May 10, 2004

FP

TO: Officials-in-Charge of Headquarters Offices

Directors, NASA Centers

FROM: F/Assistant Administrator for Human Resources

SUBJECT: Allocable, Allowable, and Reasonable Indirect Costs for

> Intergovernmental Personnel Act (IPA) Agreements

The IPA Mobility Program permits participating organizations to
negotiate the percentage of costs that each party will pay in funding an
IPA assignment. Generally, costs that may be paid by NASA include the
salary and benefits of the IPA assignee and certain travel and
relocation expenses. NASA can pay all, some, or none of those costs.

Earlier guidance from the Office of Personnel Management (OPM) stated
that agencies should not authorize reimbursement for indirect or
administrative costs associated with the IPA assignment. Recent
discussions with OPM disclosed that its guidance was not intended to
prohibit the reimbursement of an allocable share of contractor indirect
costs provided such allocation is consistent with the contractor\'s
established cost accounting practices. OPM intends to clarify the
guidance to state that: (1) the statutory authority establishing the IPA
program does not specifically prohibit reimbursement of indirect costs,
and (2) reimbursement of such costs should be determined by the agency
that enters into the agreement.

Due to the unique nature of IPA agreements, the proper indirect cost
allocation normally should be limited to a reduced allocation of General
and Administrative costs that includes only those functions or
categories that provide benefit to IPA agreements. The proper allocation
of indirect cost associated with IPA agreements generally is lower than
the indirect cost rate negotiated for organizations--- including those
indirect costs that organizations apply to support their employees
working offsite. Therefore, it is critical that the cognizant Federal
agency for negotiation and administration of indirect cost rates have a
written agreement that specifies the proper allocation of indirect costs
associated with IPA agreements.

It is the policy of some Federal agencies not to authorize the
reimbursement of indirect costs associated with IPA agreements unless
there is a written agreement from the cognizant audit official that
specifies the proper allocation of indirect costs associated with IPA
agreements. NASA is adopting a more flexible approach. In executing an
IPA agreement in which the nonfederal organization requests
reimbursement for indirect costs but the proper allocation

of indirect cost has not been verified by the cognizant audit official,
NASA may permit a provisional indirect cost rate of 6 percent in the IPA
agreement. The provisional payment of 6 percent would be adjusted, if
necessary, when the cognizant audit agency has a written agreement
specifying the proper allocation of indirect costs associated with IPA
agreements.

As a result of the OPM clarification, NASA has developed the following
three clauses addressing the allowability of indirect costs associated
with the IPA program. Each IPA agreement should include the appropriate
clause for the allocation of indirect costs.

> \(1\) Insert the following language when the organization does not
> request that indirect cost be included as part of an IPA agreement:
>
> No indirect cost for this IPA will be allowed because none have been
> proposed for this IPA.
>
> \(2\) Insert the following language when the organization requests
> indirect costs and the proper allocation of indirect cost associated
> with IPA agreements has been verified by the cognizant audit official:
>
> The rate of \_\_\_ percent as confirmed by the cognizant audit
> official will be allowed for this IPA.
>
> \(3\) Insert the following language when the organization requests
> indirect costs, but the proper allocation of indirect cost associated
> with IPA agreements has been not verified by the cognizant audit
> official:
>
> > The (name of the organization) has proposed an indirect rate of
> > \_\_\_\_ percent, which has not been audited by the cognizant audit
> > officials. In lieu of waiting until an audit of indirect cost
> > specifically for the IPA, the Government will recognize a
> > provisional rate of 6 percent. The ([name of the
> > organization]{.underline}) must notify their cognizant auditing
> > official of the provisional rate, and request that they include a
> > separate indirect rate to be used specifically for IPA's as part of
> > the next incurred cost review. The parties will equitably adjust the
> > costs of this IPA based upon an audited indirect rate, which
> > specifies the proper allocation of indirect costs associated with
> > IPA agreements involving ([name of the organization]{.underline}).

This guidance has been coordinated with the Office of the General
Counsel and the Office of Procurement. It is issued as interim guidance,
effective upon issuance, and will be coordinated through the formal
NODIS process for incorporation into the appropriate NASA Procedural
Requirements document.

If you have any questions, please contact Carolyn Davis of my staff at
(202) 358-0046 or cdavis@nasa.gov.

//signed//

Vicki A. Novak

[Officials-in-Charge of Headquarters Offices]{.underline}:

AD/Mr. Gregory

AD-2/Mr. Martin

AA/Mr. Schumacher

ADI/Mr. Jennings

ADT/Dr. Greenfield

AG/Mr. Ciganer

AL/Mr. Jezierski

AS/Dr. Grunsfeld

B/Ms. Brown

D/Mr. Bradley

E/Dr. Hayden-Watkins

F/Ms. Novak

G/Mr. Pastorek

H/Mr. Luedtke

I/Mr. O'Brien

K/Mr. Thomas

L/Mr. Forsgren

M/Mr. Readdy

N/Dr. Loston

O/Mr. Sutton

P/Mr. Mahone

Q/Mr. O'Connor

R/Dr. Lebacqz

S/Dr. Weiler

T/Adm. Steidle

U/Ms. Kicza

V/Ms. Dunnington

W/Mr. Cobb

X/Mr. Saleeba

Y/Dr. Asrar

Z/Dr. Williams

[Directors, NASA Centers]{.underline}:

ARC/Mr. Hubbard

DFRC/Mr. Petersen

GRC/Dr. Earls

GSFC/Mr. Diaz

JPL/Dr. Elachi

JSC/Gen. Howell

KSC/Mr. Kennedy

LaRC/Gen. Bridges

MSFC/Mr. King

SSC/Adm. Donaldson

cc:

[Personnel Directors]{.underline}:

FM/Mr. Sullivan

FP/Ms. Peterson

FT/Ms. Acoveno

W/Ms. Gilmore

OCP/Mr. Jedrey

ARC/Ms. McCullough

DFRC/Ms. Boyd

GRC/Ms. Gordon

GSFC/Mr. Paprocki

JPL/Mr. Roessler

JSC/Ms. Saiz

KSC/Mr. Simpkins

LaRC/Mr. Meisel

MSFC/Mr. Hightower

SSC/Ms. Lovingood