An ISD or consortium of ISDs may retain an amount not to exceed 4% of the total grant amount from program and transportation funds for administrative services provided by the ISD. Function Codes 23X, 24X, 25X, and 28X (with the exception of 282) are considered administrative. Administrative expenses are required to be designated as such in the budget and FER descriptions including the transportation budget. Costs related to Early Childhood Specialists, Fiscal Coaches/Specialists, and Early Childhood Contacts are program costs and are not considered an administrative expense subject to the 4% cap. Additional funds can be retained by the ISD for actual program costs.
An ISD may retain up to 4% administrative costs to operate the GSRP grant. The ISD may choose to detail expenses under each function code, or report under function code 611, indirect cost.
As part of the ISD’s fiscal policies, a policy must be in place for how subrecipients report administrative costs. ISDs may allow subrecipients to report all administrative expenses by function code and retain documentation on proration of expenses. ISDs may alternatively allow subrecipients to report administrative expenses under indirect. ISDs should meet with subrecipients to determine which method is most supportive of the subrecipient’s program.
Before submitting budgets and FERs, the ISD must ensure that detailed administrative items are reasonable and necessary for the quality of the activities proposed, include proper function codes and descriptions, and are properly allocated between administration and program services.
An ISD may apply an indirect cost rate instead of, or in addition to, directly allocating administrative costs. The indirect cost percentage may only be applied to funds that are retained and managed by the ISD; it cannot be calculated on the total grant award. In other words, the 4% indirect rate applies only to funds that are not transferred to other entities. If an ISD directly operates programs, it may charge up to 4% in indirect costs on the eligible funds it manages.
There may be instances where an ISD is at or below the maximum administrative limit and still have excessive administrative costs for a position or service. There may also be instances where an ISD needs to classify an item as a dual benefit cost and in these instances the ISD is permitted to use cost sharing. ISDs may not charge part of a salary to indirect and the rest to individual function codes.
The ISD must document the allocation of cost sharing. For example, the duties for a local program administrator are split between administrative and programmatic functions. The ISD may permit cost sharing with proper supportive documentation, by using a position description and a spreadsheet that demonstrates the rationale for the cost sharing. In this instance, costs must be designated as administrative and/or programmatic. The documentation that justifies cost sharing must be kept on file for a fiscal review.
All subrecipients may apply an indirect rate up to the federal de minimis. Subrecipients using indirect cannot exceed the federal de minimis for administrative expenses. If subrecipients are using indirect, a portion of an expense cannot be charged to both direct and indirect. An expense can only be charged directly or indirectly, not both.
Space costs are defined as expenses associated with operating classroom/building spaces where GSRP children will occupy. To determine reasonable and allowable space costs, subrecipients and ISDs must utilize the Building Cost Template (or similar tool) and a Fair Market Value calculator for the area in which the entity is located. Annually, subrecipients must provide documentation indicating a Fair Market Value assessment was utilized when determining operational costs charged to GSRP.
Programs must use space cost to represent the allowable portion of facility expenses including items such as mortgage and rent. Space cost reflects the operational use of a facility and may be charged to GSRP as an allowable expense, either indirectly or by function code. These costs must be prorated based on the portion of the space used for GSRP and must be reasonable, necessary, and based on fair market value.
Example of allowable space costs: A subrecipient rents their building to operate their child care center. Two of the classrooms withing that building are used for GSRP. Using the building cost template, the subrecipient would include the total square footage of the rented building and the total square footage of space used for GSRP to determine what percent of the building is used for GSRP purposes. The subrecipient would also include other operating expenses like utilities, snow removal, etc. in the building cost template to determine the overall operating expenses for the site. The proportionate share of the expenses can then be budgeted as space use costs on their budget with the completed building cost template as documentation for those expenses.
