What purpose does OMB Circular A-87 serve?

OMB Circular A-87 establishes principles for determining the allowable costs of state and local governments under federal grants and cooperative agreements. Its primary focus is on providing guidance regarding how these governments can claim and recover indirect costs associated with delivering federally funded services and programs. By defining the criteria for what constitutes an allowable cost and detailing the methodology for allocating indirect costs, the Circular ensures that state and local governments can fairly and accurately recover expenditures that support their performance in administering federal programs. This is crucial for promoting accountability and transparency in the use of federal fund resources, helping maintain the integrity of public finance.