Non-Federal Share and Matching Nicole M. Bacon, Esq. September 18, 2015
PRESENTER: NICOLE M. BACON, ESQ. Senior Associate at Feldesman Tucker Leifer Fidell LLP Attorney since 2003, with FTLF since 2008 Counsel to Federal grant recipients across the country. Representative activities include: Reviewing and revising contracts, subrecipient agreements, procurement policies and procedures, and other grant-related documents to ensure compliance with programmatic requirements and other federal regulations Advising clients on the federal requirements for grant related construction and renovation projects Counsel on federal court litigation nbacon@ftlf.com; 202.466.8960 2
LEARNING OBJECTIVES Distinguish what items and services your program can count as match; Recognize how to document matching share; Reinforce why showing "overmatch" makes sense; and Consider common and not-so-common pitfalls to avoid. 3
COST SHARING OR MATCHING DEFINITION Cost sharing or matching means the portion of project costs not paid by Federal funds (unless otherwise authorized by Federal statute). This may include the value of allowable third party in-kind contributions, as well as expenditures by the recipient. 45 CFR 75.2 4
TYPES OF MATCH Cash Match: Grantee spending its own funds (however derived, such as a cash donation, income from a state program, etc.) to buy goods and services that benefit federal program during the period match is claimed. In-kind: Traditionally grantee receives goods or services at little or no cost that it uses in its federal program during the period the match is claimed. 5
COMMON AND UNCOMMON SOURCES Common Sources of Match: Volunteer Labor Governance Functions Free Space State Funding Uncommon Sources of Match Donated Services from Specialists Unrecovered Indirect Costs Medicaid Payments 6
Federal Award: 80% HEAD START ACT 640 Non-Federal Share:20% 7
BASIC RULES 75.306(b) 1. Allowable costs only. 2. Reasonable and necessary. 3. Document and verify. 4. No double counting. 5. No Fed to Fed. 6. Include in approved budget. 7. Conform Subpart D of Uniform Guidance 8
.IN OTHER WORDS A cost is allowable if it is incurred in furtherance of program objectives For example, is this cost helping me meet one of the requirements for the federal program? If I could spend federal grant funds on X, but instead got X for free or I paid for it myself, then I can count the cost as match 9
DIRECT OR INDIRECT AS MATCH Unless restricted by statute or regulation, matching or cost sharing may be provided as direct and/or indirect costs, consistent with the recipient s accounting system and its usual method of charging for similar items and any restrictions or limitations in the applicable cost principles. - HHS GPS 10
INDIRECT COSTS Unrecovered indirect costs can be counted if you have an indirect cost rate agreement. Costs that could have been charged under the NICR - Amount Actually Charged = Amount you can count as match 11
PROGRAM INCOME AND MATCH Defined as gross income earned by the recipient that is directly generated by a supported activity or earned as a result of the award... Program income includes, but is not limited to, income from fees for services performed, the use or rental of real or personal property acquired under federally-funded projects... Interest earned on advances of Federal funds is not program income. With prior approval of the [federal agency], program income may be used to meet the cost sharing or matching requirements of the Federal award. 45 CFR 75.307(e)(3) 12
FEDERAL FUNDS AS MATCH Recipient contributions may be derived from any non- Federal source; from Federal sources if received as fees, payments, or reimbursements for the provision of a specific service, such as patient care reimbursements received under Medicare or Medicaid; or from other program income, if authorized by the OPDIV (see Part II). Otherwise, unless there is specific statutory authority, Federal funds may not be used to match HHS grant funds. HHS GPS 13
CSBG FUNDS AS MATCH CSBG IM #135 Federal Matching Requirements HUD McKinney-Vento June 4, 2014 CSBG IM #139 Federal Matching Requirements AmeriCorps March 19, 2015 14
In-Kind Match Allowability, Valuation, and Documentation 15
CONSIDERATIONS FOR WHICH RULES TO APPLY What is the purpose of the grant? Acquisition Operations Who is contributing? Recipient (i.e., you are) Volunteer/3 rd Party What is the contribution? Services Supplies Equipment Facilities 16
IF THE GRANT RECIPIENT IS DONATING SERVICES Values for non-federal entity contributions of services and property must be established in accordance with the cost principles in Subpart E. 75.306(d) So, for staff this means salary and fringe properly documented with time and effort reports. 17
INDIVIDUAL DONATING SERVICES If an individual donates his or her time: Rates for volunteer services shall be consistent with those paid for similar work in the recipient s organization. In those instances in which the required skills are not found use local labor rates for similar services. In either case, paid fringe benefits that are reasonable, necessary, allocable, and otherwise allowable may be included. But, can count only if the service is an integral and necessary part of an approved project or program. 18
ORGANIZATION DONATING SERVICES: If another organization donates the time of its employees while they are being paid by that organization: services must be valued at the employee s regular rate of pay plus allowable, allocable, reasonable and necessary fringe benefits and indirect costs (at either the other org s approved federally negotiated indirect cost rate or a rate otherwise in accordance with the provisions of the Supercircular, i.e. de minimis rate) 75.306(f). [P]rovided these services employ the same skills for which the employee is normally paid. If not, value according to previous slide. But, word of caution, service included in indirect subject to admin. cap for Head Start and must be accounted for in rate proposal 19
COST ALLOWABILITY OF VOLUNTEER TIME Allowable or Unallowable? Board member time for participating in training or board meetings? Activities between an enrolled Head Start child and that child s parent either at home or at the center. Staff member volunteering for a Head Start related activity during non-paid time? 20
OVERVIEW OF CHANGES TO TIME AND EFFORT More flexibility; less variation between rules applicable to nonprofits and other grantees New rules emphasize overall internal controls, rather than specific required procedures (such as A-122) For instance, budget estimates are useable on an interim basis as long as there is a review process Overall principle is documentation that needs to accurately reflect the work performed 21
DOCUMENTATION OF IN-KIND CONTRIBUTIONS FOR SERVICES To the extent feasible, services donated to the non-federal entity will be supported by the same methods used to support the allocability of regular personnel costs. 45 CFR 75.434(d) 22
IF THE GRANTEE IS DONATING EQUIPMENT AND SUPPLIES: Claim as match values... established in accordance with the cost principles See 75.453 First, make sure the equipment and supplies were not purchased with federal funds. If not, what is appropriate value for used supplies and equipment? Equipment you own depreciation. See 75.436 and 75.439 Supplies you own Depends on what it is, unused supplies, purchase price; Used supplies, not specified could apply use allowance or perhaps document FMV 23
IF ANOTHER IS DONATING SUPPLIES Supplies Remember: Under federal definition of supplies, anything with an acquisition cost of less than $5,000 or useful life of less than a year is a supply. Also includes computing devices under 75.2 Use Fair Market Value at time of donation 45 CFR 75.306(g) 24
IF ANOTHER IS DONATING EQUIPMENT Use of Equipment If loaned, may not exceed fair rental value 45 CFR 75.306(i)(4) A Piece of Equipment Must comply with prior approval requirements FMV for same age and condition at the time of donation 25
FACILITIES WHERE TITLE IS HELD BY GRANTEE If Grantee owns property (no federal help in purchasing)? New Rule: Lesser of Value of remaining life of the property recorded in the grantee s accounting records Current FMV (even if FMV is greater use FMV with agency approval) 75.306(d)(1)-(2) 26
IF ANOTHER IS DONATING FACILITY Land and Building What is the purpose of grant? If acquisition of Facilities (rare), then: Aggregate value of the donated property may be claimed as cost sharing of matching 45 CFR 75.306(h)(1) BUT NOTE: Rincon San Luiseno Band of Mission Indians (DAB No. 1826): fundamental principle of grants management that a grantee is required to document its costs 27
IF ANOTHER IS DONATING FACILITY & TITLE PASSES TO GRANTEE Land and Building If purpose of grant is to operate a program that needs facilities (like most of you), then: Normally only deprecation charges may be made. However, the fair rental charges for land may be allowed provided that the Federal awarding agency has approved the charges. 45 CFR 75.306(h)(2) Value: can t exceed FMV at time of donation as established by independent appraiser 28
IF ANOTHER IS DONATING SPACE The value of donated space must not exceed the fair rental value of comparable space as established by an independent appraisal of comparable space and facilities in a privately-owned building in the same locality. 45 CFR 75.306(i)(3) What is an independent appraisal? 29
DISCOUNTS FROM VENDORS? Allowable Recommendation: or Unallowable? Use old rule at 92.24(b)(7)(iii) as guidance. More goods or services for no money Demonstrable cost savings 30
PENALTIES FOR UNDERMATCH? Answer: Disallowance of federal funds See e.g. Circle of Parents, 2012 DAB 2439 Recalculate total size of program (federal expenditures plus allowable match) For Head Start 80% of recalculated program is maximum allowable federal share Any amount over maximum must be returned See PPCC II decision, Dec. 2010 31
WHAT IS AN OVERMATCH? Central Piedmont Action Council, Inc.; DAB No. 1916 (April 16, 2004) Reduce or offset a disallowance by documenting that it incurred unclaimed, allowable and allocable costs that it paid for with its own funds. Substitute, for unallowable costs, allowable costs for which it did not claim federal funding. Establish that the unclaimed costs were distinct from and in addition to the approved match 32
SO If you reach your 20%, don t stop counting! In-kind overmatch is protection against a disallowance of some of your documentation for other In-kind; Cash overmatch is protection against a disallowance of federal funds; and Don t promise to overmatch in your grant application. 33
YOUR FAVORITE SOURCES OF MATCH? 1. 2. 3. 34
WAIVER STATUTE: HEAD START ACT 640 (B) For the purpose of making such determination, the Secretary shall take into consideration with respect to the Head Start program involved-- 1) 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... ; 2) the impact of the cost the Head Start agency may incur in initial years it carries out such program; 35
WAIVER STATUTE: HEAD START ACT 640 (B), CON T. 3) the impact of an unanticipated increase in the cost the Head Start agency may incur to carry out such program; 4) whether the Head Start agency is located in a community adversely affected by a major disaster; and 5) the impact on the community that would result if the Head Start agency ceased to carry out such program. 36
DRAFTING SOLID WAIVER REQUESTS 1. Tell Your Story Provide Context How did we get in this situation? Add reasons for situation (ideally, not your fault) 2. Make a Connection Look at the waiver requirements in the Head Start Act. Which one fits? (e.g., lack of available resources) Describe factual conditions that result in a lack of the requirement. Make sure you have a cause and effect relationship. For example, the poor economy resulted in fewer volunteers because of X reason. Conclude: Because of the reasons we described, we need a waiver. Be specific about amount or percentage. 3. Ideally, waiver requests made before the end of your program year (but not definitive). 37
FINAL NON-FEDERAL SHARE TIPS Ask the following 3 questions: 1. Would this expenditure be allowable if we were using federal dollars? Reasonable? Ordinary? Necessary? 2. How much federal money would we spend to purchase the same goods or services? What is the fair market value of the goods or services? 3. How would we document this expenditure if we were using federal funds? Documentation should be detailed and include receipts and other verification if available (don t just summarize!) Use the same methods used by the recipient for its own employees. For example, use sign-in/sign-out sheet Time should be recorded on a real-time basis after the fact 38
QUESTIONS? Nicole M. Bacon Nbacon@FTLF.com (202) 466-8960 39