records.
. Processes checks to entities due payments for withholdings from employees' gross
earnings.
. Prepares all required tax reports.
. Monitors employee timesheets and time records for validity.
. Prepares all year-end reports and statements on employee earnings.
. Maintains the payroll journal and summarizes expenditure and liability data on a
monthly basis for posting to the general ledger.
C. CONTRACTS MANAGEMENT
1. Maintains individual program files, including award notices, modifications, approved
budgets, correspondence with funding agencies and Tribal program staff, and financial
and program audit reports.
2. Assists program administrative staff in contract and grant budgetary matters and
compliance issues. The CPA does not prepare program reports, but may provide some
assistance in filing as deemed necessary.
3. Performs technical assistance to the Tribe's Contracts Officer as directed by the elected
officials.
4. Prepares the financial reports and draw down-requests for all contracts and grants.
5. Records any expenditure and incurred for all contracts and grants.
D. AUTOMATED ACCOUNTING SYSTEMS
1. Serves as the contact person for the external servicing vendor for the automated system.
2. Assures the automated system is maintained in operating order.
3. Backs up the accounting system frequently and stores an occasional copy off-site.
4. Restores the system, as required.
5. Updates the automated system with all software enhancements.
6. Provides training to Tribal staff on use of required software.
7. Provides assistance to departments in the installation of automated systems and
subsequent use.
8. Provides assistance in the per capita distribution to assure payments are generated ina
timely manner.
02.202 FINANCE DIRECTOR /CONTROLLER
The CPA may perform the duties of both the Finance Director and the Controller. Or the
position of Finance Director may be filled by a separate individual. There may be other
accounting staff that performs some the duties of the Finance Director, as well as, the
Controller. These individuals are assigned to perform the Finance Director’s duties for
particular programs/funds or in the absence of the Controller. The Finance Director is
responsible for reviewing all payable vouchers to assure proper account codes are used,
funds are adequately budgeted, the proposed payment is within the guidelines of
disbursement as approved by the elected officials, and the checks for the vouchers are
prepared in a timely manner. General duties within the control of the Finance Director
include the following: (It is noted that the Finance Director utilizes accounts payable and
voucher payable employees for completion of the work.)
1, Approves all payable vouchers after review to assure that proper account codes are used,
funds are adequately budgeted, and the proposed payment is within the guidelines of
disbursement as approved by the elected officials.
2. Processes checks from the accounts payable voucher with proper supporting
documentation and secures the check signatures.
isp)
. Maintains a file of paid invoices, purchase orders, vouchers, and other documents
pertaining to the payables process.
4: Corresponds to vendors on problems on billings and duplicate invoices.
| 5. Provides technical support to staff on interpretation of Tribal financial management
| policies and procedures.
6. Serves as an advisor to the elected officials on financial management matters.
7. Assists the CPA’s with developing the annual operating budgets for the Tribe's
unrestricted fimds and trust funds for approval by the elected officials/legislature.
8. Monitors the budgets and advises on budget modification and issues. Provides technical
assistance to program staff on budgetary issues.
CHAPTER THREE
ALLOWABLE EXPENDITURE OF FEDERAL FUNDS
03.100 GENERAL GUIDELINES
It is the responsibility of the program director to assure that all costs charged to a program
are permitted under the terms of the grant or contract agreement. The most important factor
which governs the eligibility of the expenditure is the grant or contract agreement. Many
agreements restrict the type or amount of expenditure. The agreement prevails over all other
federal guidelines governing the expenditure of funds.
If the terms of the agreement require matching funds from the Tribe, the expenditure of the
matching portion falls under the same general guidelines as the agreement.
03.200 EXPENDITURES FOR 638 CONTRACTS
Program directors who are operating under a 638 contract with the Department of the
Interior or Department of Health and Human Services (IHS) have greater flexibility in the
expenditure of program funds than do program directors that are funded by other federal and
state agencies. Office of Management and Budget Circular A-87 generally determine
allowable costs for a federally funded program. However, allowable costs for a 638 contract
are defined in section 106 (k) of the Indian Self-Determination and Education Assistance
Act. This definition may differ from allowable costs in OMB Circular A-87.
Accordingly, a program director operating under a 638 contract may, without the approval
of the funding agency, expend funds provided under a self- determination contract for the
following purposes to the extent that the expenditure of the funds is supportive of the
contracted program.
1. Depreciation and use allowances not otherwise specifically prohibited by law,
including the depreciation of facilities owned by the Tribe.
2. Publication and printing costs.
. Building, realty, and facilities costs, including rental costs or mortgage expenses.
2
4. Automated data processing and similar equipment or services. 5. Costs for
capital assets and repairs.
5. Management studies.
6... Professional services, other than services provided in connection with judicial
proceedings by or against the United States.
7. Insurance and indemnification, including insurance covering the risk of loss of or
damage to property used in connection with the contract without regard to the
ownership of such property.
8. Costs incurred to raise funds or contributions from non-Federal sources for the
purpose of furthering the goals and objectives of the self -determination contract.
9. Interest expenses paid on capital expenditures such as building, building
renovation, or acquisition or fabrication of capital equipment, and interest
expenses on loans necessitated due to delays by the Bureau of Indian Affairs in
providing funds under a contract.
10. Expenses of the governing body of the Tribe that are attributable to the
management or operation of contracted programs
11. Costs associated with the management of pension funds, self-insurance funds,
and other funds of the Tribe that provide for participation by the Federal
Government.
03.300 OMB A-87 EXPENDITURES
Program directors operating under a 638 contract should refer to OMB Circular A-87 as a
general guide on the allowable costs to charge to the contract, even though the Indian Self
Determination and Education Assistance Act prevails. The additional types or examples of
expenditures in OMB Circular A-87 will provide information on costs typically associated
with federally funded programs.
Program directors operating under any federally funded program other than a 638 contract
are restricted to, and must use, OMB Circular A-87 as the final authority on the allowable
costs to charge to the program.
The applicable cost principles (to determine allowability) from OMB Circular A-87 are as
follows:
1. Accounting. The cost for establishing and maintaining accounting and other
information systems is allowable.
2. Advertising and public relations costs.
a. The term "advertising costs” means the costs of advertising media and
corollary administrative costs. Advertising media include magazines,
newspapers, radio and television programs, direct mail, exhibits, and the
like.
10
The term "public relations" includes Community relations and means those
activities dedicated to maintaining the image of the governmental unit or
maintaining or promoting understanding and favorable relations with the
Community or public at large or any segment of the public.
Advertising costs are allowable only when incurred for the recruitment of
personnel, the procurement of goods and services, the disposal of surplus
materials, and any other specific purposes necessary to meet the
requirements of the Federal award. Advertising costs associated with the
disposal of surplus materials are not allowable where all disposal costs are
reimbursed based on a standard rate as specified in the grants management
common rule-
Public relations costs are allowable when:
1) Specifically required by the Federal award and then only as a direct
cost;
2) Incurred to communicate with the public and press pertaining to
specific activities or accomplishments that result from performance of
the Federal award and then only as a direct cost; or
3) Necessary to conduct general liaison with news media and
government public relations officers, to the extent that such activities
are limited to communication and liaison necessary to keep the public
informed on matters of public concern, such as notices of Federal
contract/grant awards, financial matters, etc.
e. Unallowable advertising and public relations costs include the following:
1) All advertising and public relations costs other than as specified in
subsections c. and d.;
2) Except as otherwise permitted by these cost principles, costs of
conventions, meetings, or other events related to other activities of the
governmental unit including:
a) costs of displays, demonstrations, and exhibits;
b) Costs of meeting rooms, hospitality suites, and other special
facilities used in conjunction with shows and other special events;
and
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10.
c) Salaries and wages of employees engaged in setting up and
displaying exhibits, making demonstrations, and providing
briefings;
3) Costs of promotional items and memorabilia, including models, gifts,
and souvenirs; and
4). Costs of advertising and public relations designed solely to promote
the governmental unit.
. Advisory Councils. Costs incurred by advisory councils or committees are
allowable as a direct cost where authorized by the Federal awarding agency or as
an indirect cost where allocable to Federal awards.
Alcoholic beverages. Costs of alcoholic beverages are unallowable.
Audit services. The costs of audits are allowable provided that the audits were
performed in accordance with the Single Audit Act, as implemented by Circular
A-133, " Audits of States) Local Governments and Non Profit Organizations.”
Generally, the percentage of costs charged to Federal awards for a single audit
shall not exceed the percentage derived by dividing Federal funds expended by
total funds expended by the recipient or subrecipient (including program
matching funds) during the fiscal year. The percentage may be exceeded only if
appropriate documentation demonstrates higher actual costs.
Other audit costs are allowable if specifically approved by the awarding or
cognizant agency as a direct cost to an award or included as an indirect cost ina
cost allocation plan or rate.
Automatic electronic data processing. The cost of data processing services is
allowable (but see section 19, equipment and other capital expenditures).
Bad debts. Any losses arising from uncollectible accounts and other.claims, and
related costs, are unallowable unless provided for in Federal program award
regulations.
Bonding costs. Costs of bonding employees and officials are allowable to the
extent that such bonding is in accordance with sound business practice.
Budgeting. Costs incurred for the development, preparation, presentation, and
execution of budgets are allowable.
Communications. Costs of telephone, mail, messenger, and similar
communication services are allowable.
11. Compensation for personnel services.
a. General. Compensation for personnel services includes all remuneration, paid
currently or accrued, for services rendered during the period of performance
under Federal awards including but not necessarily limited to wages, salaries,
and fringe benefits. The costs of such compensation are allowable to the
extent that they satisfy the specific requirements of this Circular, and that the
total compensation for individual employees:
1) Is reasonable for the services rendered and conforms to the established
policy of the governmental unit consistently applied to both Federal and
non-Federal activities;
2) Follows an appointment made in accordance with a governmental unit's
laws and rules and meets merit system or other requirements required by
Federal law, where applicable; and
3) Is determined and supported as provided in subsection h.
b. Reasonableness. Compensation for employees engaged in work on Federal
awards will be considered reasonable to the extent that it is consistent with
that paid for similar work in other activities of the governmental unit. In
cases where the kinds of employees required for Federal awards are not
found in the other activities of the governmental unit, compensation will be
considered reasonable to the extent that 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.
c. Unallowable costs. Costs, which are unallowable under other sections of
these principles, shall not be allowable under this section solely on the basis
that they constitute personnel compensation.
d. Fringe benefits.
1) Fringe benefits are allowances and services provided by employers to
their employees as compensation in addition to regular salaries and
wages. Fringe benefits include, but are not limited to, the costs of leave,
employee insurance, pensions, and unemployment benefit plans. Except
as provided elsewhere in these principles, the costs of fringe benefits are
allowable to the extent that the benefits are reasonable and are required
by law, governmental unit-employee agreement, or an established policy
of the governmental unit.
2) The cost of fringe 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, holidays, court leave, military leave, and
__other similar benefits, are allowable if: (a) they are provided under __
established written leave policies; (b) the costs are equitably allocated to
all related activities, including Federal awards; and, (c) the accounting
basis (cash or accrual) selected for costing each type of leave is
consistently followed by the governmental unit.
3) When a governmental unit uses the cash basis of accounting, the cost of
leave is recognized in the period that the leave is taken and paid for.
Payments for unused leave when an employee retires or terminates
employment are allowable in the year of payment provided they are
allocated as a general administrative expense to all activities of the
governmental unit or component.
4) The accrual basis may be only used for those types of leave for which a
liability as defined by Generally Accepted Accounting Principles
(GAAP) exists when the leave is earned. When a governmental unit uses
leave costs are the lesser of the amount accrued or funded.
5) The cost of fringe benefits in the form of employer contributions or
expenses for social security; employee life, health, unemployment, and
worker's compensation insurance (except as indicated in section 25,
Insurance and indemnification); pension plan costs (see subsection e.);
and other similar benefits are allowable, provided such benefits are
granted under established written policies. Such benefits, whether treated
as indirect costs or as direct costs, shall be allocated to Federal awards
and all other activities in a manner consistent with the pattern of benefits
attributable to the individuals or group (s) of employees whose salaries
and wages are chargeable to such Federal awards and other activities.
. Pension costs. Pension plan costs may be computed using a pay- as-you-go
method or an acceptable actuarial cost method in accordance with established
written policies of the governmental unit.
1) For.pension plans financed on a pay-as-you-go method, allowable costs
will be limited to those representing actual payments to retirees or their
beneficiaries.
2) Pension costs calculated using an actuarial cost-based method recognized
by GAAP are allowable for a given fiscal year if they are funded for that
year within six months after the end of that year. Costs funded after the
six-month period (or a later period agreed to by the cognizant agency) are
allowable in the year funded. The cognizant agency may agree to an
14
extension of the six month period if an appropriate adjustment is made to
compensate for the timing of the charges to the Federal Government and
related Federal reimbursement and the governmental unit's contribution
to the pension fund. Adjustments may be made by cash refund or other
equitable procedures to compensate the Federal Government for the time
value of Federal reimbursements in excess of contributions to the pension
fund.
3) Amounts funded by the governmental unit in excess of the actuarially
determined amount for a fiscal year may be used as the governmental
unit's contribution in future periods.
4) When a governmental unit converts to an acceptable actuarial cost
method, as defined by GAAP, and funds pension costs in accordance
with this method, the unfunded liability at the time of conversion shall be
allowable if amortized over a period of years in accordance with GAAP.
5) The Federal Government shall receive an equitable share of any
previously allowed pension costs (including earnings thereon) which
revert or inure to the governmental unit in the form of a refund,
withdrawal, or other credit.
f. Post-retirement health benefits. Post-retirement health benefits (PRHB) refers
to costs of health insurance or health services not included in a pension plan
covered by subsection e. for retirees and their spouse, dependents, and
survivors. PRHB costs may be computed using a pay-as-you-go method or an
acceptable actuarial cost method in accordance with established written
policies of the governmental unit.
1) For PRHB financed ‘on a pay as-you-go method, allowable costs will be
limited to those representing actual payments to retirees or their
beneficiaries.
2) PRHB costs calculated using an actuarial cost method recognized by
GAAP are allowable if they are funded for that year within six months
after the end of that year. Costs funded after the six-month period (ora
later period agreed to by the cognizant agency) are allowable in the year
funded. The cognizant agency may agree to an extension for the sixmonth period if an appropriate adjustment is made to compensate for the
timing of the charges to the Federal Government and related Federal
reimbursements and the governmental unit's contributions to the PRHB
fund. Adjustments may be made by cash refund, reduction in current
year's PRHB costs, or other equitable procedures to compensate the
Federal Government for the time value of Federal reimbursements in
excess of contributions to the PRHB fund.
15
3). Amounts. funded in excess of the actuarially determined amount for a
fiscal year may be used as the government's contribution in a future
period.
4) When a governmental unit converts to an acceptable actuarial cost
method and funds PRHB costs in accordance with this method, the initial
unfounded liability attributable to prior years shall be allowable if
amortized over a period of years in accordance with GAAP, or, ifno such
GAAP period exists, over a period negotiated with the cognizant agency.
5) To be allowable in the current year, the PRHB costs must be paid either
to:
(a) An insurer or other benefit provider as current year costs or
premiums, or
(b) An insurer or trustee to maintain a trust fund or reserve for the sole
purpose of providing post-retirement benefits to retirees and other
beneficiaries.
6) The Federal Government shall receive an equitable share for any amounts
of previously allowed post-retirement benefit costs (including earnings
thereon), which revert or inure to the governmental unit in the form of a
refund, withdrawal, or other credit.
Severance pay.
ga
1) Payments in addition to regular salaries and wages made to workers
whose employment is being terminated are allowable to the extent that, in
each case, they are required by (a) law, (b) employer-employee
agreement, or (c) established written policy.
2) Severance payments (but not accruals) associated with normal turnover
are allowable. Such payments shall be allocated to all activities of the
governmental unit as an indirect cost.
3) Abnormal or mass severance pay will be considered on a case- by-case
basis and is allowable only if approved by the cognizant Federal agency.
h. Support of salaries and wages. These standards regarding time distribution
are in addition to the standards for payroll documentation.
1) Charges to Federal awards for salaries and wages, whether treated as
direct or indirect costs, will be based on payrolls documented in
16
2)
accordance with generally accepted practice of the governmental unit and
approved by a responsible official (s) of the governmental unit.
No further documentation is required for the salaries and wages of
employees who work in.a single indirect cost activity.
Where employees are expected to work solely on a single Federal award
or cost objective, charges for their salaries and wages will be supported
by periodic certifications that the employees worked solely on that
4)
program _for_the period covered-by-the.certification.-These-certifications—.—.---
will be prepared at least semi-annually and will be signed by the
employee or supervisory official having first hand knowledge of the work
performed by the employee.
Where employees work on multiple activities or cost objectives, a
distribution of their salaries or wages will be supported by personnel
activity reports or equivalent documentation which meets the standards in
subsection (5) unless a statistical sampling system (see subsection (6)) or
other substitute system has been approved by the cognizant Federal
agency. Such documentary support will be required where employees
work on:
(a) More than one Federal award,
(b) A Federal award and a non-Federal award,
(c) An indirect cost activity and a direct cost activity,
(d) Two or more indirect activities which are allocated using different
allocation bases, or
(e) An unallowable activity and a direct or indirect cost activity.
Personnel activity reports or equivalent documentation must meet the
following standards:
(a) They must reflect an after-the-fact distribution for the actual activity
of each employee,
(o) They must account for the total activity for which each employee is
compensated,
(c) They must be prepared at least monthly and must coincide with one
or more pay periods, and
(d) The employee must sign them.
(e) Budget estimates or other distribution percentages determined before
the services are performed do not qualify as support for charges to
Federal awards but may be used for interim accounting purposes,
provided that:
(i) The governmental unit's system for establishing the estimates
produces reasonable approximations of the activity actually
performed;
(ii) At least quarterly, comparison of actual costs to budgeted
distributions based on the monthly activity reports are made.
Costs charged to Federal awards to reflect adjustments made as a
result of the activity actually performed may be recorded annually
if the quarterly comparisons show the differences between
budgeted and actual costs are less than ten percent; and
(iii)The budget estimates or other distribution percentages are revised
__at least quarterly, if necessary, to reflect changed circumstances. _
6) Substitute systems for allocating salaries and wages to Federal awards
may be used in place of activity reports. These systems are subject to
approval if required by the cognizant agency. Such systems may include,
but are not limited to, random moment sampling, case counts, or other
quantifiable measures of employee effort.
(a) Substitute systems which use sampling methods (primarily for Aid to
Families with Dependent Children (AFDC), Medicaid, and other
public assistance programs) must meet acceptable statistical sampling
standards including:
(b) The sampling universe must include all of the employees whose
salaries and wages are to be allocated based on sample results except
as provided in subsection (c);
(c) The entire time period involved must be covered by the sample; and
(d) The results must be statistically valid and applied to the period being
sampled.
(e) Allocating charges for the sampled employees’ supervisors, clerical
and support staffs, based on the results of the sampled employees,
will be acceptable.
(f) Less than full compliance with the statistical sampling -standards
noted in subsection (a) may be accepted by the cognizant agency ifit
concludes that the amounts to be allocated to Federal awards will be
18
minimal, or if it includes that the system proposed by the
governmental unit will result in lower costs to Federal awards than a
system which complies with the standards.
7) Salaries and wages of employees used in meeting cost sharing or
matching requirements of Federal awards must be supported in the same
manner as those claimed as allowable costs under Federal awards.
i, Donated Services.
1) Professional and technical personnel, consultants, and other skilled and
unskilled labor may furnish donated or volunteer services to a
governmental unit. The value of these services is not reimbursable either
as a direct or indirect cost. However, the value of donated services may
be used to meet cost sharing of matching requirements in accordance
with the provisions of the Common Rule.
2) The value of donated services utilized in the performance of a direct cost
activity shall, when material in amount, be considered in the
determination of the governmental unit's indirect costs or rate(s) and,
accordingly, shall be allocated a proportionate share of applicable indirect
costs.
3) To the extent feasible, donated services will be supported by the same
methods used by the governmental unit to support the allocability of
regular personnel services.
12. Contingencies. Contributions to a contingency reserve or any similar provision
made for events the occurrence of which cannot be foretold with certainty as to
time, or intensity, or with an assurance of their happening, are unallowable. The
term "contingency reserve" excludes self-insurance reserves (see subsection
25.c), pension plan reserves (see subsection 11. e), and post-retirement health
and other benefit reserves (see subsection 11. f) computed using acceptable
actuarial cost methods.
13. Contributions and donations. Contributions and donations, including cash,
property, and services, by governmental units to others, regardless of the
recipient, are unallowable.
14. Defense and prosecution of criminal and civil proceedings. and claims.
a. The following costs are unallowable for contracts covered by 10 U.S.C, 2324
(k), “Allowable costs under defense contracts."
1) Costs incurred in defense of any civil or criminal fraud proceeding or
similar proceeding (including filing of certification brought by the United
States where the contractor is found liable or has pleaded nolo contendere
to a charge of fraud or similar proceeding, including filing of a false
certification).
2) Costs incurred by a contractor in connection with any criminal, civil or
administrative proceedings commenced by the Untied States or a State to
the extent provided in 10 U.S.C. 2324 (k).
b. Legal expenses required in the administration of Federal programs are
allowable. Legal expenses for prosecution for claims against the Federal
Government are unallowable.
15. Depreciation and use allowances.
a. Depreciation and use allowances are means of allocating the cost of fixed
assets to periods benefiting from asset use. Compensation for the use of fixed
assets on hand may be made through depreciation or use allowances. A
combination of the two methods may not be used in connection with a single
class of fixed assets (e.g., buildings, office equipment, computer equipment,
etc.) except as provided in subsection g. Except for enterprise funds and
internal service funds that are included as part of a State/local cost allocation
plan, classes of assets shall be determined on the same basis used for the
government-wide financial statements.
_.. b. The computation of depreciation or use allowances shall be based on the
acquisition cost of the assets involved. Where actual cost records have not
been maintained, a reasonable estimate of the original acquisition cost may
be used: The value of an asset donated to the governmental unit by an
unrelated third party shall be its fair market value at the time of donation.
Governmental or quasi-governmental organizations located within the same
State shall not be considered unrelated third parties for this purpose.
c. The computation of depreciation or use allowances will exclude:
1) The cost of land:
2) Any portion of the cost of buildings and equipment borne by or donated
by the Federal government irrespective of where title was originally
vested or where it presently resides; and
3) Any portion of the cost of buildings and equipment contributed by or for
the governmental unit, or a related donor organization, in satisfaction of a
matching requirement.
d. Where the use allowance method is followed, the use allowance for buildings
and improvements (including land improvements - such as paved parking
areas, fences, and sidewalks) will be computed at an annual rate not
exceeding two percent of acquisition costs, The use allowance for equipment
will be computed at an annual rate not exceeding 6 2/3 percent of acquisition
cost, When the use allowance method is used for buildings, the entire
building must be treated as a single asset; the building's components ( ¢.g.,
plumbing system, heating and air condition, etc.) cannot be segregated from
the building's shell. The two percent limitation, however, need not be
applied to equipment which is merely attached or fastened to the building but
not permanently fixed to it and which is used as furnishirigs or decorations or
for specialized purposes (e.g. dentist chairs and dental treatment units,
counters, laboratory benches bolted to the floor, dishwashers, modular
furniture, carpeting, etc.). Such equipment will be considered as not being
permanently fixed to the building if it can be removed without the destruction
of, or need for costly or extensive alterations or repairs, to the building or the
equipment. Equipment that meets these criteria will be subject to the 6 2/3
percent equipment use allowance limitation.
e, Where the depreciation method is followed, the period of useful service
(useful life) established in each case for usable capital assets must take into
consideration such factors as type of construction, nature of the equipment
used, historical usage patterns, technological developments, and the renewal
and replacement policies of the governmental unit followed for the individual
items or classes of assets involved. In the absence of clear evidence
indicating that the expected consumption of the asset will be significantly
greater in the early portions than in the later portions of its useful life, the
straight line method of depreciation shall be used. Depreciation methods
once used shall not be changed unless approved by the Federal cognizant or
awarding agency. When the depreciation method is introduced for
application to an asset previously subject to a use allowance, the annual
depreciation charge thereon may not exceed the amount that would have
resulted had the depreciation method been in effect from the date of
acquisition of the asset. The combination of use allowances and depreciation
applicable to the asset shall not exceed the total acquisition cost of the asset
or fair market value at time of donation.
f. When the depreciation method is used for buildings, a building's shell may be
segregated from the major component for the building (e.g., plumbing
system, heating, and air conditioning system, etc.) and each major component
depreciated over its estimated useful life, or the entire building (i.e., the shell
and all components) may be treated as a single asset and depreciated over a
single useful life.
aa
. A reasonable use allowance may be negotiated for any assets that are
considered to be fully depreciated, after taking into consideration the amount
of depreciation previously charged to the government, the estimated useful
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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.