Historically, the CDC has not reimbursed public services providers for any indirect program expense. In 2013/2014, we liberalized our policy to reimburse indirect expense only if the agency requesting such reimbursement had a federally-approved indirect cost plan that they provided to the CDC in advance. However, we have since learned that federal agencies, or at least HUD, no longer perform the task of approving indirect cost plans. These policies were altered for Fiscal Year 2014/2015, to read:
CDBG, HOME, CSF, and ESG funds may generally not be used for general administration costs. Such costs are allowed in the public services category provided the Commission staff approves, in advance, an indirect expense allocation plan for the applicant agency.
Thus, the CDC will not reimburse expenses of an indirect nature or general administrative unless we have previously been provided -and ultimately approve -an agency indirect allocation plan. Any reimbursement requests will be held or returned if this documentation is not in place. This applies to general agency admin/overhead allocations as well as to facility-based allocations:
- Agency General Admin/Overhead: If you seek reimbursement for this type expense, you will need to provide a spreadsheet that shows your board-approved total agency budget and the basis for allocating general admin/overhead. Typically, this is summarized in the form of an indirect rate such as 15%. The basis for calculating this rate might be total direct expense, total personnel
expense, total FTE’s or perhaps some other reasonable basis. Your subsequent
reimbursement requests need to be consistent with this allocation plan and calculated rate and periodic CDC monitoring visits will test for this.
- Facility-Based Allocations: Commonly, a facility may contain more than one program or serve more than one function. If you are seeking reimbursement for a facility-based expense, for example, utility costs, and you are allocating such costs on some facility-based methodology, we need this documented in advance of any reimbursement request. For example, if a facility houses Program A and Program B and Program A occupies 35% of the facility space, you could allocate 35% of a PG&E invoice to that program. If you do this, the CDC needs advance documentation that shows the basis for this calculated allocation
Finally, an important cautionary tale regarding personnel cost allocation. It is never acceptable to expense personnel cost on an allocated basis. All personnel costs, no exceptions, must be charged based on “effort” and timecards completed on that basis. That is, staff members need to complete a timecard based on where they actually spent their time and the accounting records need to be directly tied to this. Any other allocation scheme is unacceptable for federal funding and the CDC has adopted this federal standard for all of our funding programs. Thus, for example, a scheme where an agency basically states, “we think the ED will spend about 25% of their time on Program A so we are allocating 25% of their time to that program” is unacceptable. Again, the expensing of personnel cost always need to be based on day-to-day activities and reflected accurately in the timecard and accounting systems. If you have CoC funding or any other federal funding and you are using an estimation allocation as just described, you need to cease that practice immediately and get disciplined about timecards being filled out based on “effort”, that is, actual hours and fractions of hours spend on various activities.
Periodic CDC monitoring visits will also test the personnel costs and we will ask to view timecards and will need to trace personnel costs from the timecards through the general ledger
Generally, the CDC has adopted accounting standards from the federal Community Development Block Grant (CDBG) program administered by HUD. HUD has published a guidebook entitled Playing by the Rules: A Handbook for CDBG Subrecipients on Administrative Systems. That handbook is a companion to this memo and provides a great depth of information on required accounting and other administrative systems.
Lastly, for agencies that have Continuum of Care contracts with HUD, please review our CoC Compliance page, look for the Fund Accounting guidance. For the most part, the federal CDBG and CoC requirements and standards are the same.