9/16/2016 GRANT MANAGEMENT AND COST ALLOCATION DISCUSSION TOPICS • Grant Tracking • Cost Allocation Definitions Methods Examples Cost Allocation Plans Allocating administrative expenses Payroll and time effort reporting • Uniform Guidance 1
9/16/2016 GRANT TRACKING LEGAL SERVICE CORPORATION ACCOUNTING GUIDE GRANT TRACKING REQUIREMENTS • 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 REQUIREMENTS (CONTINUED) • 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 2
9/16/2016 LEGAL SERVICE CORPORATION ACCOUNTING GUIDE REQUIREMENTS (CONTINUED) • 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 COMMON ISSUES WITH GRANT MANAGEMENT AND TRACKING • 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 3
9/16/2016 RECOMMENDATIONS • 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 GRANT TRACKING FORM EXAMPLES 4
9/16/2016 COST ALLOCATION 5
9/16/2016 COST ALLOCATION • 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 REASONS FOR ALLOCATING COSTS • 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 PART 1630 COST STANDARDS AND PROCEDURES ‐ ALLOWABLE • Allowable if: Actually incurred in the performance of the grant or 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 6
9/16/2016 PART 1630 COST STANDARDS AND PROCEDURES – ALLOCABLE COSTS • A cost is allocable to a particular cost objective, such as a grant, project, service, or other 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 (CONTINUED) • 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 organization, although a direct relationship to any particular cost objective cannot be shown PART 1630 COST STANDARDS AND PROCEDURES – DIRECT COSTS • 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 organization) • 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 7
9/16/2016 PART 1630 COST STANDARDS AND PROCEDURES – INDIRECT COSTS • Indirect costs are those that have been incurred for common or joint activities and cannot be readily identified with a particular final cost objective • 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 – ALLOCATION OF 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 SIMPLIFIED ALLOCATION METHOD 8
9/16/2016 OTHER METHODS FOR CALCULATING INDIRECT COST RATES • Multiple Rate • Direct Allocation Methods DIRECT ALLOCATION METHOD • 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 (CONT.) • 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 9
9/16/2016 DIRECT ALLOCATION METHOD (CONT.) INDIRECT COST INFORMATION 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 (CONT.) 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 10
9/16/2016 INDIRECT COST INFORMATION (CONT.) 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) 11
9/16/2016 INDIRECT COST INFORMATION (CONT.) 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 – 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 INDIRECT COST INFORMATION – EXAMPLE 10% DE MINIMIS CALCULATION (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 Less Subaward/SubContract ‐$75,000 Less Equipment ‐$10,000 Modified Total Direct Cost (MTDC) $205,000 12
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