Cost Principles Table, Category B: Operating Costs, HRS Chapter 103F

Airfare (Inter-Island)
• Costs for airline tickets Allowable with prior approval.Required Documentation:
Schedule of inter-island travel detailing staff, destination, purpose, fare costs, per diem/subsistence and dates of travel.
Personnel policies and procedures governing travel.
Cost of cancelled travel shall not be charged to the contract.
• First class travelUnallowableUnallowable
Audit Services
Cost of an audit by an independent certified public accountant
• Federal funds
a. Audits completed in accordance with OMB Circular A-133, required for providers expending $300,000 or more in federal funds during the fiscal year.
b. Limited scope audits arranged and paid for by pass through entities to monitor subrecipients.
AllowableRequired Documentation:
Financial statements and schedule of expenditures of Federal awards, summary schedule of prior audit findings, auditor’s reports, and corrective action plans. If the audit does not contain questioned costs or audit findings related to the pass through federal funds, a notification letter may be sent to the pass through entity (see OMB Circular A-133, Subpart C.)
Copy of limited scope audit report.
• State funds only
a. Financial audits of the organization
b. Special audits required by the State
AllowableCopies of the audit report and management letter issued by the auditor.
Contractual Services -
• Costs of administrative professional and consultant services, which cannot be performed by the applicant/provider's staff, e.g., accounting, bookkeeping, payroll, and secretarial services.AllowableRequired Documentation:
Schedule detailing business or individual’s name, description of the service, and contract amount or fee.
• Legal fees for defense and prosecution of criminal and civil proceedings.
Retainer payments to attorneys.
Contractual Services -
Costs of professional and consultant services necessary for the delivery of the primary contracted services, which cannot be performed by the applicant/provider's staff.Allowable with prior approvalRequired Documentation:
Justification for contractual services proposed.
Schedule detailing subcontracted organization or individual's name, description of the service, and contract amount or fee.
Executed agreements between the contracting parties.
Depreciation expense is the method of allocating the cost of a capital asset over the estimated useful life of the asset as it relates to the contract.
• Depreciation of equipment, motor vehicles, and buildings and capital improvements, required for the program, e.g., renovations in connection with the program for office and program requirements.AllowableRequired Documentation:
Depreciation schedule, cost allocation bases, previous depreciation taken, and budgeted depreciation expense.
• Idle facilities
• Assets acquired through the State or Federal government
• Provisions for meals and snacks. Food provided as part of the services for clients as specified in the contract.Allowable with prior approvalRequired Documentation:
Schedule detailing description and cost.
• Food costs covered by SSI or other funds.UnallowableUnallowable
Indirect Costs (Negotiated Federal Rate)Costs incurred for common or joint objectives that cannot be readily identified with a particular final cost objective, e.g., general administration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting.
• General operating costs equitably distributed to benefiting objectives by using a current rate negotiated with the federal government.AllowableRequired Documentation:
A valid copy of the written agreement with the federal agency for the negotiated rate.
Attach to Proposal Budget if used.
Cost of insurance required or approved pursuant to the contract.
• Indemnification Coverage
• General Liability
• Bonding
• Applicant/Provider’s Automobiles
• Fire
• Hurricane
• Flood
AllowableRequired Documentation:
A valid Certificate of Insurance which shows the following:
1. Policy in effect during the contract period.
2. Liability coverage(s) as specified in the agreement.
3. The contracted services or type of services.
4. The State of Hawaii and the state purchasing agency as the certificate holder.
5. Address of the state purchasing agency.
6. The State of Hawaii named as additionally insured.
• Life insurance premiums of officers, employees, or Board members where the applicant/provider is the beneficiaryUnallowableUnallowable
Costs incurred for interest on borrowed capital
• Interest on debt incurred after May 14, 1997 to acquire or replace capital assets (including renovations, alterations, equipment, land, and capital assets acquired through capital leases), acquired after May 14, 1997 and used in support of the State contracts.Allowable with prior approvalRequired Documentation for prior approval:
A statement of purpose and justification for facility acquisition or replacement.
A statement as to why current facilities are not adequate.
A statement of planned future use of the facility.
A description of the financing agreement to be arranged for the facility.
A summary of the building contract with estimated cost information and statement of source and use of funds.
A lease/purchase analysis which shows that a financed purchase or capital lease is less costly to the organization than other leasing alternatives (See OMB Circular A-122.)
Reimbursements will be limited to the least costly alternative.
• All other interest costsUnallowableUnallowable
Lease/Rental of Equipment
Lease rent of program equipment used for contractual services
• Rental or lease cost in connection with the program for office and program requirements.Allowable with prior approvalRequired Documentation:
Schedule detailing item, purpose, cost and usage.
Lease/rental agreement.
• Security deposits
• Loan payments made in connection with purchase of equipment
Lease/Rental of Motor VehiclesMotor vehicle lease costs related to contracted services
• Leasing costs of vehicles used directly in connection with the programAllowable with prior approvalRequired Documentation:
Schedule detailing vehicle, purpose, cost and usage. Lease/rental agreement.
• Security deposits
• Loan payments made in connection with purchase of vehicle
Lease/Rental of Space
Lease rental of office and program facility space
• Lease rent paid for office and program requirements
• Common area charges
Allowable with prior approvalRequired Documentation:
Lease/rental agreement.
Payments must be made to a third party and comparable to other properties in the area.
Rental costs under sale and leaseback arrangements are allowable only up to the amount that would be allowed had the organization continued to own the property.
• Security deposits
• Unused space
Travel allowances based on staff’s mileage actually incurred.
Reimbursement to staff using their private vehicles for business related to the contract.
• Mileage reimbursement not to exceed federal (IRS) allowancesAllowableRequired Documentation:
Schedule for mileage detailing position of staff, destination, purpose and total miles claimed.
A record of business miles traveled for each trip using employees’ personal vehicle.
• Monthly auto allowances
• Relocation costs
• Reimbursement for personal use or non-contract related mileage
Postage, Freight and Delivery
Mailing, shipping and delivery costs relating to the contract
• Postage stamps
• Costs for mailing, e.g., certified mail
• Delivery charges for goods purchased
AllowableCheck with contracting agency
Program Activities

• All other cost items directly related to or required in order to deliver services to clients, e.g., client incentives, client excursions, training wages, and client/volunteer stipends.
Allowable with prior approvalRequired Documentation:
A schedule detailing:
1. Description of program activity.
2. Frequency of activity.
3. Number of participants.
4. Cost per person.
All program activities are limited to contract provisions; and costs must be incurred on behalf of clients.
Publication, Printing and Advertising
Costs of printing and binding, and subscriptions.
Costs of media services.
Media advertising includes magazines, newspapers, radio and television programs, direct mail, exhibit, and the like.
• Publications used directly in the program
• Professional books and journals
• Recruitment of personnel
• Procurement of goods and services
• Advertisements specifically required by contract
AllowableRequired Documentation:
Schedule providing basis for estimating cost of postage, printing and copying.
Schedule for subscriptions and publications detailing titles and costs.
Repairs and Maintenance
Necessary maintenance, repair and upkeep of facilities, buildings and equipment.
• Costs incurred for repair and maintenance of facilities and equipment, e.g., janitorial services, painting, plumbing and electrical repairs
• For leased space, allowed for lessee if responsibility by lessor is not specified in the rental agreement.
AllowableCheck with contracting agency
• Expenditures which will increase the life of a capital assetUnallowableUnallowable
Staff Training
Cost of preparation and maintenance of on-the-job, classroom and other training to increase the employees’ vocational effectiveness.
• Registration and tuition costs
• Costs of materials, including books
AllowableRequired Documentation:
Schedule detailing title of training, date, persons attending and purpose.
Training for staff who provide direct service to recipients.
Conference and workshops for the purpose of dissemination of technical information to improve the delivery of the service.
• Out of State training
• Training for administrative personnel
Allowable with prior approvalSame as above
• Entertainment costs, e.g., office parties
• Training courses taken by an employee to acquire basic skills which should have been brought to the job or to qualify for duties other than the position held.
Subsistence/Per Diem
Costs for room and board while on official travel status
• Subsistence or per diem rates may be used.AllowableRequired Documentation:
Travel policies and procedures.
Receipts for subsistence payments.
For overnight accommodations, room rates must be reasonable and ordinary in relation to accommodations within the surrounding area and type of accommodation.
Not to exceed State per diem allowances
• All tips and gratuitiesUnallowableUnallowable
Cost of materials and other consumable supplies necessary for the performance of the contract.
• Office supplies
• Motor vehicle supplies
• Educational supplies
• Medical supplies
• Recreational supplies
• Janitorial supplies
• Program supplies
AllowableCheck with contracting agency
Cost of telephone service, equipment rentals, telefacsimile, and long distance charges. (For telephone equipment purchases, see Equipment Purchases.)
• Normal monthly charges including telefacsimile lines
• Inter-island calls
• Long-distance mainland calls
• Installation costs
AllowableRequired Documentation:
Schedule detailing phone installation, monthly rates, inter-island calls, number of lines and instruments to support budget request.
Cost of ground transportation while on official travel status
• Taxi fare
• Bus fare
• Auto rentals
• Parking fees
AllowableRequired Documentation:
• All tips and gratuities
• Parking tickets and fines
• Water/Sewer
• Electricity
• Gas
• Refuse
AllowableRequired Documentation:
Schedule detailing monthly and annual costs for each item.