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>> TYLER: Hi, everyone. We will get started shortly. To start us off feel free to introduce yourself with your name and where you are joining from. We have 134 people registered for today. We are going to wait a minute more just to let other folks join in. 
PAULA: We have people from all over the country. Coast to coast north to south including Puerto Rico. 
JOHN: I saw that. 
TYLER: We have a lot of information to go ahead and get started. Welcome everyone to our second cohort, this one for fiscal oversight for IL leaders is part of a 3 week once a week meeting. I hope that you will join us for the duration. We have a lot of great information and some wonderful presenters to answer some questions and share some information. Before we get started, let's talk about accessibility. We have our ASL in Spanish interpreters available in labeled for you in the chat as well is using the language interpretation button at the bottom of your screen to the closed caption button to enable captioning to today's presentation. The format of these cohorts is 60 minutes, around that for presentation information but we are leaving space at the end to make sure that we have time for dialogue and questions, maybe you have some you are already thinking about. But if you have questions during this presentation and would like a different format of getting them answered, were welcome to visit our website to ask those questions and start technical assistance for one on one in today's setting is maybe not the best way to answer that question. Please remember to state your name before speaking and our IL T&TA team is ready if you have accessibility difficulties during today's training please reach out to our team. We have a survey of course. If you were at the conference, you know we like surveys or maybe you have joined one of our trainings so please take some time to fill that training out, it helps guide our future trainings and what we have to offer as an IL team T&TA training center. We are going to hop into the learning object gives for today. 
>> Tyler? 
TYLER: Yes, sir. 
>> Are we recording? 
TYLER: Good question. We are now. Here we go. Thanks for the reminder. With that, we will learn the most efficient and effective way to be reimbursed for your indirect costs, options for requesting indirect cost reimbursement. How to submit an update and indirect cost rate proposal how that will affect you how to simplify your accounting system to facilitate indirect cost rate reporting and voucher. Thank you for joining. I would like to go ahead and introduce our director of technical assistance, Paula McElwee. I stumbled when I was reading John's name and John Heveron who is working with us as a consultant on the IL T&TA project. I will let them go ahead and make introductions and we will get started. Welcome. 
PAULA: Thank you, Tyler. Thank you for this opportunity to share this information. This is the question I get the most. I do technical assistance and training and doing that for 15 years and I am excited and pleased to do it with this one does cause a lot of angst. We will do what we can to lay it out clearly for you and John is certainly the one to lead in this. John is with us. Do we have an intro slide for us presenters? 
TYLER:  We are missing that slide. 
PAULA: That is okay. John, if you would like to tell a little about yourself you have a few more years of experience. 
JOHN: I started working with nonprofits back in 1972 and assume that is before most of you at least many of you were born. It's been a long career, and I am still here because I love doing what I do. I truly enjoyed it, and I have worked with and done training for nonprofit organizations ever since my start. The firm I formed and now my younger partners own concentrates very heavily on nonprofit organizations. It is really what we do day in and day out so we try to stay on top of issues that are important in this is one. 
PAULA: We been working for status for independent living for number of years now? 
JOHN: For almost that long. One of my first clients when I started my practice in 1972 was the Rochester Center for Independent living. 
PAULA: That was one of the first centers funded under the rehab act, we go way back. Let's look at that next slide. So John, I'm going to let you lead and jump in now and then with a comment. 
JOHN: Thank you. This is really an important starting point, understanding direct costs and indirect costs. While there is a little flexibility, we really need to stick with these definitions. The direct cost is the cost for a specific program or project and can be identified with a final cost objective, relatively easily with a high degree of accuracy. What does that mean in English? When you provide the same services for the same population, you have a single cost objective. You may wish to call it a program but that is a single cost objective. If that is all you have just one even though you have more than one funder, you don't need to worry much about cost allocation. Most all organizations possibly every one of you does have more than one program and keep in mind fundraising is a cost objective fund raising is a program. 
PAULA: I would just add the claim of a single cost objective has happened with some centers and have said my part C and part B go to exactly the same core services therefore would be a single cost objective. You may be able to make that argument but may not be the wisest thing to do but because you are required to do resource development you should have expanded and if you haven't expanded you should in the future. It is not necessarily fit for centers even though you might possibly be able to make that argument. 
JOHN: Thank you. Before we move on, I want to add if services are different if you have a different series of services or different population you are serving that is an additional program. We can go to the next slide. Indirect costs are referred to as general administration and general expenses. They are things like your accounting your receptionist, rent and utilities for your business office and similar items that benefit all programs. Those have to be created as indirect costs. They should not be directly assigned to programs they need to be pulled and spread out over some base that is what we are going to talk about. There is a category called a " allowable cost"  we have listed some of these, but they cannot be used as a direct or indirect costs they cannot be reimbursed as direct or indirect costs under your federal funding. They include things such as entertainment, fines, penalties and lobbying. Fundraising is generally true of fundraising ‑‑ you want to comment? 
PAULA: This is tricky because the regulations say fundraising is not allowed as a cost charged to federal grants. You cannot do fundraising however, the federal law requires you do something called " Resource development”, is not defined anywhere until we have a definition or clarity around what resource development is centers have been able to do some activities others might consider fundraising and classify them instead as resource development. Sometimes the first thing I said is don't call anything fundraising. You are allowed to do resource development as soon as you use fundraising it's not allowable. That is the first level, don't call it fundraising unless you understand it is not allowed with your federal funds. Typically, part B does follow suit typically state funds also follow suit not allowing that. Resource development would be things like grant writing, going out and finding resources in your community that might be partners. So partnerships. Finding other funding sources fee for service those would be considered resource development without question nobody is questioning that. The questions arise when it is an event and most of the time people who are reviewing you will say that is a fundraising event is not allowed because it is partly entertainment and that is also not an allowable cost in most cases. It's kind of a double whammy. For the most part, fundraising events like dinners, auctions and other kinds of events along that line need to be self‑supporting. They need to make the money they spent they cannot be subsidized by your federal dollars. 
JOHN: Just to add to that, fundraising since it is a program needs to carry its fair share of indirect cost as well and that will make more sense as we go on. To be reimbursed, costs must be allowable, reasonable and allocable. How do you have your indirect costs reimbursed? Your organizations would apply to your major funder, HHS, for an indirect cost rate and we have provided a link for you to do that. We do have an example. It is going to vary, what you do will vary based on the funding you received, the activities you carry on, your size, things of that nature. Once you have submitted this, you will receive a provisional rate for the coming year. However, your actual rate is going to be based on your actual cost and on the next slide we have an example of that. If you are indirect cost proposal says you expect to have 500,000 dollars of direct costs and 120,000 dollars of indirect costs, you would expect an indirect cost rate of 24 percent. You would submit that if it is approved your provisional rate would be 24 percent. If your actual direct costs are 550,000 your actual indirect was 125,000 dollars then your actual indirect cost rate would be 22.7 percent. Does that make sense? 
PAULA: I think it does. This is the part that sometimes people stumble over when they apply the indirect cost rate approved instead of applying the methodology that was approved and there is a difference. If you don't get the flat rate, you do the process or your actual methodology which may turn out to be slightly different. Chris, did you have a question? 
>> Yes. I think it might be helpful to go is what I'm gathering you take 120,000 divided by 500,000 you get your allocation costs. How would you get your actual rate? 
JOHN: Good question. At the end of the year, assuming you have audited financial statements, reviewed financial statements in any case your final financial statements will document your direct and indirect costs in the financial statements, we probably refer to them as administrative costs and indirect costs those would be the numbers you would use. 
PAULA: You can figure this out at the end of the year if it is less, you are fine. If it is more, you have got to figure out what you're going to do because you cannot apply this to more than what your rate was. 
>> Okay. Thank you. 
JOHN: This gets adjusted each year after you have your final numbers. If your indirect cost rates are less you may have been reimbursed more during the year and you might have to pay that back. You might possibly have to reduce your indirect in the coming year. Once it is approved for the grant year, you can apply for an extension of that rate up to four years. But again, ultimately this will be reconciled to your actual costs. 
PAULA: When you get a letter, it will have dates and amounts on the letter when you get your provisional approval. Make sure you look at it and keep the whole thing not just the front page because there is information on the back of the letter, because you are going to need it. This is a continual process, it's not a one-time thing. 
JOHN: Okay. Let's go to the next slide. A used to be the case if you ever had an indirect cost rate you couldn't use the simplified de minimis method but changes to uniform guidance allow us now to elect the de minimis indirect cost rate if you don't currently have an approved indirect cost rate. It used to be ten percent, that was not adequate for probably any of you. It is now 15 percent, and I think that is still quite light, Paul might know better being closer to the organizations than I am but at any rate, it is quite a jump that is a 50 percent increase. Now, it is something to be considered but unlike how you apply all of your indirect costs, to your direct costs when you have an approved indirect cost rate, when you use the de minimis, it can only be applied to what is called” modified total direct costs."  Salaries and wages, payroll overhead the taxes, benefits, et cetera, materials and supplies, services and travel and if you make any sub‑ awards only the first 50,000 of sub‑ awards. You can't apply it to equipment purchases or other capital expenditures. You can't apply it to rental costs and can't apply it to participant support costs. Yes, it's up to 15 percent but not 15 percent of all of your direct costs. 
PAULA: One of the things I want to note is only affected for part C on September 30 we work in the prior fiscal year because we start September 29th, it is still 10 percent on the part C centers until the end of this current year you are in. Then, you can go to this 15 percent if you wish. The 10 percent also had modified costs and a ceiling, and so, when you look at what you are doing, when I have looked at some centers what they are doing with the de minimis rate, they apply it against all costs, and sometimes exceed that 25,000 dollars and the 10 percent situation or 50,000 which is what is going into effect shortly and is in effect for all your other funding sources including part the but part C is behind. As soon as they get caught up ‑‑ I hope that made sense. You have a situation where it only applies against modified costs and there is a ceiling. If you apply it against all because you are not doing it correctly so make sure you apply it only against the modified costs and only up to the ceiling and see if that is enough for you. We are guessing that it's not enough even if your percentage is 15 percent is still cannot apply it against everything and you still have a ceiling. We suggest you look at the annual cost. 
JOHN: I would like to go off script for a minute and tell you how important it is to understand these rules. I worked with 1 of the centers Paula referred a while ago. They had some proposed funding the individual they were working with told them rental was not and allowable costs. What we just said is you can't apply the 15 percent de minimis to rental costs but that doesn't mean rental isn't allowable in this person was quite insistent rental expense itself was not allowable important to understand these rules 
PAULA: In that particular case the state compliance person did not understand they had an approved indirect cost rate and was trying to apply the rules for the de minimis and to apply it to all costs. The compliance officer did not understand the federal regs, it's not impossible you will run across a situation and please check in with us if you bump up against something that doesn't make any sense but understanding this is important. Celie, he had a question for us? 
>> Thank you. For applying for the indirect costs for health and human services, do you do that if you are 722 and a 723 state does it make a difference? 
PAULA: You would still do that and a 723 state because you are still operating as an individual nonprofit even though your funding comes from the state. 
>> We are in Massachusetts. 
PAULA: Massachusetts and Minnesota ‑‑ 
>> Applied differently for us. 
PAULA: Except the state may have something to say about it. 
>> Of course, they do. 
JOHN: Let's move on to the next slide. It is important to simplify the process before you submit your indirect cost rate proposal and here are a couple of suggestions to simplify the process. Let's detail for your indirect cost and your direct cost make the whole process easier. Not only with your application but year after year as you redo this calculation. Look at your financial statements, one of those statements is a statement of functional expenses that probably doesn't have more than 12 to 18 categories of indirect expense. If you don't have formal financial statements but do a full 990, there is a page for expenses. Same thing, you are not going to find that many categories of expense. You don't need that many categories for your financials, you don't need it for your 990. You don't need it for your indirect cost rate proposal. More often than not are adding confusion for the board when you provide an excessive amount of detail. Rule of thumb I use is if you don't have $1,000 or more in an expense category in the prior year consider whether you can just put that into your miscellaneous. Most general ledgers allow you to break that out if you do need that detail, but focusing on the big picture helps the board and meets all requirements for financial statements, for annual filings and for your indirect cost rate proposal and follow‑up reporting. Any questions on that? If not, let's move on to the next slide. In some cases you will have multiple funders for a single program. If it is a single program, then keep that combined in your general ledger, and if one funder pays 60 percent the other is pain 40 percent just break out those costs on an Excel spreadsheet. This is all to help you simplify your record‑keeping. Rather than break out two funding sources for the exact same program, treat that as one program and one you do your voucher break it out based on the percentage each funder is funding. 
PAULA: In the chat we had a question are you saying categories not line items, correct? 
JOHN: Categories, yes. The program. 
PAULA: The larger grouping you put things in the title you put them in the list, chart of accounts so you might follow those accounts, actually, right? It is the chart of accounts category? 
JOHN: Yes, that's where you start the whole simplification process. 
PAULA: Each has a number of specific line items, expenses and payments and so forth. 
JOHN: Correct. Okay. If no questions we can move on to the components. Your indirect cost rate proposal is going to have an entered action to who you are. We will have an example of that. An explanation how you allocate costs. A schedule of federal funding you receive. Schedule of payroll and related costs, and a couple of idiosyncrasies with that we will go over. A schedule of direct and indirect costs a historic schedule based on your actual most recently completed fiscal year. A reconciliation to the financial statements for the 990 if there are any differences from those schedules to the financial statements. A certification of accuracy of information and a lobbying cost certificate, we've got examples. We can go on to the next slide. 
PAULA: We did have a question; do we have to submit the forms in a certain template? That is not true for the extra narrative stuff but there are a couple of federal forms are so the certification of accuracy and lobbying certificate is a federal form everything else we will give you an example based on your own calculations. 
JOHN: We came up with our fake Center for Independent living. We did this for a conference we held in Pittsburgh and called it PENNCIL, it's a fairly simple straightforward center with a limited number of programs. We follow what is called the simplified allocation method which is appropriate when you're programs benefit from your indirect costs to relatively the same extent and follows what is called the direct allocation method, which means it treats all costs as direct except your general and administrative expenses. Larger organizations have to have another break out of facilities but this is pretty simple and I think it will qualify for most of you. We can move on here. We will get into the example. There is no set format. You will give your name if you have a legal doing business as, DBA, or the name you are known by, provide that. Were your main business location is that is also the primary service location if you have other locations you would need that. Information about the population you serve, the services you provide. Primary funding sources. Your legal structure, you are probably typically a state nonprofit organization governed by an independent board. 
PAULA: All centers for independent living must be private nonprofit community based organizations. SILC's are a little different. 
JOHN: Okay. The approximate full‑time equivalent staff and whether you own or lease your facility and the approximate size of the facility. As Paula said this is a narrative, free‑form, how long should it be? Possibly a page it doesn't have to be pages it probably shouldn't, but it provides the reviewer a context for what follows. And really helps with the review so it is very useful and beneficial and does require your attention. I am sure you would want to have a couple of people involved with that, your director, maybe your executive committee of your board as well. If we can move on. Some of this information you can take certainly verbatim here. In this case, we said this organization follows US generally accepted accounting principles and uses the accrual basis of accounting. All allowable costs are charged directly to the cost objective program grant that activities the benefit. Yours shouldn't be too different from that. If we can continue to the next slide. If an allowable cost edifice one or more cost objectives it is assigned directly to the cost objectives it benefits based on level of benefit they received. If it benefits all of your programs, then it needs to be treated as an indirect cost and it's going to be allocated and we will see that on the next slide. So payroll and related costs are assigned to cost objectives based on timesheets which document actual work done. Payroll and related costs are charged directly to the cost objective for which they have been performed. Payroll and related costs that benefit all cost objectives are pooled and included with indirect costs. We talked about your accountant, your receptionist, your administrative people fall into that latter category they will be indirect their payroll will be indirect. You do need to edit this, you need to make sure it fits your organization specifically. Some organizations continue to use personnel activity reports some have different types of breakouts right on your timesheets. Some start with their expectations based were people are working what program they are working in or working in different areas one firm rule is this has to be in after the fact calculation. You might start out using where you expect people will be working but you have to document that is still the case by looking at their actual work and if it is different from what you originally expected in the way you originally allocated cost, you need to revise it. That is a real mandate. 
PAULA: This is true with administrative staff if you were charging any of their time directly. I see some situations where the executive director decided he is going to work on this new program part of the time and be the person in charge of just that program, that executive director should keep track of that time so they have an actual after the fact the county of what was direct because they can have some direct and some indirect which will be most true with program managers where they work on different programs that may have administrative time. They will have some direct and some indirect but they have to keep track sometimes that has not been historically the way it has happened but that is who did not have to do timesheets but if you charge any time direct rather than 100 percent indirect, that time has to be tracked. 
JOHN: Absolutely. You can do that with software, with different color flow pens on the timesheet. You need to capture that right at the outset otherwise it becomes a task at least for anybody who works in multiple areas some as Paula said, work hardly directly program hardly administration also some fundraising for those people they need to track their time and you want to capture that as soon as you prepare the payroll. 
PAULA: This is your biggest cost so properly allocated this cost is important. 
JOHN: Okay. The next slide. Payroll overhead, fringe benefits your FICA, Social Security unemployment retirement, workers comp, disability other fringe benefits, family leave, all of these are generally assigned in the same manner as wages. The easiest way to do that is you get a total for all of those overhead items divided by the total for all payroll and then you apply the payroll overhead to both direct and indirect payroll. I've seen some organizations that do it on a person by person basis because there cost may be higher for some personnel. That is tedious, I'm not going to say it is wrong but it just requires a lot of ongoing work. 
PAULA: We are trying to help you simplify. 
JOHN: Right. Vacation, holiday, time away, leave time of any category also is assigned in the same manner as payroll and the mechanics of that are easiest if you pool all of that and divide by all the payroll is the simplest way to do it. Whatever you do, that is what your proposal is going to describe. We can move on to the next. Rent and utilities, you would generally say something occupancy benefit individual cost objectives, those costs are charged based on square footage used by each of your programs or your administration. It is also possible to allocate your occupancy costs based on direct labor because people usually translate pretty well to space that is not always the case, but that generally would be an acceptable way to do it. If that is easier for you. Other allowable costs that benefit a single or a couple of your cost objectives would be directly assigned to those cost objectives and costs benefiting all cost objectives are included with indirect. I think at this point unless you have any more comments, Paula, we were going to see if there were any questions on anything up to this point. 
PAULA: Have answered a few in the chat. We had one person asked in describing full‑time equivalent to be described at the end of the fiscal year or overall? I would do it as of date of proposal are based on budget positions but tell them. You are in control of his proposal and describing how you are going to do it. As you do that he put it in the way you would put it in there. Chris, you have a question? 
>> Yes. You are talking about allocating indirect and direct costs, for example, for payroll, you would say you want to allocate some of the payroll to indirect costs or all of the payroll to indirect costs? 
PAULA: Only payroll related to administrative people. 
>> Only related to administrative. 
PAULA: Anybody with direct ‑‑ it might be split between programs only administrative people might have some direct some indirect some organizations choose indirect it gives them a higher indirect rate but simplifies their lives that is also an option but for accounting staff, front desk staff the executive director you are talking administrative positions that benefit everybody. Those would be or could be indirect costs at least in part. 
>> Is there a benefit to having a lower or prior indirect percentage? 
PAULA: It is all about optics. When you hear a nonprofit in the news an Executive Director makes $1.5 million dollars all of us go, there administrative rate is over 50 percent a lot of us go, I know of a center whose administrative rate is over 50 percent they chose to put a lot of costs into indirect for simplification which gave them a higher rate but their proposal was accepted. I can just tell you, sometimes if people given administrative rate is typical people want to know why are your administrative costs so high. There is not an advantage or disadvantage with your application as far as I know. John, maybe you know different. 
JOHN: I agree with that there has been a lot of push by nonprofit leadership organizations to focus on those indirect cost rates and I think they realize they overreacted in some cases. If you Google the "overhead myth” you are going to find good information why having an appropriate level of indirect is really important. You need to control organizations. In the overhead myth does it really good job of explaining that. If you are challenge about an indirect cost rate, that would be a good thing to look at and we are going to talk about one other strategy in a bit. 
>> Thank you. 
TYLER:  This is Tyler popping in a few questions that came in toward the front end of the presentation. Michael asked can you please define certain advertising. I believe that is when you were going over direct and indirect. 
JOHN: General promotional advertising would not be an allowable cost but if you are advertising to hire people that would be an allowable cost. 
PAULA: You may be able to advertise some related to specific outreach if your written plan maybe you are working ‑‑ you've identified unreached or underserved folks you may have funds you can put you outreach it might be printed in a newspaper or something like that but when you look at that specific service if you want to identify and need you might be able to do what we would think as advertising but you can't just buy a sponsorship in your SILC promotional event or advertise in other ways that are specifically advertising and not outreach or other related program. 
JOHN: If it smells more like fundraising, describing your programs are doing something internally to bolster your staff it could be a problem. 
PAULA: So certain advertising is advertising slanted toward fundraising or other direct promotion and not for the program purpose. 
TYLER: I’m going to quickly read answers that went to some questions in case anybody has no access to chat. April asked how things work of the approval is based on the previous year’s numbers and you apply the current year and Paula was able to answer that by continually adjusting using your actual based on the methodology that was approved. And Chris asked for some definitions on part B and part C of the ACL grant Paula shared part B is funding that flows through a state entity based on SILC while part C are direct grants to SILC's. I think we got Michael your answer was answered life about the categories and Rob asked the documents we have to submit need to being a template or format I believe we answer that and Paula added no, you can determine your format as long as you submit all the information and there are samples we are talking about here. 
PAULA: The slides we just went through our your proposal. If you do those pieces and put those on paper, if you put that down in writing that is to be your proposal. This presentation will be available as a recording you have to go back through and look at it you will be able to open the PowerPoint and click any links in follow‑up that way. It should be a good resource for you to look back at as you do your preparation. Here we go. 
JOHN: Here is the example with some numbers we have. One thing we listed was a schedule of federal funding this organization has these different categories of federal funding. It's based on the prior year the format would be similar to that. This is the schedule of payroll and related costs. I just want to point out in some cases we are going to list the names and their salaries and where there payroll is expected to go. In other cases it says multiple for example, have three case managers four counselor advocates. We don't need to detail everything by person if some people are doing the very same thing. That doesn't mean the same thing for the same program but they are really in the same category but people like the executive director the program director the accountant, receptionist we want to break out people like that, that have a specific function. Those are direct payroll amounts. We have payroll overhead right below that. And we have calculated we in this case have a 15.63 percent payroll overhead. That is sort of low. 
PAULA: That's lower than we typically see you typically see something in the 20s. Somebody said ‑‑ that is your indirect cost? 
JOHN: Yes. 
PAULA: I have one more thing but I'll do it after the next slide. 
JOHN: This is a listing of your indirect cost in your direct costs your direct cost list is typically longer it is going to contain somewhat more detail, smaller items of course, and in this case, we have 14 categories. I was saying this sort of fits right in there. Here, we have a calculation of indirect costs at 21.9 percent by dividing 188,600 by the 859,635. 
PAULA: When you continually adjust, we are going to cover that how the adjust your indirect cost rate, but you use it for the year don't feel like you have to adjust to continuously through the year. The purpose is to simplify your life not to make it more complicated. You apply methodology at the end of the year you justify it and may find have to change that amount if it's higher is more complicated if it's lower you just don't charge as much but we will go through that in a little more detail in a little bit. 
JOHN: Okay. The next slide is going to be a reconciliation to the financial statements. This is only necessary if you have some expected changes when you prepare this. In this case, we are listing from our proposal total direct costs of 859,635, indirect of 188,600 that total 1,048,235. The differences because the organization is adding an assistant executive director at a cost of 41,000 and depreciation expense includes an amount based on equipment that was federally funded. You can't be funded for a piece of equipment and claim depreciation or reimbursement for depreciation. We have two reconciling items. You may not have any so this schedule may not even apply to you. If you do have any it will probably be different from what you see here but that is how you would do it. The lobbying cost certificate in the following certification you can pretty much copy these verbatim. I won't just read these but just see what you have here, yours really should be almost exactly the same other than your name. 
PAULA: It doesn't have a lot of information. 
JOHN: And if there aren't more questions we have sort of final wrap up thoughts we wanted to get out there. 
PAULA: There was one question in the chat from Abby she asked, I see two utility line items one direct one indirect how do you do that? It's not they are two locations it is the use of the building is both direct and indirect. You have to figure that out how much is administrative how much is program, you have to allocate yours building costs including rent and space and your utilities and other occupancy costs. Does that make sense? 
>> Thank you. 
PAULA: Chris, yet another question? 
>> Yes. When you get your indirect costs raised I understand how you calculate that and submit a proposal for that rate, but what do you do with that rate after you debit, do you apply it to future expenses, or is it just a number four the ACL to judge your budget? 
PAULA: It does not have anything to do with ACL judging next year's budget. You get the number and when you do your bookkeeping you have costs that went in that column that said indirect and hope those numbers add to that would take them out what you charge ACL. You are doing a billing for this month to ACL you put in your salary and one of the things you add up is your indirect cost rate and don't adding the cost in that column when you submit that. That request for funds. Does that make sense did I say that right? 
JOHN: Let me spin it a little different way. You have costs to run your programs and costs to run your business. I'm going to call the cost to run your business your indirect or administrative costs and you want to be reimbursed for those. This is the process for you to get reimbursed for the costs to run your business. You are going to have those costs so you want to get that reimbursement. 
PAULA: You apply this percentage once you get your approval. They are real shortstaffed over there and I've got folks who submitted requests and they are still waiting. Then, you have to decide what you do if you don't have a rate and what to switch from de minimis to a rate, you are going to have some thinking to do how you deal with this issue until you get your approval because it may be months. I am sorry to say. That whole unit is within ACL and ACL has been under some reorganization. 
>> If I understand correctly, to repeat it back to your indirect cost rate will be used for the ACL after you get approval of that rate? 
JOHN: I would say the answer is yes. 
PAULA: Yes. 
>> Thank you. 
PAULA: Heather asked does timing matter? Can I get reimbursed for the indirect at the beginning of the year and not worry the rest of the year? What a nice thought. The answer is no. You can only request actual costs will need to be reimbursed within the next 72 hours. You can do it every payroll if you want and more frequently, if you can do it once a month we strongly recommend you drive down your part C funds continuously as you need them and don't let them sit. Some of you have cash flow where you have the cash flow issue, you don't have a cash flow issue so you don't need to draw down your money I just recommend you draw it down anyway because we don't know the reorganization if there will be a delay at some point so you want to keep the money flowing on a regular basis if they delay happens it will be problematic. Heather clarified she is talking about drawing down if you have the de minimis just drawing down in the answer is still no you can't draw down the full amount you can only draw down the 15 percent or the 10 percent depending on where you are you can only draw down that amount each draw. Until you hit the gap. Tiffany, this may be another topic, would like to discuss owning versus renting your building and the only option under depreciation. That's the other thing she said. 
JOHN: That is a biggie we have a blog article on that, we could consider doing a program on that at some point if enough people are interested. 
PAULA: If you are interested, reach out to me. I've got the blog article I can give it to you and we can look at whether you want to do some further technical assistance with us individually if there is enough demand we could probably do a session or a short cohort. It is certainly a topic that can take about an hour. Is there a list of allowable indirect and direct costs we can reference? Sort of. There is a list of non‑allowable costs in the regulations in that list is alphabetical, incomplete and not very clear sometimes you have to dig to get answers just like with advertising. You want to know what does that mean you have to do digging what does it mean fundraising versus resource development committee I wish I could say it's simple but it is the regulations we are describing. You will see those references all the way through the presentation and you can go to those references and find that alphabetical list. Other questions? Is an independent living center allowed to own property? The answer is yes we have this blog article so drop me a line I just put my email in the chat. Any of you interested in owning a building probably want to reach out and at least read through that and think about pros and cons because it can be done mortgage is an allowable cost as is mortgage interest. Okay. Other thoughts. Final thoughts, John? 
JOHN: Sure. This process once you have completed it you are going to be doing essentially the same thing every year not the complete application but you are going to need to provide all the same numbers year after year so keep a file of this stuff have a folder where you have your original calculation your provisional rate you received approval for your final approval once you get them and keep this cumulatively year after year. As we said, if you have charged too much indirect you may ‑‑ you probably will need to pay it back simply right away possibly by the reduction of what you receive monthly in the subsequent year. I don't think they are going to write you a check if you under Bill but you may be able to get a rate adjustment you should at least try for that. If we can go to the next slide. This sort of supports what we were talking about in terms of keeping things simple. This is a regulation that says any direct cost of a minor amount may be treated as indirect for reasons of practicality. If you have smaller items even in theory they should be directly allocated it is okay and it simplifies your life and simplifies your funder's life to combined those. 
PAULA: A couple of examples I have seen, organizations that try to track how many photocopies they make. That is not worth your time. Just stop. Whatever you have to do put it in your indirect pool. Office supplies are the same way unless you are doing a bunch of supplies for some specific event that can be charged directly to that event you probably want to put them in a storage closet and have people pick up what they need and put it in the indirect costs so it's simple. 
JOHN: I guess we have said this enough times it's a formula that gets approved not the rate and there is a mandate for federal agencies to follow the approved indirect cost rate. There are certain exceptions for certain programs and needs to be across all agencies under the same program but for the most part once you have an indirect cost rate the federal agencies are mandated to fully fund their share of that program including your full indirect. 
PAULA: If you have a great that says your administrative rate is only 10 percent and is a federal grant you need to negotiate and tell them you have an approved indirect cost rate that needs to be applied to that grant. The success in doing this advocacy is scattered. Some people get the point across and others say absolutely not. We are not going above that amount which leaves you at a loss you have to decide is that a loss you can absorb elsewhere in the organization. There are several people who have dropped notes in chat and let me tell you what they say. A process I would love to see more hands‑on training for applying indirect cost rate and different examples. Applying I think means actually using it as you do your cost calculations. It's not clicking the way I think it should. The process of submitting and somebody else's I agree I've listened to 2 or three trainings on indirect costs in the application piece is in clicking the way I think. You are not alone. Somebody says it appears more complicated when you really look at everything the constant movement of changes. Do you have any encouragement to these folks? 
JOHN: I have to acknowledge there is upfront pain, in simplifying your accounting system simplifying your general ledger it really is a process. There is some upfront pain to make sure you do these allocations on a continuous basis. For example, assigning and allocating your payroll direct and indirect. But upfront costs pays you back time after time. It is really worth the investment, you may need to hire somebody to help with some of this work possibly a consultant possibly work with your accounting firm but it is worth making the investment to simplify things and to have an indirect cost rate. Once you have it, your reimbursements will be where they should be. 
PAULA: We do have technical assistance myself in there is a team of about ten that also work with us that have a lot of life experience so reach out to T&TA center we can help that will come up on the slide in a minute. What is the next slide? Resources. In your copy you will be able to click on these links and find there are quite a few things there's a guide for direct cost determination. We are not finding HHS guidance that's for another department but should cover most of the same things there is your classification of cost and required certifications and indirect costs of assignment rate determination for nonprofit all our resources you might find useful as you go through this process and we have some online training training if you don't find material there just a note so they are having trouble sustaining their website they are not part of this project financially right now but have put a lot of their other resources where they can reach them if you don't have luck with this link which work the last time reach out to us and we will get you that same material in another format. Just tell us you want to do that. Everybody take a breath. Thank you so much, John, for presenting. I think it helps to simplify a very difficult topic. Or at least it's difficult when you first get started. Some of you that have been doing it for a while think you got this some of your peers would like to talk to you about that. First, reach out with your evaluation there is a link for you to use the QR code where you will find the link in the chat and give us your feedback so we continue to make this a better presentation. We have two more to go in this cohort there is one coming up next week and when the following week both on Tuesday at three o'clock Eastern. So you will find information on staying connected with the independent living training and technical assistance that includes where you will probably leave a message. We have a website. We have an email address. A place where you can sign up for our email list if you haven't received that. You can follow us on Facebook, Instagram and we would love to have you do that. Please drop in. Michael asks whether we are going to have something similar to the rapid course training and the answer is yes, but that is complicated. That was the specific subscription we cannot continue we have to modify and bring all of that information over and put it in a format that fits on our website. As we do that, please reach out but you will find contact information for our independent living training and technical assistance and if there is specific training we can probably find you a component of that. We have things that are great for new staff and board members, so we have a lot of things some are old resources some are new. We are continually uploading new resources including this presentation which will be on our website shortly. Any last comments, John? 
JOHN: I am all set. I enjoyed it. 
PAULA: Thank you. Tyler, all yours. 
TYLER: Thank you Paula and John it's a very detailed process and I think you broken down pretty well for everybody to understand and maybe take some conversation back. Thank you everyone for joining today and this training is available to you through a contract with the US Department of Health and Human Services. I hope you are able to connect with IL T&TA center remember the next two cohort meetings require registration this registration did not sign you up for the other two sessions. Consider if you would like to join us for procurement and in‑depth dive and some internal controls and working with regs. Please register if you have not already those are available on our website or signing up for our email updates. 
PAULA: You will find the chat to that registration. 
TYLER: Thank you for that. Any other final questions or parting thoughts? Thank you all. Have a great day.