Direct Service and Administrative Cost Guidance

Introduction
Goals
Definitions in Education Code
Promising Practices

Introduction

The Policy Committee of the California Department of Education (CDE), Expanded Learning Division, is tasked with developing, implementing and maintaining clear policies that support quality programs. The purpose of this document is to provide guidance around 85/15 or the portion of the California Education Code (EC) that refers to the allowable percentage of administrative expenses to be charged to the After School Education and Safety Program (ASES) and 21^st Century Community Learning Centers (CCLC) grants.

The Policy Committee divided the guidance into two categories. The first category provides direction to the grantee while the second category provides guidance to contracted service providers.

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Goals

• To inform grantees of the requirements of 85/15.
• To provide grantees an understanding of the process for monitoring 85/15 as part of Federal Program Monitoring.

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Definitions and Education Code

The following are the definitions of direct and indirect services:

Direct Services are those services that are typically delivered at the school site and where the students are the direct recipients or beneficiaries of the services. Further defined as supplementary services that when delivered at the school site, the student is the direct recipient or beneficiary of the services. Expenditures for personnel and services are justified as direct services and for inclusion in the 85 percent if:

• The personnel are providing direct, hands-on services to students;
  
  
• The services being provided are so integral to the program that not to provide the services would affect the quality of the program itself and the academic success of the students. Examples of these types of services are professional development, training, technical assistance (TA), coaching and consultation for staff as well as individuals to provide direct services for student and parent involvement activities; continuous quality improvement (CQI) activities that are focused on assessing program quality;
  
  
• The funds are used to purchase materials and equipment to be used by eligible students;
  
  
• As part of a CQI process, the funds support the analysis and use of student performance data that are then used to inform programming for eligible students.
  

Examples of Direct Services: Expanded learning program (ELP) activities including, but not limited to: academic support, enrichment activities, and recreational activities. Provision of professional development, staff training, TA, and professional learning communities, and CQI activities such as program walkthroughs, program assessments, etc.

Administrative Costs are the costs of personnel and supplies which are administrative in nature and do not have a direct relationship to support students in the program. These costs must support the funded program.

Examples of Administrative Costs:

• Local Educational Agency (LEA)/Community Based Organization (CBO) administrative personnel
• LEA/CBO program evaluation
• LEA/CBO advisory councils
• General staff development not related to expanded learning

Additional examples: equipment used for administrative duties, human resource/personnel related costs i.e., job posting, fingerprinting/background checks, tuberculosis tests, management salaries for staff that do not directly supervise line staff or site coordinators, mileage/gas/muni pass for staff/parking, rentals (excluding Professional Development-related training space), business cards, curriculum development, staffing and volunteer recruitment, district advisory meetings and events, district program evaluation or review activities (a percentage of the time spent on discussing the evaluation results with the program staff could be direct services as part of professional development when meeting with the site coordinator to review the program, general capital outlay or deferred maintenance costs of program sites, general staff development not associated with the program.

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.

• Indirect costs may not exceed 5 percent of the total grant award OR the CDE approved Indirect Cost Rate, whichever is less.
• Indirect costs plus direct administrative costs cannot exceed 15 percent.
• Approved CDE Indirect Cost Rates.
  

Example of Indirect Costs: If an LEA has already spent 12 percent on direct administrative costs, then it can only claim 3 percent for indirect costs, even if the approved rate exceeds 3 percent.

Supplant: To replace or substitute existing state and local fiscal efforts. Schools that receive the funds shall have base expenditures comparable to nonparticipating schools.

To define if supplanting exists, ask the following questions:

• “What would have happened in the absence of federal funds?”
• “What services would have been provided in the absence of federal funds?”
  

Supplement: To build upon or enhance existing state and local fiscal efforts. Schools that receive the funds shall have base expenditures comparable to nonparticipating schools.

Specific Education Code References:

Pursuant to EC sections 8426(c)(1)(2) (ASSETs), 8483.9(a)(b)(c) (ASES), 8484.8(e)(4)(B) 21^st CCLC, a fiscal agent receiving state funding may allocate no less than 85 percent of the total grant amount to school sites for direct services; and spend no more than 15 percent of the amount of the grant for administrative costs, including indirect costs.

Pursuant to EC sections 8426(c)(2) (ASSETs), 8483.7(c) (ASES), 8484.8(e)(4)(C) 21^st CCLC, in addition to the funding allowed for administrative costs (discussed above), a grantee may spend up to 15 percent of the first year’s annual grant award for startup costs.

* It is important to note, that 85/15 is monitored by site, therefore, grantees must track expenditures by site.

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Promising Practices

Promising practices will be divided into two categories: Grantees and Contracted Service Providers.

Note: It is strongly recommended that you seek legal support in the development and settlement of contracts, contract language, and policy and procedure. The intent of this tool is not to provide legal advice or offer exact instruments as free resources. Please perform the necessary due diligence that meets your needs.

Grantee

1. Contract: Execute a contract or memorandum of understanding (MOU) between contracted service provider and grantee that outlines services to be provided. Be specific with the following:
   
   
   • Terms: When does the contract begin and when does it end? It is common practice to have the terms align with fiscal years and or grant cycles. Some local educational agencies or providers may request a multi-year contract, while others prefer a one-year term.
     
     
   • Amendment process: If the contracted service provider needs to add or reduce staff, add or reduce hours, or add or reduce training opportunities; the contract should allow for a process of amendment that is flexible, transparent, and relatively quick. The contract should include language that advised both parties on the amendment process. It is important to consider timing in the amendment process; if the goal is to free up funds for other purposes, the amendment should take place soon enough that the LEA can utilize the funds within the correct fiscal year.
     
     
   • Payment and services to be performed: The party providing services should clearly communicate the program expenses and how those expenditures are generated. The expenditures should be specific enough to allow both parties to determine if they can be classified as direct service or administrative in nature.
     
     
   • LEA program plan: The contract should include or provide an exhibit referencing the deliverables of the program plan. Additionally, the contract should clarify what role the contracted service provider plays in completing the program plan and how success is measured.
     
     
   • Payment: Contractor shall be paid within a reasonable time after Contractor submits an invoice for services to the LEA. The invoice should include the following information: date, invoice number, and summary of work performed; including any necessary back up documentation such as receipts, expense reports, or timesheets.
     
     
2. Fiscal Responsibility: The grantee should develop a system to ensure fiscal responsibility. The system should be coherent and logical, and include checks and balances. The grantee should determine their indirect rate and what percentage is dedicated to administrative costs for the grantee and the provider. It is fiscally responsible to make all contracted service providers aware that the sum of the administrative costs, including the LEA, cannot exceed 15 percent. It is important that the LEA determine how the contracted service provider will report their direct and administrative costs.
   
   
3. Gray Areas: When expenditures fall into a gray area, carefully evaluate the nature and extent of the benefit to the student by asking: “How direct is the benefit to the students?” and/or “Does the expenditure have a clear education or enrichment impact on the ELP?”

Contracted Service Providers

1. Contract/MOU Execute a contract or a MOU between yourself and the grantee that outlines services to be provided. Be specific with the following:
   
   
   • Terms: When does the contract begin and when does it end. It is common practice to have the terms align with fiscal years and or grant cycles. Some grantees or contracted service providers may request a multi-year contract, while other prefer a one-year term.
     
     
   • Amendment Process: If the contracted service provider needs to add or reduce staff, add or reduce hours, or add or reduce training opportunities; the contract should allow for a process of amendment that is flexible, transparent, and relatively quick. The contract should include language that advised both parties on the amendment process. It is important to consider timing in the amendment process; if the goal is to free up funds for other purposes, the amendment should take place soon enough that the LEA can utilize the funds within the correct fiscal year.
     
     
   • Payment and Services to be Performed: The party providing the services should clearly communicate the expenses including a detailed description of the services provided. The expenditures should be specific enough to allow both parties to determine if they can be classified as direct service or administrative in nature.
     
     
   • LEA Program Plan: The contract should include the program plan or provide an exhibit referencing the deliverables of the program plan. Additionally, the contract should clarify what role the contracted service provider plays in completing the program plan and how success is measured.
     
     
2. Invoice for Services: Provide clear invoices that demonstrate proof of service(s). The invoice should include back up documents as outlined in the contract or MOU. The invoice should use common school accounting language that communicates if the expenses incurred were direct or indirect in nature. The invoice(s) should be provided in a timely manner so that proper accounting of expenses can be maintained within the fiscal year.
   
   
3. Duty Statements: Develop job descriptions or duty statements that outline the essential functions of the job and if the essential functions are direct services or administrative in nature. Review the job descriptions or duty statements with the grantee so that both parties are aware of the nature of the work.
   
   
4. Self-Audit: At least once every other year, prepare a time audit documenting how much time is spent on direct service and how much time is spent on administrative functions to properly calculate direct and administrative costs. Utilize this technique for line staff providing direct service to young people and for all other ELP support roles such as site leads or site coordinators, area supervisors, quality assurance coaches and or any other positions funded fully or partially by the ASES or 21^st CCLC grant funds.
   
   
5. Expense Reporting Form: Contact your Regional Consultant for resources or  utilize a mutually agreed upon reporting tool to demonstrate how the program expenses are categorized into administrative or direct services (see example below).The direct and administrative totals should equal 100 percent of costs. The administrative costs should not exceed 15 percent total. It is a promising practice to provide an expense reporting form in the beginning of the year to demonstrate a budget and again at the end of the year to report how funds were spent.
   
   
6. School Object Codes: Using a common accounting language helps both the grantee and contracted service provider speak the same language. Often times the district accounting departments work with multiple grants and programs and do not specialize in ASES or 21^st CCLC. Utilizing accounting codes that they are familiar with helps all parties manage the 85/15 better.
   
   
7. Gray Areas: When expenditures fall into a gray area, carefully evaluate the nature and extent of the benefit to the student by asking: “How direct is the benefit to the students?” and/or “Does the expenditure have a clear education or enrichment impact on the expanded learning program?”

Unallowable Use of Funds

The Uniform Administration Requirements, Cost Principles and Audit Requirements for Federal Awards  External link opens in new window or tab. Part 200 outlines some of the unallowable costs. These include, but are not limited to:

• Advertising
• Public Relations Costs
• Advisory Councils
• Alcohol
• Bad Debt
• Donations
• Entertainment Costs
• Fundraising costs
• Membership Costs
• Recruiting costs
• Rental Costs

In addition to this, Local Education Agencies may not charge rent to the program for operating on the school site or utilize grant funds for the use of incentives.

All costs incurred by the program must be reasonable and necessary. If you have any questions, please don’t hesitate to contact your System of Support for Expanded Learning team.

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