What type of costs does OMB Circular A-87 allow to be recovered under federal awards?

OMB Circular A-87 provides guidelines for the allowable costs of state and local governments seeking reimbursement from the federal government under federal grants and awards. It specifies that both direct and indirect costs can be recovered, provided they meet certain criteria.

Direct costs are those that can be directly attributed to a specific project or program, such as salaries and equipment purchased for a particular project. Indirect costs, on the other hand, are expenses that are not easily traceable to a specific program but are necessary for the overall operation. This includes items like utilities, administrative salaries, and other overhead expenses.

The acceptance of both types of costs under federal awards is essential for ensuring that entities can recover the full range of expenses associated with managing and delivering programs. This allows for a more comprehensive approach to budgeting and funding in governmental finance, facilitating the support of ongoing projects and ensuring compliance with federal regulations.

Therefore, the inclusion of both direct and indirect costs in recoverable expenses aligns with the overarching goal of OMB Circular A-87 to promote efficient and effective management of federal funds by state and local governments.