1 On-Line Financial Management Workshops Cost Classification, Administrative Costs & Program Income June 2009

2 Financial Management Workshops Cost Classification, Administrative Costs & Program Income

3 What will we cover in this session?  Cost Classification –You need to keep track of all funds flowing in and out of your organization  Administrative Costs –You must be able to distinguish these costs from program costs  Program Income –What do you need to know about it?

4 What Are the Rules for Maintaining a Financial Accounting System?  DOL Regulations –29 CFR PART 97 For Governmental Organizations –29 CFR PART 95 For Non-Governmental Organizations  GAAP –Generally Accepted Accounting Principles

5 What is Cost Classification?  Process of assigning costs to benefiting cost objectives  How?  Direct charge  Allocation  Where?  General Ledger or Books of Account

6 Reporting Considerations  All Federally required reporting elements must be identified in cost classification system  All Federally required reports must be traceable to –Official Accounting Records –Source Documentation

7 Documentation Defending How Costs Were Classified…  Supporting records/documents for both direct and indirect costs (Invoices, certified time sheets, actual receipts)  Time distribution method (based only on actual time worked)  Cost allocation method

8 Two Basic Cost Categories  Administration –20 CFR provides list of administrative functions  Program Activities –All grant costs that relate to direct provision of services to participants and employers

9 Other Reporting Categories – Program income –Match requirements –Non-Federal share –Federal leveraged funds –Other program specific requirements

10  Website All ETA Reporting Formats

11 Chart of Accounts  Numerical listing or codes  General ledger/books of account  Identify costs in books of account  Report financial results of operations  Accumulate & track costs  Source of funds  Program activities or cost categories  Interim & final cost objectives

12 Chart of Accounts  Sample Chart of Accounts  For illustrative purposes only  Demonstrates a four level coding system  Key Considerations  Grants and other funding received  Relevant costs principles  GAAP requirements See attached reference: Cost Classi - chart of accounts

13 Example Derived from Sample Chart  Code Structure for Child Care for WIA Adult Participant – Level 1 50 = Fund Source - WIA Adult State Project Level 2 1 = Participant Type Level = Child Care Level 3A 4 = Direct Payment Level = Child Care

14 Documentation Requirements  Using Sample Chart Codes –150 - Staff Travel –200 - Office Supplies

15 Administration Cost - Definition  20 CFR – applies to all grants and programs receiving WIA Title I funds  Allocable portion of necessary and reasonable costs that are not related to direct provision of workforce services  Coordination of and provision of general administrative functions

16 Administrative Functions  Accounting, budgeting, financial and cash management  Procurement and purchasing  Personnel and property management  Payroll, audit and general legal services  Oversight and monitoring activities  Developing information systems and procedures related to administrative functions

17 Administrative or Program?  Oversight and monitoring  Goods and Services  Travel  Information Systems –It depends on the nature of function or activity!!!!

18 Administrative or Program?  Awards or contracts to Subrecipients or Vendors –Depends on the nature of the subaward  Costs of personnel who perform both administrative and program services –Must be allocated based on benefits received by each cost category

19 Job Title vs. Job Function  It is the Job Function NOT the Job Title That Dictates Cost Classification

20 Matrix of Administrative and Program Costs  Provides Listing of Common Grantee Costs  Distinguishes Between Administrative, Program or Both See Attached Reference: Matrix of Admin. & Program Costs

21 Direct Cost or Indirect Cost?  Direct Costs –Identified with a specific grant  Indirect Costs –Shared among multiple programs  Direct and Indirect Costs Can Be Either Administrative or Program

22 Direct Costs Both Administrative and Program  Informational System Costs for Specific Grant –Administrative - Related to Procurement and Payroll –Program - Related to performance tracking and reporting

23 Indirect Costs Both Administrative and Program  Operational Costs for an Office Working with Multiple Programs –Administrative – General Office Equipment and Supplies –Program – Transportation of Participants

24 Total Grant Costs  All Administrative Costs –Both Direct and Indirect PLUS  All Program Costs –Both Direct and Indirect

25 Total Grant Costs Total Reported Expenditures $1,000,000 Total Program Costs $900,000 Total Administrative Costs $100,000 Direct $775,000 Indirect $125,000 Direct $40,000 Indirect $60,000

26 Administrative Cost Limitations  Specific to each grant  Contained in Grant Agreement  Measured at conclusion of grant period  Tracked, accounted for & reported quarterly  Includes direct and indirect administrative costs

27 Administrative Costs ≠ Indirect Costs Let’s Get This Straight!!!!!!!!!!

28 $475,000 Direct $475,000 Direct $75,000 Indirect $75,000 Indirect $55,000 Admin $55,000 Admin $550,000 Total Grant Award Administrative Costs May be BOTH Direct & Indirect

29 Grantee Indirect Costs Example  Approved Indirect Cost Rate of 50%  Organization-wide Direct Salaries & Wages are $300,000  Total Indirect Costs to be spread to all fund sources are $150,000  ETA Grant is $550,000  ETA Grant Direct Salary & Wages are $150,000  Indirect Costs Charged to ETA Grant are $75,000

30 Administrative Costs vs. Indirect Costs  ETA Grant is $550,000  Administrative Limit is 10%  ETA Grant Administrative Costs are $55,000 (10% x $550,000)  Indirect costs chargeable to grant are $75,000

31…KNOW  Review costs of your organization that comprise indirect cost pool –component of indirect cost rate calculation  Break out costs between program and administrative –Using the WIA definition of Administrative Costs

32 Pool of Indirect Costs  Accounting System A  Procurement System A  Director P&A  Receptionist P&A  Facilities P&A  Assume this calculates to 65% administrative and 35% program

33Then,  Apply the 65% - 35% ratio to the total indirect costs of $75,000 for the grant, as calculated in the example used in the slides we have been using.  Indirect Administration = $48,750  Indirect Program = $26,250

34 What is Program Income?  Requirements –29 CFR & 29 CFR –20 CFR  Additional Funds to Expend  Must be Reported in a Separate Section of ETA 9130

35 Examples of Program Income  Fees for services  User or rental fees  Sale of products

36 What Else is Program Income?  Interest Income  Revenues in Excess of Expenditures –For WIA Title I Programs –20 CFR

37 What is Not Program Income?  Applicable Credits  Sale of Property  Royalties  Donations  Profits of Commercial Organizations  Income Earned After Grant Period  Interest (non-WIA) and Matching Funds

38 More on Program Income  No Administrative Cost Limitation  Allowable activities  Proper Classification  Included in Financial Report  Other Administrative Rules Apply  Included in Scope of Audit  Sanctions for Misuse

39 Common Compliance Findings Associated with …  Distinguishing Between Administrative and Program Costs  Exceeding Administrative Cost Limit  Failure to Properly Report Program Income  Failure to Maintain Adequate Support Documentation

40 Sound Solutions  Be Familiar with WIA Regulations at 20 CFR Parts and  Be Familiar with Uniform Administrative Requirements at 29 CFR Parts and  Carefully Review Data Submitted on Quarterly ETA-9130s  Proactively Maintain Required Source Documentation

41 Test Your Knowledge  Question 1. True or False? If your organization has multiple grants and multiple funding sources, you are allowed to combine funds and will not be asked to tie specific costs to a specific fund source.

42 Answer Key  Answer 1. False

43 Test Your Knowledge  Question 2. Name 3 cost items that represent program income.

44 Answer Key  Answer 2. Fees for services, user or rental fees, sale of products, interest income and revenues in excess of expenditures.

45 Web Site Addresses  One Stop Comprehensive Financial Management Technical Assistance guide:  OMB Circulars  DOL Advisories and Memorandums (TEGL/TEN)

46Questions? If you have questions, please contact your Federal Project Officer