DFAC Allowability of Costs – Federal Programs
DFAC Allowability of Costs – Federal Programs
DFAC
Allowability of Costs – Federal Programs
(Sample Procedure)
Allowability of Costs – Federal Programs
Expenditures of federal funds must be aligned with approved budgeted items. Any changes or variations from the state-approved budget and grant application need prior approval from the state.
Delegation of Responsibility
When determining how the school district will spend its grant funds, the Superintendent, Business Manager and Federal Programs Coordinator will review the proposed cost to determine whether it is an allowable use of federal grant funds before obligating and spending those funds on the proposed good or service.
Allowability Determinations
All costs supported by federal education funds must meet the standards outlined in EDGAR, 2 CFR Part 3474 and 2 CFR Part 200, Subpart E, which are listed below. The Superintendent, Business Manager and Federal Programs Coordinator must consider these factors when making an allowability determination. A section entitled, Helpful Questions for Determining Whether Costs are Allowable, is located at the end of this document.
Part 200 sets forth general cost guidelines that must be considered, as well as rules for specific types of items, both of which must be considered when determining whether a cost is an allowable expenditure of federal funds. The expenditure must also be allowable under the applicable program statute (e.g., Title I of the Elementary and Secondary Education Act (ESEA), or the Carl D. Perkins Career and Technical Education Act (Perkins)), along with accompanying program regulations, nonregulatory guidance, and grant award notifications.
Restrictions in state and local rules or policy also must be considered. For example, travel and other job-related expenses incurred by employees are not allowable unless they also are in compliance with board policy GAN, administrative regulations, and related procedures.
Whichever allowability requirements are stricter will govern whether a cost is allowable.
General allowability determination factors include the following:
- Be Necessary and Reasonable for the performance of the federal award. A cost is reasonable if, it does not exceed an amount that a prudent person would under the circumstances prevailing when the decision to incur the cost. For example, reasonable means that sound business practices were followed, and purchases were comparable to market prices.
- When determining reasonableness of a cost, consideration must be given to:
- Whether the cost is generally recognized as ordinary and necessary for the operation of the district or the proper and efficient performance of the federal award.
- The restraints or requirements imposed by such factors, as: sound business practices; arm’s-length bargaining; federal, state, and other laws and regulations; and terms and conditions of the federal award.
- Market prices for comparable costs for the geographic area.
- Whether the individual incurring the cost acted with prudence in the circumstancesconsidering responsibilities to the district, its employees, its students, the public at large, and the federal government.
- Whether the cost represents a deviat from the district established written policies and procedures incurr costs.(2 CFR Sec. 200.404)
Whether a cost is necessary will be determined based on the needs of the program. Specifically, the expenditure must be necessary to achieve an important program objective. A key aspect in determining whether a cost is necessary is whether the district can demonstrate that the cost addresses an existing need and can prove it. For example, the school entity may deem a language skills software program necessary for a limited English proficiency program.
- When determining whether a cost is necessary, consideration may be given to:
- Whether the cost is needed for the proper and efficient performance of the federal award program.
- Whether the cost is identified in the approved budget or application.
- Whether there is an educational benefit associated with the cost.
- Whether the cost aligns with identified needs based on results and findings from a needs assessment.
- Whether the cost addresses program goals and objectives and is based on program data.
- Allocable to the federal award. A cost is allocable to the federal award if the cost is assignable to the federal award or other cost objective in accordance with the relative benefit received. This means that the federal grant program derived a benefit in proportion to the funds charged to the program. (2 CFR Sec. 200.405)
- For example, if fifty percent (50%) of a teacher’s salary is paid with grant funds, then that teacher must spend at least fifty percent (50%) of his/her time on the grant program.
- Consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the school entity.
- Conform to any limitations or exclusions set forth as cost principles in Part 200 or in the terms and conditions of the federal award.
- Consistent treatment. A cost must not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost.
- Adequately documented. All expenditures must be properly documented. (§ 200.300 through 200.309)
- Be determined in accordance with generally accepted accounting principles (GAAP), unless provided otherwise in Part 200.
- Not be included as a cost or used to meet cost- sharing requirements of, federally-financed program in either the current or prior period. Some federal program statutes require the nonfederal entity to contribute a certain amount of nonfederal resources to be eligible for the federal program.
- Be the net of all applicable credits. The term “applicable credits” refers to those receipts orreduction of expenditures transactions that offset or reduce direct or indirect costs allocable to the federal award. Typical examples of such transactions are: purchase discounts; rebates or allowances; recoveries or indemnities on losses;, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the direct relate to allowable costs, they must be credited to the federal award, either as a cost reduction or a cash refund, as appropriate. (2 CFR Sec. 200.406)
Selected Items of Cost
Subpart E of Part 200 sets forth principles to be applied in establishing the allowability of fifty-five (55) specific cost items (commonly referred to as Selected Items of Cost), at 2 CFR Sec. 200.420-200.475. These specific cost items are listed in the chart below along with the citation to the section of Subpart E addressing the allowability of that item. These principles are in addition to the other general allowability standards and apply whether or not a particular item of cost is properly treated as direct cost or indirect (F&A) cost. Meeting the specific criteria for a listed item does not by itself mean the cost is allowable, as it may be unallowable under other standards or for other reasons, such as restrictions contained in the terms and conditions of a particular grant or restrictions established by the state or in Board policy. If an item is unallowable for any of these reasons, federal funds cannot be used to purchase it.
School district employees responsible for spending federal grant funds and for determining allowability must be familiar with and refer to the Part 200 selected items of cost section. These rules must be followed when charging these specific expenditures to a federal grant. When applicable, employees must check costs against the selected items of cost requirements to ensure the cost is allowable and also check state, district, and program-specific rules.
The selected item of cost addressed in Part 200 includes the following (in alphabetical order):
| Item of Cost | Citation of Allowability Rule |
|---|---|
| Adverstising and public relations costs | 2 CFR § 200.421 |
| Advisory councils | 2 CFR § 200.422 |
| Alcoholic beverages | 2 CFR § 200.423 |
| Alumni/ae activities | 2 CFR § 200.424 |
| Audit services | 2 CFR § 200.425 |
| Bad debts | 2 CFR § 200.426 |
| Bonding costs | 2 CFR § 200.427 |
| Collection of improper payments | 2 CFR § 200.428 |
| Commencement and convocation costs | 2 CFR § 200.429 |
| Compensation – personal services | 2 CFR § 200.430 |
| Compensation – fringe benefits | 2 CFR § 200.431 |
| Conferences | 2 CFR § 200.432 |
| Contingency provisions | 2 CFR § 200.433 |
| Contributions and donations | 2 CFR § 200.434 |
| Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringements |
2 CFR § 200.435 |
| Depreciation | 2 CFR § 200.436 |
| Employee health and welfare costs | 2 CFR § 200.437 |
| Entertainment and prizes | 2 CFR § 200.438 |
| Equipment and other capital expenditures | 2 CFR § 200.439 |
| Exchange rates | 2 CFR § 200.440 |
| Fines, penalties, damages and other settlements | 2 CFR § 200.441 |
| Fund raising and investment management costs | 2 CFR § 200.442 |
| Gains and losses on disposition of depreciable assets | 2 CFR § 200.443 |
| General costs of government | 2 CFR § 200.444 |
| Goods and services for personal use | 2 CFR § 200.445 |
| Idle facilities and idle capacity | 2 CFR § 200.446 |
| Insurance and indemnification | 2 CFR § 200.447 |
| Intellectual property | 2 CFR § 200.448 |
| Interest | 2 CFR § 200.449 |
| Lobbying | 2 CFR § 200.450 |
| Losses on other awards or contracts | 2 CFR § 200.451 |
| Maintenance and repair costs | 2 CFR § 200.452 |
| Materials and supplies costs, including costs of computing devices | 2 CFR § 200.453 |
| Memberships, subscriptions, and professional activity costs | 2 CFR § 200.454 |
| Organization costs | 2 CFR § 200.455 |
| Participant support costs | 2 CFR § 200.456 |
| Plant and security costs | 2 CFR § 200.457 |
| Pre-award costs | 2 CFR § 200.458 |
| Professional services costs | 2 CFR § 200.459 |
| Proposal costs | 2 CFR § 200.460 |
| Publication and printing costs | 2 CFR § 200.461 |
| Rearrangement and reconversion costs | 2 CFR § 200.462 |
| Recruiting costs | 2 CFR § 200.463 |
| Relocation costs of employees | 2 CFR § 200.464 |
| Rental costs of real property and equipment | 2 CFR § 200.465 |
| Scholarships, student aid costs, and tuition remission | 2 CFR § 200.466 |
| Selling and marketing costs | 2 CFR § 200.467 |
| Specialized service facilities | 2 CFR § 200.468 |
| Student activity costs | 2 CFR § 200.469 |
| Taxes (including Value Added Tax) | 2 CFR § 200.470 |
| Telecommunication and video surveillance costs | 2 CFR § 200.471 |
| Termination costs | 2 CFR § 200.472 |
| Training and education costs | 2 CFR § 200.473 |
| Transportation costs | 2 CFR § 200.474 |
| Travel costs | 2 CFR § 200.475 |
| Trustees | 2 CFR § 200.476 |
Helpful Questions for Determining Whether Costs are Allowable -
In addition to applying the cost principles and standards described above, district staff involved in expending federal funds should ask the following questions when assessing the allowability of a particular cost:
- Is the proposed cost allowable under the relevant program?
- Is the proposed cost consistent with an approved program plan and budget?
- Is the proposed cost consistent with program specific fiscal rules? For example, the school entity may be required to use federal funds only to supplement the amount of funds available from nonfederal (and possibly other federal) sources, or only as a match for funds from nonfederal sources.
- Is the proposed cost consistent with EDGAR?
- Is the proposed cost consistent with specific conditions imposed on the grant (if applicable)?
- Is the proposed cost consistent with the underlying needs of the program? For example, program funds must benefit the appropriate population of students for which they are allocated. This means that, for instance, funds allocated under Title III of the Elementary and Secondary Education Act (ESEA) governing language instruction programs for Limited English Proficient (LEP) students must only be spent on LEP students and cannot be used to benefit non-LEP Students.
- Will the cost be targeted at addressing specific areas of weakness that are the focus of the program, as indicated by available data?
Any questions related to specific costs should be forwarded to the Superintendent, Business Manager or Federal Programs Coordinator who shall consult with the board’s legal counsel for clarification as Appropriate.
Approved: KASB Recommended – 6/17; 12/24