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c. Unallowable costs. Costs which are unallowable under other sections of these principles shall <br />not be allowable under this section solely on the basis that they constitute personnel <br />compensation. <br />d. Fringe benefits. <br />(1) Fringe benefits are allowances and services provided by employers to their employees as <br />compensation in addition to regular salaries and wages. Fringe benefits include, but are not <br />limited to, the costs of leave, employee insurance, pensions, and unemployment benefit plans. <br />Except as provided elsewhere in these principles, the costs of fringe benefits are allowable to the <br />extent that the benefits are reasonable and are required by law, governmental unit-employee <br />agreement, or an established policy of the governmental unit. <br />(2) The cost of fringe benefits in the form of regular compensation paid to employees during <br />periods of authorized absences from the job, such as for annual leave, sick leave, holidays, court <br />leave, military leave, and other similar benefits, are allowable if: (a) they are provided under <br />established written leave policies; (b) the costs are equitably allocated to all related activities, <br />including Federal awards; and, (c) the accounting basis (cash or accrual) selected for costing <br />each type of leave is consistently followed by the governmental unit. <br />(3) When a governmental unit uses the cash basis of accounting, the cost of leave is recognized <br />in the period that the leave is taken and paid for. Payments for unused leave when an employee <br />retires or terminates employment are allowable in the year of payment provided they are <br />allocated as a general administrative expense to all activities of the governmental unit or <br />component. <br />(4) The accrual basis may be only used for those types of leave for which a liability as defined <br />by Generally Accepted Accounting Principles (GAAP) exists when the leave is earned. When a <br />governmental unit uses the accrual basis of accounting, in accordance with GAAP, allowable <br />leave costs are the lesser of the amount accrued or funded. <br />(5) The cost of fringe benefits in the form of employer contributions or expenses for social <br />security; employee life, health, unemployment, and worker's compensation insurance (except as <br />indicated in section 22, Insurance and indemnification); pension plan costs (see subsection e.); <br />and other similar benefits are allowable, provided such benefits are granted under established <br />written policies. Such benefits, whether treated as indirect costs or as direct costs, shall be <br />allocated to Federal awards and all other activities in a manner consistent with the pattern of <br />benefits attributable to the individuals or group(s) of employees whose salaries and wages are <br />chargeable to such Federal awards and other activities. <br />e. Pension plan costs. Pension plan costs may be computed using a pay-as-you-go method or an <br />acceptable actuarial cost method in accordance with established written policies of the <br />governmental unit. <br />(1) For pension plans financed on a pay-as-you-go method, allowable costs will be limited to <br />those representing actual payments to retirees or their beneficiaries. <br />18 <br /> <br />