[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: 48CFR9905.506-60]

[Page 488-489]
 
            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. 9905.506-60  Illustrations.

    (a) An institution allocates indirect expenses for Organized 
Research on the basis of a modified total direct cost base. In a 
proposal for a covered contract, it estimates the allocable expenses 
based solely on the estimated amount of indirect costs allocated to 
Organized Research and the amount of the modified total direct cost base 
estimated to be incurred during the 8 months in which performance is 
scheduled to be commenced and completed. Such a proposal would be in 
violation of the requirements of this Standard that the calculation of 
the amounts of both the indirect cost pools and the allocation bases be 
based on the contractor's cost accounting period.

[[Page 489]]

    (b) An institution whose cost accounting period is the calendar 
year, installs a computer service center to begin operations on May 1. 
The operating expense related to the new service center is expected to 
be material in amount, will be accumulated in an intermediate cost 
objective, and will be allocated to the benefiting cost objectives on 
the basis of measured usage. The total operating expenses of the 
computer service center for the 8-month part of the cost accounting 
period may be allocated to the benefiting cost objectives of that same 
8-month period.
    (c) An institution changes its fiscal year from a calendar year to 
the 12-month period ending May 31. For financial reporting purposes, it 
has a 5-month transitional ``fiscal year.'' The same 5-month period must 
be used as the transitional cost accounting period; it may not be 
combined as provided in 9905.506-50(f), because the transitional period 
would be longer than 15 months. The new fiscal year must be adopted 
thereafter as its regular cost accounting period. The change in its cost 
accounting period is a change in accounting practices; adjustments of 
the contract prices may thereafter be required in accordance with 
subdivision (a)(4) (ii) or (iii) of the contract clause at 9903.201-
4(e).
    (d) Financial reports are prepared on a calendar year basis on a 
university-wide basis. However, the contracting segment does all 
internal financial planning, budgeting, and internal reporting on the 
basis of a twelve month period ended June 30. The contracting parties 
agree to use the period ended June 30 and they agree to overhead rates 
on the June 30 basis. They also agree on a technique for prorating 
fiscal year assignment of the university's central system office 
expenses between such June 30 periods. This practice is permitted by the 
Standard.
    (e) Most financial accounts and contract cost records are maintained 
on the basis of a fiscal year which ends November 30 each year. However, 
employee vacation allowances are regularly managed on the basis of a 
``vacation year'' which ends September 30 each year. Vacation expenses 
are estimated uniformly during each ``vacation year.'' Adjustments are 
made each October to adjust the accrued liability to actual, and the 
estimating rates are modified to the extent deemed appropriate. This use 
of a separate annual period for determining the amounts of vacation 
expense is permitted under 9905.506-50(b).