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Instructions for calculating your FAR Overhead Rate

Although every attempt has been made to include the items and computations necessary and the
flexibility to calculate the Federal Acquisitions Regulation (FAR) Overhead Rate, this tool may not
address every unique situation that may exist. Its intended use is to provide guidance as well as a
template to calculate a firm’s overhead rate which may be used in the submission to do business
with PENNDOT, however, the items and calculations are subject to further adjustment by PENNDOT
before approval.

COMPLETING THE FORMS


Step 1 Enter the name of the Company(go to cell A14) and Fiscal Year Ending Date(go to cell
A26) on the "COVER" tab to create your company specific cover page.

Step 2 Organize your expenses using the categories found in the "OVERHEAD" Tab.

Step 3 Input all your expense balances in the "OVERHEAD" tab's Schedule of General and
Administrative Overhead Rate Computation in the grey portion of the General Ledger
column. PLEASE NOTE THAT CELLS C14 AND C29 ARE LEFT INTENTIONALLY BLANK.

Step 4 In the lower portion of the "OVERHEAD" tab, reconcile all your General and
Administrative expenses by inputting the amounts in the grey for Net Revenue, Direct
Labor, Net Income and Interest Income(if any). If there is a difference, there may be
an expense incorrectly inputted or missing.

Step 5 In the "Exclusions" tab, fill out Exclusions Worksheet.

Step 6 Ensure that your trial balance reconciles to your submitted overhead rate schedule.
Include the trial balance with your submission. Should you need further guidance on
what a trial balance is, see the definition provided in the Definitions tab or an
example has been provided on the Trial Blance tab. The provided example only
indicates the debit or credit balance an account will typically have. Ensure that you
have completed the trial balance using your financial information. In addition, ensure you
have completed the AASHTO Internal Control Questionnaire and have attached the
requested information.

IF CALCULATING AN OFFICE RATE ONLY(COMBINED RATE REPORT), SKIP STEPS 7 & 8


A combined rate is used when you perform no Field Work.
Use the Dual Rate when you do perform Field Work.

Step 7 In the "CALC" tab, input in the "ENTER TOTAL PAYROLL HERE" grey portion your
total gross payroll for the reported fiscal year ending.

Step 8 In the "Field Expenses" tab, fill out the "Schedule of Segregated Field Expenses"

PRINTING THE FORMS


Step 9 To use the print buttons below, you must first determine if your macro settings will
print buttons to operate.

Click on Tools then Macros then Security to see what your security level is set at.
If security level is set on:

LOW….then you can use the print buttons(escape out of the dialogue boxes
so you can print)
Instructions for calculating your FAR Overhead Rate

MEDIUM…then you can use the print buttons but when doing so a dialogue
box pops up to which you must click on "ENABLE MACROS"

HIGH or VERY HIGH….then you CAN NOT use the print buttons unless
you change your security setting to MEDIUM and
then follow the MEDIUM security level instructions
YOU SHOULD RETURN YOUR MACRO SECURITY
SETTING TO ITS ORIGINAL SETTING

To print, click on the appropriate button to generate the Overhead Report that you
need to submit. The Overhead Report that will be submitted to PENNDOT Consultant
Agreements consists of the Cover Page(Cover tab), Schedule of General and
Administrative Overhead Rate Computation(Overhead tab), Allocation Calculations(Calc
tab)…FOR DUAL RATE SUBMISSIONS ONLY and the Notes of the Exclusions to the
Schedule of General and Administrative Overhead Rate Computation(Notes tab).

For Office Rate Only, For Office and Field Rates,


use the Combined Rate Report use the Dual Rate Report

USEFUL LINKS

FAR -- Part 31Contract Cost Principles and Procedures


….a resource to support FAR overhead rate issues
with the complete access to the FAR Regulations

DCAA

…a valuable resource, the Defense Contract Audit Agency(DCAA),


under the authority, direction and control of the Under Secretary of
Defense(Comptroller), is responsible for performing all contract audits
for the Department of Defense, and providing accounting and financial
advisory services regarding contracts and subcontracts to all DoD
Components responsible for procurement and contract administration.
These services are provided in connection with negotiation, administration,
and settlement of contracts and subcontracts. DCAA also provides contract
audit services to some other Government Agencies.

USDOT FHWA Resource Center


…...includes the AASHTO Uniform Audit & Accounting Guide
(please note: after clicking this link, the website has a 5 second
delay before page is pulled up)
General Ledger Components for FAR Overhead Rate Calculation

Direct Labor All technical labor that is attributable to jobs.


Also included, any premium time(when consultant's policy
is to charge to direct) associated with a contract that can be identified
as the cause for the overtime

Advertising In programs and professional publications. Public relations in responding and


communicating with the public/press/stockholders/creditors and customers
in regards to company operations/activities and its associated travel expenses.
Imprinted clothing, souvenirs, models, buttons and other mementos provided
to the public/customers. Costs directly associated with trade shows
including labor and fringe benefits.

Automobile Include lease payments, automobile rentals, gas, registrations, repair and
maintenance and parking

Building Maintenance Includes ongoing maintenance, landscaping and upkeep services, repairs, etc.

Bonuses Include all bonuses to all employees

Cognizant Audit Developed to assign primary responsibility for an audit to a single entity
(the “cognizant agency”) to avoid the duplication of audit work performed
in accordance with Government Auditing Standards to obtain reasonable
assurance that claimed costs are accordance with the FAR Subpart 31.2
cost principles. Such audit work may be performed by home-state auditors,
a Federal audit agency, or a non-home State auditor designated by the
home-State auditor.

Computer Support Services Include automated payroll service, non-capitalized software costs(licenses
and maintenance), computer(harddrives, monitors, printers, scanners, etc.)
rentals and computer support(outside technical support)

Consulting Outside professionals services(i.e. medical broker, real estate broker and
other specialty advisors[i.e. brokers, promoters, organizers, management
consultants and investments counselors in relation to company
organization/reorganization costs])

Contributions Contributions on behalf of employees and clients, political contributions,


sponsorship of golf outings and door prizes, meals and hospitality expenses
for professional organization fundraisers.

Depreciation In addition to depreciation of capitalized assets include amortization of


intangible assets(copyrights, patents, etc.)
Also includes amortization of goodwill(in conjunction with an
acquisition of a business)

Direct Costs Any cost that is identified specifically with a particular final cost objective.
Costs that can be identified specifically with a contract are direct costs.

Direct costs include labor, materials, and reimbursable expenses incurred


specifically for an agreement. All direct labor costs allocable to design
and engineering contracts (regardless of the contract type, e.g.,
lump-sum versus actual cost) must be included in the direct labor base
regardless of whether the costs are billable to a client. Costs directly
identifiable to projects should not be included in the indirect cost pool.

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General Ledger Components for FAR Overhead Rate Calculation

Dues and Subscriptions Includes professional memberships, licenses and registrations and
professional publications, books and subscriptions and private club dues

Entertainment Fees, travel and related expenses for golf outings, football, baseball games
and other similar sporting events, which includes meals and/or alcohol.
All alcohol expenses with meals, holiday parties and similar expenses.

Facilities Capital Cost of Money(FCCM) In accordance with Department letter dated 12/3/03, the Department only
accepts FCCM as a component of ownership cost when evaluating cost
of ownership in accordance with Chapter 31 of the Federal Acquisition
Regulations for rent of office space between organizations under
common control.

Group Insurance Includes employee group life, medical and any life insurance policies
for the company and/or its employees(includes key man). Key man
insurance expense can be adjusted by any gain or loss from the
cash surrender value of that policy

Indirect Costs After direct costs have been determined and charged directly to the contract
or other work, indirect costs are those remaining to be allocated to
intermediate or two or more final cost objectives. No final cost objective shall
have allocated to it as an indirect cost any cost, if other costs incurred for
the same purpose, in like circumstances, have been included as a direct
cost of that or any other final cost objective.

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General Ledger Components for FAR Overhead Rate Calculation

Insurance Includes professional and general( which covers auto, property, worker's
comp., umbrella, etc.) liability policies

Interest Includes interest from borrowing activities

Legal and Accounting Includes legal, audit and accounting services from law or CPA firms
Also includes organization/reorganization costs(incorporation fees,
cost for attorneys and accountants)

Marketing Brochures, promotional material. Lobbying costs.


Travel expenses related to marketing activities.

Meetings and Seminars Annual company service award ceremony(exclude alcohol costs), training
and conference expenses. Includes mileage, hotel, airfare, car rental,
meals, etc.

Office and Miscellaneous Includes furniture, copier and phone leases. Janitorial,
office supplies, penalties(i.e. late filings), bad debts and bank
service charges.

Office Machine Maintenance

Other Equipment Rentals & Maintenance Include any rentals and maintenance other than office space, computer
related and office related equipment(i.e. out of office equipment)

Other Fringe Benefits Tuition reimbursement, professional development, performance and


achievement awards, gifts. Imprinted company clothing for employees.
Relocation expenses.

Other Supplies Includes supplies other than office and data processing(i.e. out of office
supplies for traffic count materials and other non-specific expenses
to perform outside the office activities).

Payroll Taxes FICA and other payroll associated taxes

Postage, Printing and Stationery Postage, express delivery services

Recruiting Fees Advertising for employment in newspaper, on Monster.com or on any other


employment referral or recruitment source. Also includes finder’s fees paid
to employees

Rent

Retirement Benefits Includes 401(k) with employer matching and employer profit sharing
contributions as well as pensions and other retirement benefits
Also includes plan administration.

Salaries-Administrative/Technical, Indirect Includes salaries that are Non-Technical ...Accounting, Marketing,


Receptionist, IT and Couriers. Also includes a portion of technical salaries
for indirect time(i.e. proposals) and any technical premium time
(overtime rate greater that one's original rate) that is not identifiable to any
specific job

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General Ledger Components for FAR Overhead Rate Calculation

Supplies Reproduction and technical supply costs associated with the preparation,
production and submission of proposals. Includes products and services by
outside vendors to include specialty papers including bond, color copies,
printing, binding materials, traffic count materials, foam board, photographs,
aircraft rental, video production, etc. Also includes data processing supplies

Taxes-Income Federal and State

Taxes, Other Than Income Includes sales tax, business privilege, capital stock tax and any gross
receipt tax payments

Telephone Includes local/long distance, internet and mobile

Travel Travel costs associated with proposal preparation. This includes meetings
between offices and those to presentation sites. These costs are specific to
a proposal. Includes mileage, hotel, airfare, car rental, meals, etc.

Travel costs associated with travel between offices for meetings of a general
nature, not specific to any proposal, training, conference or billable job.
Also included are work share meetings and associates conferences.
Includes mileage, hotel, airfare, car rental, meals, etc.

Trial Balance A list of all accounts in the ledger and their balances. The profit and loss
statement and balance sheet and other financial reports can be prepared
using the account balances from the trial balance. The submitted trial
balance should reconcile to the submitted overhead rate schedule and will
include the detailed accounts included on the submitted overhead rate
schedule.

Vacation, Sick, Holiday Includes Paid Leave(Severance)

Utilities

Page 6 of 15
Exclusion Worksheet

Exclusions: Answer all bolded statements. If one doesn't apply, leave blank.

(1) To exclude Advertising/Public Relations costs per FAR 31.205-1.

Enter any costs associated with souvenirs, models, imprinted clothing, buttons
and other mementos provided to customers or to the public and costs
directly associated with trade shows, including labor and fringe benefits. Enter total here…………….

(2) To exclude personal use of company vehicles per FAR 31.205-6.

Enter company vehicle(s) with their corresponding Fair Market Value and Personal Use %(Whole Number).

Vehicle Personal Use


Year/Make/Model ID # FMV % $

Total………………………………………………………………………………………………………………………. 0

(3) To exclude executive compensation per FAR 31.205-6.

Enter Max Compensation Limit for current year. Year


Amount

List officers and their last FYE W-2 compensation


W-2 Over Max
Officers Compensation Comp. Limit

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Total………………………………………………………………………………………………………………………. 0

(4) To exclude bonus and incentive compensation per FAR 31.205-6.


In order for bonuses and incentive compensation to be allowable, it must
a. have a good faith agreement before services are rendered between
employee and employer; or
b. be in accordance to an established plan/policy followed consistently
If not, enter amount that is unallowable Enter total here…………….
(5) To exclude organization/reorganization costs per FAR 31.205-27.
If it includes brokers/promoters/organizers/
mgmt consultants/investment counselors fees Enter total here…………….

(6) To exclude contributions per FAR 31.205-8.

(7) To exclude amortization of Goodwill per FAR 31.205-49. Enter total here…………….

(8) To exclude private club dues per FAR 31.205-13. Enter total here…………….

(9) To exclude entertainment per FAR 31.205-14 and any


alcoholic beverages related to those activities per FAR 31.205-51. Enter total here…………….

(10) To exclude key man insurance per FAR 31.205-19. Enter total here…………….

(11) To exclude interest per FAR 31.205-20.

(12) To exclude organization/reorganization costs per FAR 31.205-27.


If it includes incorporation/attorneys/accountants fees Enter total here…………….

(13) To exclude lobbying costs per FAR 31.205-22 and any


alcoholic beverages related to those activities per FAR 31.205-51. Enter total here…………….

(14) To exclude penalties per FAR 31.205-15. Enter total here…………….

(15) To exclude bad debts per FAR 31.205-3. Enter total here…………….

(16) To exclude gifts per FAR 31.205-13. Enter total here…………….

(17) To exclude excess rent over the normal costs of ownership when
property is rented from an entity under common control per FAR 31-205-36. Enter total here…………….

(18) To exclude federal income taxes per FAR 31.205-41. Enter total here…………….
ABC, INC.
Schedule of Segregated Field Expenses
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

You must enter an amount for Direct Labor from field personnel.
If none, enter "0" and skip to the next step.

Field Expenses: Enter ONLY the expenses that are specifically


attributable and reasonably can be segregated to the Field Office.

Field Expenses not specifically segregated here will be allocated using


the appropriate cost basis. Leave blank any expenses that do not apply.

Account Title Field Expenses

Direct Labor
Advertising
Automobile Expense(Including Lease Payments)
Bonuses

Building Maintenance
Computer Support Services
Consulting
Contributions
Depreciation
Dues and Subscriptions
Entertainment
Group Insurance
Insurance
Legal and Accounting
Meetings and Seminars
Other Equipment Rentals & Maintenance
Other Fringe Benefits
Payroll Taxes
Postage, Printing and Stationery
Recruiting Fees
Retirement Benefits
Salaries-Administrative
Salaries-Technical, Indirect
Taxes-Income
Taxes, Other Than Income
Telephone
Travel
Utilities

Vacation, Sick Leave, Holiday


Totals
ABC, INC.

SCHEDULE OF GENERAL AND ADMINISTRATIVE


OVERHEAD RATE COMPUTATION

OR THE FISCAL YEAR ENDED DECEMBER 31, 2006


ABC, INC.
SCHEDULE OF GENERAL AND ADMINISTRATIVE OVERHEAD RATE COMPUTATION
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

General Ledger Allowable


Account Title Balance Exclusions Direct Costs Indirect Costs

Direct Labor

Advertising 0
Automobile Expense(Including Lease Payments) 0
Bonuses 0
0
Building Maintenance
Computer Support Services
Contributions 0
Depreciation 0
Dues and Subscriptions 0
Entertainment 0
Facilities Capital Cost of Money(FCCM)
Group Insurance 0
Insurance
Interest 0
Legal and Accounting 0
Marketing 0
Meetings and Seminars
Office and Miscellaneous 0
0
Office Machine Maintenance
Other Equipment Rentals & Maintenance
Other Fringe Benefits 0
Payroll Taxes
Postage, Printing and Stationery
Recruiting Fees
Rent 0
Retirement Benefits
Salaries-Administrative
Salaries-Technical, Indirect
Supplies
Taxes-Income 0
Taxes, Other Than Income
Telephone
Travel
Utilities
Vacation, Sick Leave, Holiday

Total

FAR General & Administrative Overhead Rate(Allowable Indirect Costs/Direct Labor) =

Facilities Capital Cost of Money(FCCM)-as a Percent of Direct Labor =


ABC, INC.
ALLOCATION CALCULATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

ENTER TOTAL PAYROLL HERE>>>>>>>>

When expenses can be specifically (directly) identified to field or office this is how they should be allocated

Allocation Method No. 1


FAR
Direct Labor (OFFICE) =
Direct Labor (FIELD) =
Total direct labor =

OFFICE
Direct Labor (OFFICE) = = =
Total Direct Labor

FIELD
Direct Labor (FIELD) = = =
Total Direct Labor

Allocation Method No. 2

FAR
Total Labor(Payroll) =
Paid Leave =
Indirect salaries exclusive of paid leave =
Direct labor (FIELD) percentage =

FIELD
Allocated support service labor = (Indirect salaries exclusive of paid leave) * (Direct labor FIELD percentage)
=
=

Total labor exclusive of paid leave and = [(Total Labor) - (Paid Leave) - (Direct Labor FIELD)]
direct labor (FIELD)
=

Allocated support service labor = = =


Total labor exclusive of paid leave and
direct labor (FIELD)

OFFICE
ABC, INC.
NOTES OF THE EXCLUSIONS TO THE SCHEDULE OF
GENERAL AND ADMINISTRATIVE OVERHEAD RATE COMPUTATION
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

Below are a list of various exclusions that may apply to the Schedule of General and Administrative
Overhead Rate Compensation and are noted as such:

(1) To exclude Advertising/Public Relations costs per FAR 31.205-1.

(2) To exclude personal use of company vehicles per FAR 31.205-6.

(3) To exclude executive compensation per FAR 31.205-6.

(4) To exclude bonus and incentive compensation per FAR 31.205-6.

(5) To exclude organization/reorganization costs per FAR 31.205-27.

(6) To exclude contributions per FAR 31.205-8.

(7) To exclude amortization of Goodwill per FAR 31.205-49.

(8) To exclude private club dues per FAR 31.205-13.

(9) To exclude entertainment per FAR 31.205-14 and any


alcoholic beverages related to those activities per FAR 31.205-51.

(10) To exclude key man insurance per FAR 31.205-19.

(11) To exclude interest per FAR 31.205-20.

(12) To exclude organization/reorganization costs per FAR 31.205-27.

(13) To exclude lobbying costs per FAR 31.205-22 and any


alcoholic beverages related to those activities per FAR 31.205-51.

(14) To exclude penalties per FAR 31.205-15.

(15) To exclude bad debts per FAR 31.205-3.

(16) To exclude gifts per FAR 31.205-13.

(17) To exclude excess rent over the normal costs of ownership when
property is rented from an entity under common control per FAR 31-205-36.

(18) To exclude federal income taxes per FAR 31.205-41.


Example:

ABC, Inc.
Trial Balance
As of December 31, 2010

Account Title Debit Amount Credit Amount


Cash XXX.XX
Checking Account XXX.XX
Notes Receivable XXX.XX
Accounts Receivable XXX.XX
Costs in Excess of Billings XXX.XX
Computer Hardware/Software XXX.XX
Equipment XXX.XX
Furniture and Fixtures XXX.XX
Vehicles XXX.XX
Accumulated Depreciation XXX.XX
Prepaid Expenses XXX.XX
Notes Payable XXX.XX
Accounts Payable XXX.XX
Loans Payable XXX.XX
Payroll Taxes Payable XXX.XX
Accrued Expenses XXX.XX
Stock XXX.XX
Additional Paid in Capital XXX.XX
Distributions XXX.XX
Retained Earnings XXX.XX
Fees XXX.XX
Miscellaneous Income XXX.XX
Interest Income XXX.XX
Other Income XXX.XX
Salaries Expenses XXX.XX
Project Expenses XXX.XX
Reimbursed Project Expenses XXX.XX
Payroll Taxes Expenses XXX.XX
Wages XXX.XX
Indirect Wages XXX.XX
Bonus Expense XXX.XX
Advertising Expense XXX.XX
Recrutiting Expense XXX.XX
Training Expense XXX.XX
Seminar Expense XXX.XX
Lodging Expense XXX.XX
Auto Expense XXX.XX
Bad Debt Expense XXX.XX
Contributions XXX.XX
Depreciation Expense XXX.XX
Dues & Subscriptions XXX.XX
Equipment Rental XXX.XX
Utilities XXX.XX
Insurance Expense XXX.XX
Legal Expense XXX.XX
Accounting Expense XXX.XX
Printing/Reproduction Expense XXX.XX
Miscellaneous Expense XXX.XX
Rent Expense XXX.XX
Supplies Expense XXX.XX
Taxes XXX.XX
Telephone XXX.XX
Meals XXX.XX
Entertainment XXX.XX
Fines & Penalties XXX.XX
Employee Relations (Morale) XXX.XX
Interest Expense XXX.XX
Total Debits / Credits $ XXX,XXX.XX $ XXX,XXX.XX