PCSGP Start-Up Sub-Grant Use of Funds

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1. How may charter schools use PCSGP Start-Up Sub-Grant Funds?

   The Public Charter Schools Grant Program (PCSGP) is a sub-grant program funded by the federal Charter Schools Program (CSP), authorized under Title IV, Part C of the Elementary and Secondary Education Act (ESEA) of 1965, as amended by the Every Student Succeeds Act (ESSA) (20 United States Code [USC] sections 7221–7221j). PCSGP Start-Up Sub-Grant activities may include: (1) post-award planning and design of the educational program which may include (a) refinement of the desired educational results and of the methods for measuring progress toward achieving those results; and (b) professional development of teachers and other staff who will work at the charter school; and (2) initial implementation of the charter school, which may include (a) informing the community about the school; (b) acquiring necessary equipment and educational materials and supplies; (c) acquiring or developing curriculum materials; and (d) other initial operational costs that cannot be met from State or local sources, pursuant to 20 USC Section 7221c(f)(3). Specific requirements for the use of PCSGP Start-Up Sub-Grant funds are dependent on the type of sub-grant awarded to a charter school: Planning, Implementation, Replication, or Expansion. Planning and Implementation sub-grants generally may be awarded for a period of up to three years, with no more than 18 months used for the Planning phase, and no more than 36 months total used for both Planning and Implementation phases of the new charter school. Replication and Expansion sub-grants may not exceed 36 months from the time of award.

   Sub-grantees may only use sub-grant funds as stated in their approved PCSGP budget. The PCSGP funds must supplement, not supplant, existing services and may not be used to supplant federal, state, local, or nonfederal funds. Programs may not use PCSGP funds to pay for existing levels of service funded from any other source. Supplanting is the use of PCSGP funds to pay for costs that would normally be paid using state or local funds. This primarily includes the operational costs of the school, such as rent and teacher salaries. Charter Schools Program Nonregulatory Guidance (D-3) indicates: “If the charter school can show that the state or local funds it has received are necessary to meet expenses other than the one at issue, then the charter school has met its burden of showing that the ‘other initial operational costs’ cannot be met from state or local sources and, therefore, is allowable under the CSP grant.”

   In addition, Office of Management and Budget (OMB) Circular A-122 establishes principles for determining allowable costs for Federal grants to non-profit entities. As a general matter, costs must be reasonable, necessary, and allocable to meet the objectives of the grant pursuant to Cost Principles for Non-Profit Organizations, 2 Code of Federal Regulations (CFR) 230. PCSGP Start-Up Sub-Grant funds may be used to fund one or more of the following activities described in 20 USC Section 7221b(h):

   • Preparing teachers, school leaders, and specialized instructional support personnel, including through paying the costs associated with (A) providing professional development; and (B) hiring and compensating, during the eligible applicant’s planning period specified in the application for sub-grant funds that is required under this section, one or more of the following:
     • Teachers
     • School leaders
     • Specialized instructional support personnel
   • Acquiring supplies, training, equipment (including technology), and educational materials (including developing and acquiring instructional materials).
   • Carrying out necessary renovations to ensure that a new school building complies with applicable statutes and regulations, and minor facilities repairs (excluding construction).
   • Providing one-time, startup costs associated with providing transportation to students to and from the charter school.
   • Carrying out community engagement activities, which may include paying the cost of student and staff recruitment.
   • Providing for other appropriate, non-sustained costs related to the activities described in subsection (b)(1) when such costs cannot be met from other sources.
     

   
   Definitions for the staffing positions described pursuant to 20 USC Section 7801:

   • Specialized instructional support personnel. The term `specialized instructional support personnel' means:
     • School counselors, school social workers, and school psychologists; and
     • Other qualified professional personnel, such as school nurses, speech language pathologists, and school librarians, involved in providing assessment, diagnosis, counseling, educational, therapeutic, and other necessary services (including related services as that term is defined in section 602 of the Individuals with Disabilities Education Act [20 USC Section 1401]) as part of a comprehensive program to meet student needs.
   • School leader. The term `school leader' means a principal, assistant principal, or other individual who is:
     • An employee or officer of an elementary school or secondary school, local educational agency, or other entity operating an elementary school or secondary school; and
     • Responsible for the daily instructional leadership and managerial operations in the elementary school or secondary school building.

2. What types of costs qualify as "other initial operational costs that cannot be met from State or local sources"?

   As stated in item one, Public Charter Schools Grant Program (PCSGP) Start-Up Sub-Grant activities may include: initial implementation of the charter school, which may include (a) informing the community about the school; (b) acquiring necessary equipment and educational materials and supplies; (c) acquiring or developing curriculum materials; and (d) other initial operational costs that cannot be met from State or local sources. As a general matter, these “other initial operational costs” must be “other appropriate, non-sustained costs related to the activities in the sub-grantee’s approved application to open and prepare for the operation of a new charter school, open and prepare for the operation of a replicated high-quality charter school, or expand a high-quality charter school pursuant to 2 Code of Federal Regulations (CFR) 200 (84.282)(b)(1). Additional detail is provided by the Charter Schools Program Nonregulatory Guidance (D-3):

   • Costs associated with creating and implementing office functions, such as accounting systems, attendance and registration systems, and human resources policies;
   • Costs associated with the installation of computers, data systems, networks, and telephones;
   • Sub-grantees in their Planning Phase Only: Personnel expenses incurred before the school’s opening, provided that these expenses are associated with planning phase activities, such as program and curriculum development and integration, and teacher and staff recruiting. Personnel expenses, such as salaries for certificated and classified staff, must be for a reasonable period of time (generally no more than four months) and are limited to teachers, school leaders, and specialized instructional support personnel. Benefits may only be claimed for associated claimed salaries. The sub-grantee must maintain accurate time and effort records to document the amount of time each employee works on tasks related to PCSGP Planning Phase tasks;
   • Sub-grantees in their Planning Phase Only: Rental or occupancy costs for the school facility for a reasonable period of time (generally no more than 3 months) in preparation for the school’s opening;
   • All of the expenses described in (a)–(d) are allowable under the PCSGP only to the extent that they are related to the planning, implementation, replication, or expansion of the charter school and cannot be met from State or local sources. A charter school that has received State or local funds would have to demonstrate that the State or local funds are unavailable to cover the expense at issue. If the charter school can show that the State or local funds it has received are necessary to meet expenses other than the one at issue, then the charter school has met its burden of showing that the “other initial operational cost” cannot be met from State or local sources and, therefore, is allowable under the Charter Schools Program grant. 20 United States Code (USC) Section 7221c(f)(3)(B)(iv).

3. What other factors may impact eligibility of expenditures for reimbursement?

   • a) Costs incurred must be one-time in nature and may not include ongoing operational costs. When making the distinction between one-time and ongoing costs, it is helpful to ask the following questions: Is the expense required to operate the school? Will the school continue to incur the expense after the sub-grant has ended? Answering “yes” to either of the above questions most likely indicates that the expense is not one-time in nature, and is most likely not allowable.
   • b) Costs incurred must be obligated during the sub-grant project period in order to be eligible for reimbursement. Therefore, costs related to developing the charter petition or for services rendered beyond the duration of the sub-grant project period are not allowable.
   • c) Purchases or contracts for goods and services must follow pertinent procurement regulations. Procurement regulations ensure the appropriate use of federal funds, prevent conflicts of interest, and promote open competition between vendors offering similar goods and services. Most, if not all, purchases under the sub-grant must comply with appropriate procurement regulations. You may find additional information on procurement in Appendix C of the 2020–23 Public Charter Schools Grant Program (PCSGP) Start-Up Sub-Grant Request for Applications. This requirement is provided for in the following passage from the electronic Code of Federal Regulations (CFR) at Electronic Code of Federal Regulations .
   • d) All purchases must be reasonable and necessary to the completion of the sub-grant objectives or the initial operation of the school. Goods and services purchased using sub-grant funds should correlate to some need reflected in the approved charter petition or the approved Work Plan in the sub-grant application. Expenses will be questioned if they appear to be unreasonable or unnecessary to the essential operation of the charter school or the completion of the sub-grant objectives.

4. May PCSGP funds be expended on construction?

   No, Public Charter Schools Grant Program (PCSGP) funds may not be used for construction. PCSGP funds may be used for necessary repairs of buildings and equipment that neither add to the permanent value of the property nor appreciably prolong its life, but merely keep it in an efficient operating condition. Minor improvements to the facility are allowable as they relate to items needed to be compliant with the American with Disabilities Act or to meet local health and safety building codes. All costs must be reasonable and necessary. Office of Management and Budget (OMB) Circular A-122, Section 27 (rev. May 10, 2004); 2 Code of Federal Regulations (CFR) appendix B to part 230, Section 27.

5. What kind of equipment is permitted?

   Public Charter Schools Grant Program (PCSGP) Start-Up Sub-Grant funds may be used for costs associated with the planning and implementation of a new charter school, or replication or expansion of a high-quality charter school. Start-Up Sub-Grant activities may include acquiring necessary equipment and educational materials and supplies. Thus, in accordance with Office of Management and Budget (OMB) cost principles, to qualify as an allowable cost, the equipment must be necessary and reasonable for the proper and efficient performance and administration of the sub-grant. In addition, the cost of the equipment must be included in the approved application and budget for the sub-grant. Equipment necessary to implement a charter school may include, but is not necessarily limited to, desks, chairs, computers, equipment related to physical education and art, and playground equipment. 20 United States Code (USC) Section 7221c(f)(3)(B)(ii); OMB Circular A-122.

6. What types of fees can be charged to the sub-grant?

   Public Charter Schools Grant Program (PCSGP) funds may be used for the following initial (one-time) set up costs:

   • Memberships to charter school support organizations
   • Western Association of Schools and Colleges (WASC) Accreditation fees OR Third-party External Reviewer fees
   • Student Information Systems
   • Back office provider fees for one-time costs such as set up and trainings, planning phase only
   • Online software, first year subscription only
     

   
   Once a facility agreement has been signed AND the building is occupied, the following start-up fees may be charged to the sub-grant for a reasonable length of time (no more three months). All costs must be before the first day of school serving students:

   • Insurance and Utilities prior to the start of school
   • Security Systems

   
   Start-up personnel fees can also be paid from the sub-grant such as:

   • Finger printing costs
   • Online recruiting sites, ex. EDJoin

7. Are indirect costs allowable?

   For Public Charter Schools Grant Program (PCSGP) Start-Up Sub-Grants beginning December 1, 2021, and beyond, PCSGP Start-up Sub-Grant funds may be used to support indirect costs, limited to the sub-grantee’s California Department of Education (CDE)-approved Indirect Cost Rates (ICR) as found at Indirect Cost Rates (ICR) for the applicable fiscal year in which the funds are expended. If the sub-grantee does not have a current CDE-approved ICR, and has never received one, the sub-grantee may charge indirect costs at a preliminary de minimis rate of 10 percent. Indirect costs are agency-wide, general management costs (i.e., activities for the direction and control of the agency as a whole). General management costs consist of administrative activities necessary for the general operation of the agency, such as accounting, budgeting, payroll preparation, personnel services, purchasing, and centralized data processing. All indirect costs must be charged against eligible program expenditures, in compliance with state and federal law and regulations, and aligned with standard accounting practices. Please see additional information on rates, eligible program expenditures, and other guidance at Frequently Asked Questions about Indirect Costs. For assistance in determining indirect cost rates, please email PCSGPGeneral@cde.ca.gov. Indirect costs must be included in the sub-grantee's approved budget submitted with the initial PCSGP Start-Up Sub-Grant application, and may not be added through subsequent budget revisions.

8. What additional regulations apply to PCSGP funds?

   All Public Charter Schools Grant Program (PCSGP) federally funded applicants must adhere to the following regulations:

   • Every Student Succeeds Act (PDF)
   • Electronic Code of Federal Regulations Uniform Guidance: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
   • U.S. Department of Education Charter Schools Program Nonregulatory Guidance (DOC; Updated Jan-2014)
   • U.S. Department of Education Charter Schools Program State Educational Agencies Grant Legislation, Regulations, and Guidance CSP
   • Office of Management and Budget (OMB) Circular A-21, Cost Principles for Educational Institutions (PDF)
   • OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments
   • OMB Circular A-122, Cost Principles for Non-Profit Organizations

   
   Sub-grantees are prohibited from using federal grant funds for fundraising, civil defense, legal claims against the state or federal government, and contingencies. For a detailed description of these expenditure classifications, refer to the California School Accounting Manual (CSAM), 2019 Edition. Visit Definitions, Instructions, and Procedures for viewing and downloading information.