Transcript Practical Approaches to Cost Allocation
PRESENTED BY: BELINDA RINKER, JD SENIOR ADVISOR, OFFICE OF HEAD START [email protected]
Note: Play presentation as a PowerPoint slide show to activate hyperlinks.
Definition of Non-Federal Share
That portion of the total costs of the program provided by the grantee agency in the form of in-kind donations or cash match received from third parties or contributed by the agency. In-kind contributions must be provided and cash expended during the project period along with Federal funds to satisfy the matching requirements.
Criteria for Acceptable Non-Federal Share
To be accepted, all cost sharing or matching contributions, including cash and third party in kind, shall meet all of the following criteria: Are verifiable from the recipient's records; Are not included as contributions for any other federally assisted project or program; Are necessary and reasonable for proper and efficient accomplishment of project or program objectives; Are allowable under the applicable cost principles; Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for cost sharing or matching; Are provided for in the approved budget; and Conform to other provisions of this part, as applicable.
45 CFR § 74.23 and 45 CFR § 92.24
Sources of Non-Federal Share
In-Kind: Property or services that benefit a grant supported project or program and are contributed by non-Federal third parties without charge to the grantee. In-kind contributions may consist of the value of real property and equipment and the value of goods and services directly benefiting the grant program and specifically identifiable to it. In-kind match is counted for the period when the services are provided or when the donated goods are received and used. Cash Contributions: The grantee's cash outlay, which is generated by the grantee or donated by a third party, and is expended to fund allowable program costs. Cash match counts toward the non-Federal share requirement when expended, not when donated to or generated by the grantee.
Fiscal and Non-Federal Share Citations
45 CFR Part 74.23
Institutions of Higher Education, Hospitals, Other Non-Profit Organizations, and Commercial Organizations 45 CFR Part 92.24
States, Local Governments and Indian Tribal Governments Performance Standards All Grantees Mostly 45 CFR 1301 Improving Head Start for School Readiness Act of 2007 All Grantees Much in Sec. 642
Allowable Cost Requirement
Allowable Cost: Third party in-kind contributions shall count toward satisfying a cost-sharing or matching requirement only where, if the party receiving the contribution were to pay for them, they would be an allowable cost. Allowable costs are determined by the tests of reasonableness, necessity and allocability as defined in Title 2 of the Code of Federal Regulations ( 2 CFR 220 , 2 CFR 225 , and CFR 230 ), commonly called the cost principles.
Cost Principle Citations
2 CFR Part 220 Cost Principles for Educational Institutions 2 CFR Part 225 Cost Principles for State, Local, and Indian Tribal Governments 2 CFR Part 230 Cost Principles for Non-Profit (Commercial) Organizations 48 CFR Subpart 31.2
Cost Principles for For-Profit Organizations
Head Start Act Sec. 640(b) Financial assistance extended under this subchapter for a Head Start program shall not exceed 80 percent of the approved costs of the assisted program or activities, except that the Secretary may approve assistance in excess of such percentage if the Secretary determines that such action is required in furtherance of the purposes of this subchapter.
45 CFR §1301.20(b): The non-Federal share will not be required to exceed 20 percent of the total costs of the program.
Calculating Non-Federal Share Method 1: (80/20) Method 2: General
Federal Funds x .25 = Non-Federal Share $2,000,000 (Federal Funds) x .25 = $500,000 (Non Federal Share) Total Grant = $2,500,000 Federal Funds ÷ Federal Share = Total Grant – Federal Funds = Non Federal Share $2,000,000 ÷ .80 = $2,500,000 - $2,000,000 = $500,000 $2,000,000 ÷ .85 = $2,352,941 - $2,000,000 = $352,941 Use with a waiver or Non Federal share over 20%
Allowable Non-Federal Share Costs
Allowable Cost: Third party in-kind contributions shall count toward satisfying a cost-sharing or matching requirement only where, if the party receiving the contribution were to pay for them, they would be an allowable cost. Cash Contributions: The grantee's cash outlay, which is generated by the grantee or donated by a third party, and is expended to fund allowable program costs. Cash match counts toward the non Federal share requirement when expended, not when donated to or generated by the grantee.
Elements of an Allowable Cost
Reasonable for the performance of the award.
Allocable to the award.
Conform to any applicable limitations or exclusions. For example: Use of Head Start funds to assist, promote or deter union organizing. Head Start Act, Sec. 644(e).
Alcoholic beverages. 2 CFR Part 230, Appendix B(3).
Consistent with policies and procedures that apply to both Federally funded and other activities.
Accorded consistent treatment.
Meet generally accepted accounting principles (GAAP).
Not included as a cost or cost sharing for any other Federally funded program.
2 CFR Part 230, Appendix A(2)
Reasonableness of Costs
A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs.
Generally recognized as ordinary and necessary.
Exemplifies sound business practices, arms length bargaining, complies with laws, rules, regulations and grant awards.
Whether the individuals involved acted in meeting their responsibilities with prudence under the circumstances.
Significant deviation from established practices of the organization.
2 CFR Part 230, Appendix A(3)
A cost is allocable to a particular cost objective, such as a grant, contract, project, service, or other activity, in accordance with the relative benefits received. A cost is allocable to a Federal award if it is treated consistently with other costs incurred for the same purpose in like circumstances and: Is incurred specifically for the award. Benefits both the award and other work and can be distributed in reasonable proportion to the benefits received, or Is necessary to the overall operation of the organization, although a direct relationship to any particular cost objective cannot be shown.
2 CFR Part 230, Appendix A(4)
Prudent –adjective 1. wise or judicious in practical affairs; sagacious; discreet or circumspect; sober. 2. careful in providing for the future; provident: a prudent decision.
A prudent person is attentive, vigilant, cautious, perceptive, and generally governed by common sense. ND State Government Website.
The local Low Income Home Energy Assistance Program (LIHEAP) gives the Head Start program seven windows valued at $500 each. LIHEAP purchased the windows for weatherization program use, but made an error in its order and received the wrong size of non-exchangeable windows. The Head Start agency installs the windows in its Head Start dining area as part of a planned and budgeted minor renovation.
Can the grantee claim $3,500 (7 x $500) of Non-Federal share costs on account of the donated windows?
Dad and his son Frank (a Head Start Center based child) spent a pleasant afternoon making masks from paper plates. Frank and Dad talked about shapes and colors as they cut and pasted circles, triangles and squares on the masks. Teacher assistants in the program are paid $8.72 per hour.
Can the grantee claim $17.44 (2hrs x $8.72/hr) as a Non-Federal share cost for these activities?
Types of Parent-Child Activities
OHS – PC – A – 006 What types of activities between an enrolled Head Start child and that child’s parent(s) or guardian(s) can be conducted in the child’s home and counted, by the Head Start program, as non-federal share?
If a Head Start child’s teacher (or home visitor) provides the child’s parents with written plans or guidance as to the types of activities that need to be done with the child at home in order to support the child’s Head Start experience these activities may, when fairly valued, be counted as non-federal share. The "countability" of the parent’s efforts hinge on doing things with the enrolled child that support the child’s Head Start experience, that are articulated by the teacher (or home visitor) and that support the curriculum used by the program. General parenting duties do not constitute activities that can be counted as non-federal share, unless these activities meet the requirements noted above. The valuation of the parent’s time should, unless a program can demonstrate otherwise, be valued at the rate of a teacher’s assistant.
Valuation of Parent-Child Activities
OHS – PC – A – 013 How should a Head Start program value parent volunteer time for purposes of claiming non-federal share?
The value of the time should be equal to what it would have cost the program to employ someone to do the task for which the parent had volunteered. (It is important to note that for something to be allowable as non-federal it needs to be something for which grant funds could have been used). For example, if a parent is volunteering in the classroom, that parent is, in effect, functioning as a second teacher assistant and the average hourly rate for an assistant in that program (salary and benefits) would be a reasonable charge. If a parent volunteered to help paint the exterior of a Head Start center, then the program can fairly charge as non-federal what it would have cost to hire a painter to do the same work. Programs must ensure that all parent volunteer time is adequately documented.
Primary Benefit Analysis
OHS – PC – A – 077 Is the value of parent involvement in a Head Start program an allowable cost for in-kind match?
To determine if a parent involvement activity is allowable as an in-kind match a Head Start program should ask these questions: 1.
Does the parent involvement activity primarily benefit the parent or child? If the answer is yes, then the activity is not allowable as an in-kind match. Does the parent involvement activity provide a good or service to benefit the program? If the answer is yes, then the activity is allowable as an in-kind match.
Other Policy Clarifications
Allowability of parent activities PC – A – 022 (valuation and record keeping) PC – A – 033 (walking to and from Center) PC – A – 040 (home-based curriculum activities) PC – A – 049 & 058 (parent transportation of home based children to socialization activities) PC – A – 060 (having lunch with child) PC – A – 076 (babysitting for a parent volunteer) PC – A – 078 (volunteering for governing body or policy council)
A local church provides classroom space for the Head Start program at no cost to the program. The space includes three classrooms of 1,200 square feet each and half of the 600 square feet of common space. An independent appraisal certified by the grantee establishes the fair market rental rate for the space at $16.00 per square foot per year. The grantee operates year round.
Can the grantee claim Non-Federal share of $62,400 for the donated space (1,200 x 3 + 300 = 3,900 x $16.00)?
A wealthy patron in the community donates $25,000 to the local community action agency operating the Head Start program. The donation is specifically restricted to Head Start use by the donor and the agency places the fund in an account separate from its other funds labeled “For Head Start Use Only”.
At the end of its budget period, can the grantee claim $25,000 in donated match toward its Non-Federal Share costs?
Attorney at Law
A local law firm of has made one of its senior associates, Ms. Banks, available to serve on the Head Start policy council. The policy council meets once per month for a period of three hours. Ms. Banks attends all twelve scheduled meetings. Her firm provides a letter stating that her regular billing rate is $350 per hour. Can the grantee claim $12,600 (12 x 3hs x $350) as a Non-Federal share cost for Ms. Banks’ policy council participation?
A local office supply company donates four boxes of 6 reams each of colored paper to the program. The boxes of paper are left in the reception area. Both Head Start teachers and state child care providers help themselves to the donated paper, which quickly disappears. Each ream of paper is value at $15.00.
Can the grantee claim $360 (4 x 6 X $15) as a Non-Federal share cost for the donated paper?
A local sign company has donated billboard space to the Head Start program in areas of the city where high concentrations of Head Start eligible children and families live. The program uses 5 billboards for the entire program year (10 months) to advertise the availability of Head Start services and provide enrollment information. The billboards usually rent for $30.00 per month.
Can the grantee claim $1,500 (10 x 5 x $30) as a Non-Federal share cost for the donated billboard space?
As a special “Thank You” to early education providers, the local office supply store is offering a 20% discount to Head Start, Early Head Start and licensed child care providers throughout the month of August. The Head Start program buys $10,000 of supplies and the Early Head Start program buys $2,000 of supplies in August.
Can the Head Start program claim $2,500 ($12,500 discounted 20% = $10,000) and the Early Head Start program claim $500 ($2,500 discounted 20% = $2,000) of in-kind costs on account of the discount?
Wheels on the Bus
The local school district, a community partner to the grantee, provides Head Start compliant transportation to the program’s children at no cost. Twenty Head Start children ride the bus twice a day (morning and afternoon) for 160 days. The busses hold 40 passengers each. The school’s transportation manager sends the Head Start fiscal officer an email which says it costs “at least a couple of hundred dollars” for each bus run.
Can the grantee claim a Non-Federal share cost of $32,000 (160 x 2 x $200 ÷ 40 x 20) for the free transportation?
The home-based Early Head Start program conducts 52 one and a half-hour home visits per year as part of its curriculum for infants and toddlers. Sally’s family pays rent of $1,000 per month and has utilities costs of $200 per month. Sally’s family participates in all 52 scheduled home visits.
Can the grantee claim a Non-Federal share cost of $2.47 per visit, $128.44 for the year ($1,200 x 12 ÷ 365 ÷ 24 x 1.5 x 52) for the in-home use of parent space?
Managing Non-Federal Share
Document Carefully and Completely Budget Effectively Monitor Monthly
Disallowance of Non-Federal Share
Funded Federal Share: Non-Federal Share: Total Grant Award: Actual Maximum Federal Share Federal Share Spent: Allowed Non-Federal Share: Actual Grant Amount: $ 800,000 200,000 $1,000,000 $ 800,000 180,000 $ 980,000 $980,000 x .80 = $784,000 If waiver in place, multiplier changes to reflect actual federal share.
Disallowance $800,000 - $784,000 = $16,000 See PI-HS-12-02 : Non-Federal Share Issues
Waivers of Non-Federal Share
Grantees must actively seek to generate Non Federal Share through in-kind donations and cash match.
Grantees facing challenges in generating necessary Non-Federal Share can submit a written request for waiver (reduction) of Non Federal Share.
Can be submitted with the proposed annual budget.
May also be submitted during the program fiscal year.
Waiver only applies to one budget period.
Waiver requests can be re-submitted for subsequent budget periods.
The lack of resources available in the community that may prevent the Head Start agency from providing all or a portion of the Non-Federal contribution that may be required.
The impact of the cost the Head Start agency may incur in initial years it carries out such program.
The impact of an unanticipated increase in the cost the Head Start agency may incur to carry out such program. Whether the Head Start agency is located in a community adversely affected by a major disaster.
The impact on the community that would result if the Head Start agency ceased to carry out such program.
Head Start Act, Sec. 640(b)(1)-(5)