New Search
compensation, unemployment compensation, severance pay, and similar employee benefits (e.g., <br />subsection8.f. for post retirement health benefits), are allowable in the year of payment provided <br />(1) the governmental unit follows a consistent costing policy and (2) they are allocated as a <br />general administrative expense to all activities of the governmental unit. <br />f. Insurance refunds shall be credited against insurance costs in the year the refund is received. <br />g. Indemnification includes securing the governmental unit against liabilities to third persons and <br />other losses not compensated by insurance or otherwise. The Federal Government is obligated to <br />indemnify the governmental unit only to the extent expressly provided for in the Federal award, <br />except as provided in subsection d. <br />h. Costs of commercial insurance that protects against the costs of the contractor for correction <br />of the contractor's own defects in materials or workmanship are unallowable. <br />23.Interest. <br />a. Costs incurred for interest on borrowed capital or the use of a governmental unit’s own funds, <br />however represented, are unallowable except as specifically provided in subsection b. or <br />authorized by Federal legislation. <br /> b. Financing costs (including interest) paid or incurred which are associated with the otherwise <br />allowable costs of building acquisition, construction, or fabrication, reconstruction or <br />remodeling completed on or after October 1, 1980 is allowable subject to the conditions in (1) <br />through (4) of this section 23.b. Financing costs (including interest) paid or incurred on or after <br />September 1, 1995 for land or associated with otherwise allowable costs of equipment is <br />allowable, subject to the conditions in (1) through (4). <br />(1)The financing is provided (from other than tax or user fee sources) by a bona fide third party <br />external to the governmental unit; <br />(2) Thee assets are used in support of Federal awards; <br />(3)Earnings on debt service reserve funds or interest earned on borrowed funds pending <br />payment of the construction or acquisition costs are used to offset the current period's cost or <br />the capitalized interest, as appropriate. Earnings subject to being reported to the Federal <br />Internal Revenue Service under arbitrage requirements are excludable. <br />(4)For debt arrangements over $1 million, unless the governmental unit makes an initial equity <br />contribution to the asset purchase of 25 percent or more, the governmental unit shall reduce <br />claims for interest cost by an amount equal to imputed interest earnings on excess cash flow, <br />which is to be calculated as follows. Annually, non-Federal entities shall prepare a cumulative <br />(from the inception of the project) report of monthly cash flows that includes inflows and <br />outflows, regardless of the funding source. Inflows consist of depreciation expense, <br />amortization of capitalized construction interest, and annual interest cost. For cash flow <br />calculations, the annual inflow figures shall be divided by the number of months in the year <br />31 <br /> <br />