Minnesota Department of Transportation

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MnDOT Policies

Audit Oversight of Overhead and Indirect Cost Rates

MnDOT Policy #FM010
Revised: December 16, 2024

View/print signed policy (PDF)

Please go to the MnDOT Org Chart to find specific contact information: Org Chart.

Responsible Senior Officer: Deputy Commissioner/Chief Administrative Officer
Policy Owner: Director - Office of Audit
Policy Contact: External Audit Programs Audit Director, Office of Audit

Policy statement

MnDOT adopts the AASHTO, "Uniform Audit & Accounting Guide," (Guide) 1 for reimbursement of consultant contracts (professional/technical services), as found in the U.S. Code of Federal Regulations, 48 CFR, Chapter 1, Subpart 31.2, "Contracts with Commercial Organizations” (FAR Part 31). This applies to all federal and state professional/technical contracts that MnDOT administers or oversees.

The Guide, developed under the direction and guidance of the Federal Highway Administration (FHWA), is a collaboration among the American Council of Engineering Companies (ACEC) and the American Association of State Highway and Transportation Officials (AASHTO) Subcommittee on Internal and External Audit. It was designed to assist engineering consultants, independent CPAs, and state DOT auditors with the preparation, and/or auditing, of statements of direct labor, fringe benefits, and general overhead (indirect cost rate schedules). 

  • In addition to the Guide, MnDOT applies an overhead rate cap to professional/technical contracts.2 For contracts that include special studies, special expertise or special circumstances, an exception to the cap may be requested if a unique situation applies. Exceptions may be requested through Consultant Services. Final approval must be granted by the Deputy Commissioner/Chief Engineer and the Audit Director.
  • MnDOT does not reimburse Facilities Capital Cost of Money (FCCM) rates or allow cost of service rates.

For additional information about submitting an overhead rate for MnDOT’s consideration, review, and approval, visit the Rates page on the Office of Audit website.

Grants

MnDOT adopts the requirements outlined in 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and all applicable state and federal laws, rules, regulations, and policies provided in the MnDOT Grant Management Policy. To assess risk, the Office of Audit considers these criteria for all federal and state grant agreements that MnDOT administers or oversees.

For additional information about submitting an indirect cost rate for MnDOT’s consideration, review, and approval, visit the Grants page on the Office of Audit website.

Oversight

Annually, each consultant and grantee must submit their proposed overhead or indirect cost rate for review and approval. The MnDOT Office of Audit must determine whether the proposed rate meets the requirements specified above and may adjust the proposed rate accordingly.

Reason for policy

For professional/technical contracts, Minnesota Statutes §174.23, subd. 9 requires MnDOT to establish reimbursement policies based on the cost principles of the federal acquisition regulations to determine the reasonableness and allowability of various costs, including overhead factors, direct salary costs, and other costs of design and consultant contracts. This policy meets this statutory requirement and ensures consultants are developing rates consistent with requirements in FAR Part 31, the AASHTO Guide, and any applicable state contracting laws and policies.

For grants, Minnesota Statutes §16B.98, subd. 1 requires the recipient of state fund appropriations to agree to minimize administrative costs and directs granting agencies to negotiate appropriate limits so that the state derives the optimum benefit for grant funds. This policy ensures grantees are developing rates consistent with this requirement, 2 CFR 200, and any applicable state and MnDOT policies.

This policy ensures consultant and grantee costs are reasonable and meet federal and state requirements.

Applicability

All MnDOT employees must comply with this policy.

Key stakeholders with responsibilities under this policy include:

  • MnDOT Deputy Commissioners
  • Office of Audit
  • Contract Administrators/Project Managers
  • Consultants and Grantees

Definitions

Acceptance Review

MnDOT’s review and acceptance, with or without adjustment, of a consultant’s or grantee’s rate that was developed in-house or by a certified public accounting firm.

Cognizant Agency

Any federal agency or state department of transportation as identified in the Guide that has performed an audit in accordance with generally accepted government auditing standards to test compliance with the requirements of the Federal cost principles (as specified in 48 CFR 31) and issued an audit report of the consultant's indirect cost rate, or any described agency that has conducted a review of an audit report and related workpapers prepared by a certified public accountant and issued a letter of concurrence with the audited indirect cost rate(s).

Cognizant Review

MnDOT performance of an overhead or indirect cost rate review to which MnDOT is acting as a cognizant agency to approve the certified public accountant’s submitted rate and issue a letter of concurrence to the consultant.

Cognizant Acceptance

MnDOT’s review and acceptance, with or without adjustment, of another cognizant agency’s letter of concurrence.

Consultant

A business or person contracted with MnDOT to provide products or services.

Facilities Capital Cost of Money (FCCM)

A calculation of costs related to a consultant’s investment in fixed assets/facilities used in contract performance, regardless of whether the source of the investment is equity or borrowed capital.

Governmental Entities

A federal, state, local or tribal government established or recognized by the U.S. Constitution, a state constitution, a treaty, a statute, or a court decision.

Grantee

An entity that receives a grant from MnDOT.

Overhead Rate/Indirect Cost Rate

A calculation of costs allocated to the production of a product or service. Overhead costs are expenses that are not directly tied to production such as the cost of human resources, utilities, maintenance, etc.

Note: The Office of Audit uses the term “Indirect Cost Rate” for grantees and the term “Overhead Rate” for non-grantees such as consultants or contractors.

Responsibilities

Deputy Commissioner/Chief Engineer

  • Approve MnDOT’s overhead rate cap.

Office of Audit

  • Review and issue acceptance and cognizant approval letters.
  • Write cognizant letters of approval, when applicable.
  • Adjust rates to meet federal and state requirements, when necessary.
  • Perform financial analysis reviews of consultants and grantees to verify financial stability.
  • Perform field audits of overhead and indirect cost rates, as needed.

Contract Administrators/Project Managers

  • Verify consultant or grantee is properly applying the approved overhead or indirect cost rate on each contract.

Consultants and Grantees

Policy Owner (Director, Office of Audit)

  • Review the policy every two years, or sooner as necessary, to ensure the policy remains up to date.
  • Ensure procedures, training, and other documents associated with the policy remain current.
  • Monitor state, federal, enterprise, agency, or other requirements that apply to the policy or procedures.
  • Consult with the Office of Chief Counsel to ensure the policy and procedures remain compliant with all state, federal, enterprise, agency, or other requirements.
  • Ensure that necessary approvals by state or federal agencies are obtained before changes to the policy or procedures are implemented.
  • Work with the Policy Coordinator to revise the policy and/or confirm its accuracy.
  • Communicate policy revisions, reviews, and retirements to stakeholders.

Resources and related information

Processes, Procedures, and Instructions

Resources

History and updates

Adopted

August 20, 2013

Superseded

  • Policy #2.823-G-1: Reimbursement Guidelines for Consultant Contracts
    • Effective: April 12, 1989

Revised

  • First Revision: August 28, 2017
  • Second Revision: June 23, 2020
  • Third Revision: December 16, 2024

This policy's next scheduled review is due December 2026.

1. The AASHTO Guide is available to member organizations for free and through paid subscription to others at AASHTO Journal - AASHTO Issues Accounting & Audit Guide Update (transportation.org). ↩
2. See 23 USC §112(b)(2)(F) ↩