[Code of Federal Regulations]
[Title 48, Volume 7]
[Revised as of October 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR9905.502-60]

[Page 482-483]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
     CHAPTER 99--COST ACCOUNTING STANDARDS BOARD, OFFICE OF FEDERAL 
           PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET
 
PART 9905--COST ACCOUNTING STANDARDS FOR EDUCATIONAL INSTITUTIONS--Table of Contents
 
Sec. 9905.502-60  Illustrations.

    (a) Illustrations of costs which are incurred for the same purpose:
    (1) An educational institution normally allocates all travel as an 
indirect cost and previously disclosed this accounting practice to the 
Government. For purposes of a new proposal, the educational institution 
intends to allocate the travel costs of personnel whose time is 
accounted for as direct labor directly to the contract. Since travel 
costs of personnel whose time is accounted for as direct labor working 
on other contracts are costs which are incurred for the same purpose, 
these costs may no longer be included within indirect cost pools for 
purposes of allocation to any covered Government contract. The 
educational institution's Disclosure Statement must be amended for the 
proposed changes in accounting practices.

[[Page 483]]

    (2) An educational institution normally allocates purchasing 
activity costs indirectly and allocates this cost to instruction and 
research on the basis of modified total costs. A proposal for a new 
contract requires a disproportionate amount of subcontract 
administration to be performed by the purchasing activity. The 
educational institution prefers to continue to allocate purchasing 
activity costs indirectly. In order to equitably allocate the total 
purchasing activity costs, the educational institution may use a method 
for allocating all such costs which would provide an equitable 
distribution to all applicable indirect cost pools. For example, the 
institution may use the number of transactions processed rather than its 
former allocation base of modified total costs. The educational 
institution's Disclosure Statement must be amended for the proposed 
changes in accounting practices.
    (b) Illustrations of costs which are not incurred for the same 
purpose:
    (1) An educational institution normally allocates special test 
equipment costs directly to contracts. The costs of general purpose test 
equipment are normally included in the indirect cost pool which is 
allocated to contracts. Both of these accounting practices were 
previously disclosed to the Government. Since both types of costs 
involved were not incurred for the same purpose in accordance with the 
criteria set forth in the educational institution's Disclosure 
Statement, the allocation of general purpose test equipment costs from 
the indirect cost pool to the contract, in addition to the directly 
allocated special test equipment costs, is not considered a violation of 
the Standard.
    (2) An educational institution proposes to perform a contract which 
will require three firemen on 24-hour duty at a fixed-post to provide 
protection against damage to highly inflammable materials used on the 
contract. The educational institution presently has a firefighting force 
of 10 employees for general protection of its facilities. The 
educational institution's costs for these latter firemen are treated as 
indirect costs and allocated to all contracts; however, it wants to 
allocate the three fixed-post firemen directly to the particular 
contract requiring them and also allocate a portion of the cost of the 
general firefighting force to the same contract. The institution may do 
so but only on condition that its disclosed practices indicate that the 
costs of the separate classes of firemen serve different purposes and 
that it is the institution's practice to allocate the general 
firefighting force indirectly and to allocate fixed-post firemen 
directly.