2 CFR Part 225

Cost Principles for State, Local, and Indian Tribal Governments (OMB Circular A-87)

2 CFR Part 225 replaces the OMB circular A-87. Most useful to program directors and fiscal officers, this Part establishes principles and standards for determining costs for federal awards carried out through grants,cost reimbursement contracts, and other agreements with State and local governments and federally-recognized Indian tribal governments.

TITLE 2--GRANTS AND AGREEMENTS
CHAPTER II--OFFICE OF MANAGEMENT AND BUDGET CIRCULARS AND GUIDANCE
PART 225_COST PRINCIPLES FOR STATE, LOCAL, AND INDIAN TRIBAL GOVERNMENTS (OMB CIRCULAR A-87)

Sec.
225.5 Purpose
225.10 Authority
225.15 Background
225.20 Policy.
225.25 Definitions.
225.30 OMB responsibilities.
225.35 Federal agency responsibilities.
225.40 Effective date of changes.
225.45 Relationship to previous issuance.
225.50 Policy review date.
225.55 Information Contact.

Appendix A to Part 225--General Principles for Determining Allowable Costs
Appendix B to Part 225--Selected Items of Cost
Appendix C to Part 225--State/Local-Wide Central Service Cost Allocation Plans
Appendix D to Part 225--Public Assistance Cost Allocation Plans
Appendix E to Part 225--State and Local Indirect Cost Rate Proposals

Authority: 31 U.S.C. 503; 31 U.S.C. 1111; 41 U.S.C. 405; Reorganization Plan No. 2 of 1970; E.O. 11541, 35 FR 10737, 3 CFR, 1966-1970, p. 939. Source: 70 FR 51910, Aug. 31, 2005, unless otherwise noted.

Sec. 225.5  Purpose.
This part establishes principles and standards for determining costs for Federal awards carried out through grants, cost reimbursement contracts, and other agreements with State and local governments and federally-recognized Indian tribal governments (governmental units).

Sec. 225.10  Authority.

This part is issued under the authority of the Budget and Accounting Act of 1921, as amended; the Budget and Accounting Procedures Act of 1950, as amended; the Chief Financial Officers Act of 1990; Reorganization Plan No. 2 of 1970; and Executive Order No. 11541 (``Prescribing the Duties of the Office of Management and Budget and the Domestic Policy Council in the Executive Office of the President'').

Sec. 225.15  Background.

As part of the government-wide grant streamlining effort under Public Law 106-107, Federal Financial Award Management Improvement Act of 1999, OMB led an interagency workgroup to simplify and make consistent, to the extent feasible, the various rules used to award Federal grants. An interagency task force was established in 2001 to review existing cost principles for Federal awards to State, local, and Indian tribal governments; colleges and universities; and non-profit organizations. The task force studied ``Selected Items of Cost'' in each of the three cost principles to determine which items of costs could be stated consistently and/or more clearly.

Sec. 225.20  Policy.

This part establishes principles and standards to provide a uniform approach for determining costs and to promote effective program delivery, efficiency, and better relationships between governmental units and the Federal Government. The principles are for determining allowable costs only. They are not intended to identify the circumstances or to dictate the extent of Federal and governmental unit participation in the financing of a particular Federal award. Provision for profit or other increment above cost is outside the scope of this part.

Sec. 225.25  Definitions.

Definitions of key terms used in this part are contained in Appendix A to this part, Section B.

Sec. 225.30  OMB responsibilities.

The Office of Management and Budget (OMB) will review agency regulations and implementation of this part, and will provide policy interpretations and assistance to insure effective and efficient implementation. Any exceptions will be subject to approval by OMB. Exceptions will only be made in particular cases where adequate justification is presented.

Sec. 225.35  Federal agency responsibilities.

Agencies responsible for administering programs that involve cost reimbursement contracts, grants, and other agreements with governmental units shall issue regulations to implement the provisions of this part and its appendices.

Sec. 225.40  Effective date of changes.

This part is effective August 31, 2005.

Sec. 225.45  Relationship to previous issuance.

(a) The guidance in this part previously was issued as OMB Circular A-87. Appendix A to this part contains the guidance that was in Attachment A (general principles) to the OMB circular; Appendix B contains the guidance that was in Attachment B (selected items of cost); Appendix C contains the information that was in Attachment C (state/local-wide central service cost allocation plans); Appendix D contains the guidance that was in Attachment D (public assistance cost allocation plans); and Appendix E contains the guidance that was in Attachment E (state and local indirect cost rate proposals).

(b) This part supersedes OMB Circular A-87, as amended May 10, 2004, which superseded Circular A-87, as amended and issued May 4, 1995.

Sec. 225.50  Policy review date.

This part will have a policy review three years from the date of issuance.

Sec. 225.55  Information contact.

Further information concerning this part may be obtained by contacting the Office of Federal Financial Management, Financial Standards and Reporting Branch, Office of Management and Budget, Washington, DC 20503, telephone 202-395-3993.

See also: 
      Appendix A to Part 225--General Principles for Determining Allowable Costs
      Appendix B to Part 225---Selected Items of Cost
      Appendix C to Part 225--State/Local-Wide Central Service Cost Allocation Plans
      Appendix D to Part 225--Public Assistance Cost Allocation Plans
      Appendix E to Part 225--State and Local Indirect Cost Rate Proposals

2 CFR Part 225. Cost Principles For State, Local, and Indian Tribal Governments (OMB Circular A-87). 2006. English.

Last Reviewed: April 2008

Last Updated: August 6, 2015