GRANT MANAGEMENT AND COST ALLOCATION DISCUSSION TOPICS Grant - - PDF document

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GRANT MANAGEMENT AND COST ALLOCATION

• Grant Tracking
• Cost Allocation
• Definitions
• Methods
• Examples
• Cost Allocation Plans
• Allocating administrative expenses
• Payroll and time effort reporting
• Uniform Guidance

DISCUSSION TOPICS

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GRANT TRACKING

• Establish and maintain an accounting system

to record separately grants, contracts, and contributions

• Evaluate reporting guidelines to ensure proper

accounting LEGAL SERVICE CORPORATION ACCOUNTING GUIDE GRANT TRACKING REQUIREMENTS

• Tracking should provide basic information that

focuses on the organization as whole and meets the common need for external users

• Provide statement of financial position,

statement of activities, statement of revenues, expenses, and changes in fund balance LEGAL SERVICE CORPORATION ACCOUNTING GUIDE REQUIREMENTS (CONTINUED)

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• Report and classify net assets, revenues,

expenses, and gains and losses based on existence or absence of donor‐imposed restrictions

• Accounting records should be maintained on a

double‐entry basis using fund accounting LEGAL SERVICE CORPORATION ACCOUNTING GUIDE REQUIREMENTS (CONTINUED)

• Accounting records should be maintained on

an automated system.

• Each recipient should establish the system

most appropriate to its needs and provide an adequate audit trail LEGAL SERVICE CORPORATION ACCOUNTING GUIDE REQUIREMENTS (CONTINUED)

• Lack of policies and procedures
• Lack of documentation
• Lack of tracking grant activity separately – in

the general system or outside of the general ledger system COMMON ISSUES WITH GRANT MANAGEMENT AND TRACKING

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• Separate general ledger codes for tracking
• Use difference types of codes for different

sources (federal, state, local)

• Use grant tracking forms to document key

details and requirements

• Ensure written policies and procedures are in

place and available to staff

• Ensure documentation appropriately retained

RECOMMENDATIONS GRANT TRACKING FORM EXAMPLES

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COST ALLOCATION

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• Grant recipients will incur expenses that

support work performed under more than one grant, contract or other funding agreement.

• Such common costs should be allocated

among the funds on the basis agreed to by the applicable organization

• Although different types and methodology of

plans, the methodology used should result in an equitable distribution of costs charged to programs COST ALLOCATION

• It is required by governmental agencies and

most funding sources

• To ensure all programs receive their fair and

equitable share of all costs associated with providing a particular service

• To inform the community of the true costs of

providing various sources so that the community can continually access the cost/benefit of making the expenditure

REASONS FOR ALLOCATING COSTS

• Allowable if:
• Actually incurred in the performance of the grant
• r contract and the recipient was liable for the

payment

• Reasonable and necessary for the performance of

the grant or contract as approved

• Allocable to the grant or contract
• In compliance with rules, laws, regulations, LSC

Accounting Guide

PART 1630 COST STANDARDS AND PROCEDURES ‐ ALLOWABLE

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• A cost is allocable to a particular cost
• bjective, such as a grant, project, service, or
• ther activity
• Costs may be allocated to LSC funds either as

indirect or direct

• A cost is allocable to a LSC grant or contract if

it is treated consistently with other costs incurred for the same purpose in like circumstances PART 1630 COST STANDARDS AND PROCEDURES – ALLOCABLE COSTS

• A cost is allocable if:
• It is incurred specifically for the grant or contract
• Benefits both the grant or contract and other work

and can be distributed in a reasonable proportion to the benefits received

• Is necessary to the overall operation of the
• rganization, although a direct relationship to any

particular cost objective cannot be shown

PART 1630 COST STANDARDS AND PROCEDURES – ALLOCABLE COSTS (CONTINUED)

• Direct costs are those that can be identified specifically

with a particular final cost objective (a particular grant award, project, service, of other direct activity of the

• rganization)
• Costs identified specifically with grant awards are direct

costs of the awards and are to be assigned directly

• Direct costs include, but not limited to:
• Salaries and wages of recipient staff who are working on cases or

matters identified with specific grants or contracts

• Salaries and wages charged directly to LSC grants and

contracts must be supported by personnel activity reports

PART 1630 COST STANDARDS AND PROCEDURES – DIRECT COSTS

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• Indirect costs are those that have been incurred

for common or joint activities and cannot be readily identified with a particular final cost

• bjective
• Examples
• Costs of operating and maintaining facilities
• Costs of general program administration (salaries and

wages of program staff whose time is not directly attributable to a particular grant or contract)

• Such staff may include, but not limited to, executive officers

and personnel, accounting, secretarial and clerical staff

PART 1630 COST STANDARDS AND PROCEDURES – INDIRECT COSTS

• Simplified allocation method
• When a recipient only has one major function (the

delivery of legal services to low‐income clients), allocation of costs may be by a simplified allocation method

• Total allowable indirect costs are divided by an

equitable distribution base and distributed to individual grant awards accordingly

• The distribution base may be total direct costs, direct

salaries and wages, attorney hours, number of cases, number of employees, or another base which results in equitable distribution of indirect costs among funding sources

PART 1630 COST STANDARDS AND PROCEDURES – ALLOCATION OF INDIRECT COSTS

SIMPLIFIED ALLOCATION METHOD

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• Multiple Rate
• Direct Allocation Methods

OTHER METHODS FOR CALCULATING INDIRECT COST RATES

• Used by organizations that treat all costs as

direct pools except general administration and expenses

• These organizations generally separate their

costs into three categories:

• General administration and expenses
• Fundraising
• Other direct functions (including projects

performed under federal awards)

DIRECT ALLOCATION METHOD

• Joint costs, such as depreciation, rental

expense, operation and maintenance facilities, telephone expenses, and the like are prorated individually as direct costs to each category and to each award or other activity using a base most appropriate to the particular cost being prorated.

• Indirect costs consist exclusively of general

administration and general expenses

DIRECT ALLOCATION METHOD (CONT.)

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DIRECT ALLOCATION METHOD (CONT.)

Indirect Cost Pool = Indirect Cost Rate % Direct Cost Base FOR EXAMPLE: $30,000 in the indirect cost pool & $200,000 in direct salaries and wages would equal 15% indirect cost rate.

INDIRECT COST INFORMATION

Once a grantee has acquired a rate or elected to use the de minimis rate, the Grantee will multiple the rate percent by the appropriate base. FOR EXAMPLE 15% times $20,000 in salaries and wages = $3,000 indirect cost that can be requested for reimbursement

INDIRECT COST INFORMATION (CONT.)

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Rate X Base = Maximum amount to be reimbursed for indirect costs Example – 15% is the approved rate; salaries and wages it the distribution base Grantee has three programs Program 1 = 15% * $100,000 = $15,000 Program 2 = 15% * $50,000 = $7,500 Program 3 = 15% * $25,000 = $3,750

INDIRECT COST INFORMATION (CONT.)

If de minimum rate of 10% used, the distribution base to use is always MTDC. Steps in calculating MTDC:

• 1. Identify direct and indirect costs
• 2. Separate unallowable (both direct and indirect)
• 3. Identify costs that must be excluded form the

MTDC Base

• 4. Calculate the MTDC base

INDIRECT COST INFORMATION (CONT.)

Included in the MTDC Base:

• Project personnel salaries and wages
• Fringe benefits
• Materials and supplies
• Computing devices with per unit cost of less than

$5,000

• Vendor service contracts/consultant fees
• Travel
• Subawards and subcontracts up to $25,000 (remainder

is EXEMPT from the indirect cost calculation)

INDIRECT COST INFORMATION (CONT.)

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Costs to be excluded from the MTDC base:

• Individual items of special purpose capital equipment

with a per unit cost of $5,000 or more

• Capital expenditures (buildings, land, office equipment

and furnishings, etc.)

• Rental fees and maintenance costs related to rental

property

• Participant support costs
• The portion of each subcontract and subaward

exceeding $25,000 (regardless of the period of performance)

INDIRECT COST INFORMATION (CONT.)

Program A Budget Salaries and Wages $100,000 Fringe Benefits $50,000 Travel $10,000 Materials & Supplies $20,000 Subaward/Subcontract (1) $100,000 Equipment $10,000 Total Direct Costs $290,000

INDIRECT COST INFORMATION – EXAMPLE 10% DE MINIMIS CALCULATION

Program A Budget Salaries and Wages $100,000 Fringe Benefits $50,000 Travel $10,000 Materials & Supplies $20,000 Subaward/Subcontract (1) $100,000 Equipment $10,000 Total Direct Costs $290,000 Less Subaward/SubContract ‐$75,000 Less Equipment ‐$10,000 Modified Total Direct Cost (MTDC) $205,000

INDIRECT COST INFORMATION – EXAMPLE 10% DE MINIMIS CALCULATION (CONT.)

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Program A Budget Salaries and Wages $100,000 Fringe Benefits $50,000 Travel $10,000 Materials & Supplies $20,000 Subaward/Subcontract (1) $100,000 Equipment $10,000 Total Direct Costs $290,000 Less Subaward/SubContract ‐$75,000 Less Equipment ‐$10,000 Modified Total Direct Cost (MTDC) $205,000 10% de minimum rate of MTDC $20,500

INDIRECT COST INFORMATION – EXAMPLE 10% DE MINIMIS CALCULATION (CONT.)

• $20,500 is the maximum amount allowable

for indirect costs for the program under the de minimis rule.

• Combined total budget for this example would

be total direct of $290,000 plus indirect of $20,500 = $310,500 INDIRECT COST INFORMATION – EXAMPLE 10% DE MINIMIS CALCULATION (CONT.)

• Provisional rate or billing rate – used for funding,

interim reimbursement, and reporting indirect costs on awards pending the establishment of a final rate

• Final rate

Note: A final indirect cost rate is established after the organization’s actual costs are known, typically a fiscal year. Once established, a final cost rate is used to adjust the indirect costs claimed.

TYPES OF INDIRECT COSTS RATES

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• Pre‐determined rate – rate is based on estimate
• f the costs to be incurred during the period. Pre‐

determine rate not subject to an adjustment

• Fixed rates with carry‐forward – an indirect cost

rate which has the same characteristics of a pre‐ determined rate, expect that the difference between the estimated costs and the actual costs

• f the period covered by the rate is carried

forward as an adjustment to the rate computation of a subsequent period

• De minimis (10%)

TYPES OF INDIRECT COSTS RATES (CONT.)

• Without prior approvals, the following costs

can be charged to LSC funds:

• Pre‐award costs or costs incurred after the ending
• f the funding
• Purchases and leases of equipment, furniture, or
• ther personal non‐expendable property if price

exceeds $10,000

• Purchases of real property
• Capital expenditures exceeding $10,000 to

improve real property

PART 1630 COST STANDARDS AND PROCEDURES – PRIOR APPROVALS

• Costs that benefit programs and cannot be

identified to a specific program

GENERAL AND ADMINISTRATIVE COSTS

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• Salaries and

expenses of the CEO and his or her staff

• General record

keeping

• Business and office

management

• Corporate legal

services

• Personnel

Procurement

• General board

activities

• Accounting, auditing,

and budgeting

• Internal and external

reporting GENERAL AND ADMINISTRATIVE COSTS ‐ EXAMPLES

• Overall program management, program

coordination, and office management function, including salaries and related costs of the executive director, project director, and project evaluator when directly allocated

• Preparing program plans, budget schedules, and

related amendments

• Monitoring of programs, projects, subrecipients

and related system and processes

EXAMPLES OF DIRECT ADMINISTRATION

• Developing system and procedures, including

management information systems, for assuring compliance with program requirements

• Preparing reports and other documents related

to the program requirements

• Evaluating program results against stated
• bjectives
• Performing administration services such as

program specific payroll, accounting, auditing or legal activities

EXAMPLES OF DIRECT ADMINISTRATION (CONT.)

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• Purpose is to summarize, in writing, the

methods and procedures that the organization will use to allocate costs to various programs, grants, contracts, and agreements

COST ALLOCATION PLAN

• Prepare an agency wide budget displaying a

breakdown of revenues and expenses by activity

• An activity is defined as program services, fund raising,
• r administration
• Identify all program specific costs, fund raising

costs, and management and general costs.

• Identify all costs that belong strictly to a single

activity.

• Develop techniques that will provide verifiable

bases upon which expenses may be related to program or supporting service activities

DEVELOPMENT OF COST ALLOCATION PLAN

• Identify the employees and the

programs/activity to which they relate

• Develop information outlining the duties of

employees, the functional classification of work to be done, and the approximate amount of time to be spent on each activity for the projected year

• Budgeted allocations should be prepared

based on the above review IMPLEMENTATION OF A COST ALLOCATION PLAN

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• Employees involved in more than one activity

need to complete time reports detailing working performed, time spent, and functional classification. The time reports should be completed continuously or at various times throughout the year to reflect any seasonal patters in work assignments. IMPLEMENTATION OF A COST ALLOCATION PLAN (CONTINUED)

• Staff training should be conducted to ensure that all

time reports are being completed properly

• Each completed time report should be reviewed by

supervisor and signed as evidence of their review and approval

• Summary of time sheets should be completed and

compared with predetermined estimated percentages. Where significant variations exist, a review should be made to determine the reasons.

• Where applicable, the revised percentages based on

time studies should be used in making the final allocations for the financial statements.

IMPLEMENTATION OF A COST ALLOCATION PLAN (CONTINUED)

• Base allocations on the time study and usage reports to

determine the functional allocation of expenditures

• If time study and usage reports not available, consider:
• An allocation percentage previously established for

expenses that benefit all programs (for example – centralized telephone system)

• A basis that utilizes experience levels established for similar

costs (percentages based on each program’s direct salaries to total direct salaries that could be used to allocate administrative salaries)

• Allocation methods approved by the federal government or
• ther funding source for indirect costs associated with

federal assistance

ALLOCATIONS OF ADMINISTRATIVE COSTS

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• Obtain copy of the cost allocation plan.
• Review time studies done for allocating expenses and

employee time sheets and job descriptions.

• Review instructions given to employees for completing

the time reports and usage studies.

• Examine expenditures (on a test basis) to determine

the allocation methods were followed.

• Ascertain that the allocation and classification methods

used were consistent with those in the prior year.

• Compare actual expenditures with budgeted and/or

prior amounts and obtain explanations for significant variations.

WHAT AUDITORS WILL DO TO REVIEW YOUR COST ALLOCATION METHODS

• Employee time study
• Telephone usage study
• Postage usage study
• Copy machine usage study

EXAMPLES OF TIME/USAGE STUDIES

• Employee time
• Time reports
• Fringe benefits
• Allocated same basis as salaries
• Travel costs
• Expense reports
• Printed materials
• Use of the material determined by content, reason for

distribution, and the audience to whom it is addressed

• Telephone
• Use of extensions

TYPES OF EXPENSES AND ALLOCATION STRATEGY EXAMPLES

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• Stationary, supplies, postage, fax, copier
• By usage – have employees list the functions to be

benefited

• Occupancy costs (rent, utilities, maintenance, repairs,

cleaning)

• A study of the function of the personnel using the space
• involved. Calculate the square footage used by the

employee and apply the percentages determined in the time studies to allocate costs.

• Depreciation, maintenance and repairs, Equipment

rental

• Equipment usage; otherwise charge to administration

TYPES OF EXPENSES AND ALLOCATION STRATEGY EXAMPLES (CONTINUED)

• Professional liability insurance
• Allocate on the same basis as salaries
• Property insurance
• Allocate on the same basis as salaries
• Advertising
• Direct invoice if benefiting to specific program;
• therwise charge to administration

TYPES OF EXPENSES AND ALLOCATION STRATEGY EXAMPLES (CONTINUED)

• Plans in place do not have sufficient detail

documenting the methodologies used

• Wrong Census data was used to determine

allocation percentages

• Supporting documentation for the allocation

method used was not maintained COMMON ISSUES RELATING TO COST ALLOCATION PLANS

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• Ensure all cost allocation processes are fully

documented in writing

• Ensure all policies and procedures address the

requirements of CFR Part 1630 and LSC’s Accounting Guide (if applicable)

• Develop written policy for allocating indirect

costs that are prohibited by LSC regulations to funding sources other than LSC (if applicable)

COST ALLOCATION RECOMMENDATIONS UNIFORM GUIDANCE

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TIP Part 3 of the compliance supplement details general guidance on the various compliance requirements. Compliance Requirement – Allowable Costs/Cost Principles Uniform Guidance part E prescribes the cost accounting policies associated with the administration of Federal awards.

• Necessary and reasonable for the performance of the Federal

award

• Allocable
• Conform to limitations/exclusions in cost principles or Federal

awards as to types or amounts of cost items

• Consistent with policies and procedures that apply uniformly to

Federal and non‐Federal activities of the entity

• Consistent treatment for application
• GAAP
• Not be included as a cost or used to meet cost sharing/matching

requirements of another Federal Program

• Be adequately documented

FACTORS AFFECTING ALLOWABILITY OF COSTS

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• 200.407 Prior Written Approval – 22 items of cost
• 200.414 Indirect costs
• Must accept approved negotiated rates, except:
• Allowed by Federal statute or regulation
• Approved by agency head or delegate, OMB notified of

deviations

• 10% of modified total direct costs (de minimis IDCR)
• First time users and new grantees only
• Can be used indefinitely
• One time four‐year extension of current approval rate

(final and pre‐determined rates only)

COST PRINCIPLES

• 200.430 Compensation – Personnel Services
• Time and distribution records must be maintained

for all employees whose salary is

• Paid in whole or in part with federal funds
• Used to meet a match/cost share requirement
• Must encompass all time worked for the organization

and what percentage is federal

COST PRINCIPLES – SELECTED ITEMS OF COST

• 200.430(i) – 9 standards for documenting personnel

records (MUST)

• Be supported by a system of internal controls which

provides reasonable assurance that the charges are accurate, allowable, and property allocated followed by seven other criteria

• Budget estimate (must be trued up) / percentage of

distribution of activities

• If the time records do not meet above criteria, actual

personal activity reports (time cards) may be required

COST PRINCIPLES – SELECTED ITEMS OF COST (CONTINUED)

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PERSONNEL ACTIVITY REPORT ‐ EXAMPLE

PERSONNEL ACTIVITY REPORT – EXAMPLE (CONT.) PERSONNEL ACTIVITY REPORT – EXAMPLE (CONT.)

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PERSONNEL ACTIVITY REPORT – EXAMPLE (CONT.) ALLOCATION OF PERSONNEL WORKSHEET – EXAMPLE

EMPLOYEE TIME DISTRIBUTION ‐ EXAMPLE

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2016 Compliance Supplement website: https://www.whitehouse.gov/omb/circulars/a13 3_compliance_supplement_2016 Uniform administrative requirements: https://www.federalregister.gov/articles/2013/1 2/26/2013‐30465/uniform‐administrative‐ requirements‐cost‐principles‐and‐audit‐ requirements‐for‐federal‐awards

A FEW COMMON QUESTIONS

• 1. What do we do if some grants/contracts do not

provide for any indirect costs or provide for indirect costs rates that are lower than those established, provisional or final? All indirect costs, using the approved rate, must be allocated to all grants/contracts regardless of any restrictions or funding limitations. Any allocable indirect costs that exceed any restrictions MAY NOT be shifted to

• ther federal grants/contracts, unless specifically
• authorized. Non‐federal revenue sources must be used

to pay these unrecovered costs

A FEW COMMON QUESTIONS

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• 2. Accrued annual leave cost – is it allowable under 2

CFR part 200? Yes – if complies with Financial Standard Number 43. Conditions to be met:

• Employer’s obligation relating to employees’ rights to

receive compensation for future absences is attributable to employee’s services already rendered

• The obligation relates to rights that vest or accumulate
• Payment of compensation is probable
• The amount can be reasonably estimated.

A FEW COMMON QUESTIONS (CONT.)

• 3. Can audit costs be recovered under 2 CFR Part

200? Audit costs could be recovered as either direct

• r indirect costs in accordance with cost

principles and the benefits received concept. To recover audit costs, the organization must build them into specific grant/contract documents.

A FEW COMMON QUESTIONS (CONT.)

• 4. What is the time period that an indirect cost

rate agreement covers? A provisional indirect cost rate is negotiated to cover a one year period. However, because of the time lapse between the submission and the approval process, provisional rates are usually established for a two year period. A final indirect cost rate agreement is negotiated to cover one fiscal year after which a new final indirect cost rate must be negotiated for the subsequent fiscal year.

A FEW COMMON QUESTIONS (CONT.)

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CONTINUING PROFESSIONAL EDUCATION (CPE) CREDITS

BKD, LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org. The information in BKD seminars is presented by BKD professionals for informational purposes

• nly. Applying specific information to your situation requires careful consideration of facts &
• circumstances. Consult your BKD advisor before acting on any matters covered herein or in these

seminars.

QUESTIONS?

FOR MORE INFORMATION

THANK YOU!

Kimberly Marshall, CPA Senior Audit Manager kjmarshall@bkd.com (630) 282‐9576

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