Employment and Training Administration, Labor.
This final notice is intended to provide guidance on resource sharing methodologies for the shared costs of a One-Stop service delivery system, which is required to be established under the Workforce Investment Act of 1998 (WIA) for a number of Federal employment and training programs. The guidance has been revised, in part, based on the comments received on the notice published in the Federal Register on June 27, 2000. In order to effectively present this concept, this document discusses the two distinctly different concepts of cost allocation and resource sharing. We anticipate that the primary users of this guidance will be the financial and accounting staff, as well as auditors, of the One-Stop partner programs and the One-Stop operators. However, we also expect that this guidance will have a much broader audience and will provide program operators and others with a fuller understanding of cost allocation principles and possible ways through which each partner program can pay for its fair share of common One-Stop costs.
As the participating programs have come together to work out the details of service delivery in a One-Stop setting, a number of questions have arisen about how costs can be allocated and resources shared. This notice provides general guidance that all One-Stop centers and their partner programs will be able to follow in establishing their own system for cost allocation and resource sharing. It describes ways to identify and determine One-Stop shared costs and, as a separate issue, describes alternative ways to pay for and fund these costs. This guidance is intended to be used in conformance with WIA requirements and the requirements applicable to each of the partner programs. It is expected that the principles included herein will be used to meet the needs of both individual One-Stop centers and the local One-Stop system as a whole. This framework may not be applicable for all One-Stop settings, and additional guidance will be provided as needed.
This notice is the result of a collaborative effort involving representatives from the Departments of Agriculture, Education, Health and Human Services, as well as the Department of Labor's Employment and Training Administration, Office of Cost Determination and Office of Inspector General. The Federal partners that participated in the preparation of this paper, as well as the Office of Management and Budget, accept the principles discussed herein as appropriate cost allocation and resource sharing guidance for WIA One-Stop centers.
May 31, 2001.
All comments received during the comment period following the publication of the initial guidance (65 FR 39760, et seq.) are available for public inspection and copying during normal business hours at the Employment and Training Administration, Office of Financial and Administrative Management, 200 Constitution Avenue, NW., Room N-4716, Washington, DC 20210.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Mr. Edward J. Donahue, Jr. at 202-693-3157 (This is not a toll-free number) or 1-800-326-2577 (TDD). This document will also be found at the website—http://usworkforce.org after publication.End Further Info End Preamble Start Supplemental Information
I. Summary and Explanation
This section contains a discussion of the comments received on the initial guidance during the comment period. We received a total of 103 comments from twenty-two different entities. There was some duplication of comments including a virtually identical letter with five comments sent by two different entities. Five of the entities submitting comments were units of federal agencies (one—U.S. Department of Education, two—U.S. Department of Labor, and two—U.S. Department of Health and Human Services); five of the commenting entities represent vocational rehabilitation services programs; five of the commenting entities represent adult and vocational education programs; five of the commenting entities represent the WIA title I-B program; two of the commenting entities represent programs for older individuals; two of the commenting entities represent the temporary assistance for needy families program, and two of the commenting entities were unions. Some of the twenty-two entities are counted in multiple categories in the previous sentence.
A number of commenters suggested that the document ought to include both more examples and more detail for the examples provided. This notice is intended to outline a basic framework for cost allocation and resource sharing that would be acceptable to all of the federal partner program agencies. We intend to provide more detailed examples in a One-Stop system financial management technical assistance guide. The process for development of the cost allocation and resource sharing section of the technical assistance guide will provide a forum through which States and local One-Stop systems that have implemented successful cost allocation and resource sharing procedures and/or those that have identified potential pitfalls will share that information as ETA proceeds with the development of the guide.
A few commenters indicated that there will be programs that are linked to the One-Stop centers through electronic or other technology-based means only.
These commenters suggest the need for more specific guidance or examples for such situations. One of these commenters also expressed a desire to see examples for satellite and affiliated sites. As indicated in the previous paragraph, ETA anticipates that it will include more specific examples in its technical assistance guide. However, it should be noted that the costs of computer-based, telephonic or other technological linkages that are shared by partner programs should be allocated to those partner programs based on the benefits derived therefrom in accordance with the basic guidance presented in this paper.
We received several comments that suggested that administrative cost limits of other programs (e.g., the Carl Perkins five percent (5%) limit) would preclude them from contributing what is perceived to be an open ended percentage share of the common/shared costs of the One-Stop. One commenter suggested that the guidance could be interpreted in a way that would result in a partner paying for costs that are unallowable under its program. Some of the comments suggested that the only way that their program could participate was by establishing a fixed predetermined amount of contribution in advance. While it may be true that many of the shared costs will be classified as administrative under the individual partner programs, it should also be noted that there are many program activities that could be integrated and treated as common One-Stop costs. As discussed in other sections of this paper, the efficiencies of scale that will result from the process of Start Printed Page 29639integrating the common activities and costs of the several partner programs should result in reduced costs, including reduced administrative costs, for the individual partner programs. Whatever the nature of the shared cost (program or administrative, direct or indirect, allowable or unallowable), each partner program must be assessed its proportionate share based on the benefit received by that program. Also, this paper clearly indicates that no partner may use federal funds to pay for a cost in violation of its statutory and regulatory provisions. Therefore, it may be necessary for local One-Stops to supplement the federal resources with non-federal resources. While it may be necessary for the partner programs to identify the limits of their ability to contribute to the common costs of the One-Stop, in no case would it be proper for a predetermined budgeted amount to be set as the actual cost for any program. Cost allocation is always based on actual costs, which may be greater or less than the budget planning levels.
One commenter thought that the statement in this guidance that the One-Stop budget does not need to be included in the MOU was contrary to the provisions at WIA section 121(c)(2) and the regulation at 20 CFR 662.300. Both of those provisions require that the MOU include a description of the methods for funding the costs of program services and the operating costs of the One-Stop, but they do not require the inclusion of a budget in the local MOU. If a local area chooses to include its One-Stop budget in the MOU, it may do so. However, care should be taken to assure that the MOU is written so as not to require modification every time there is a need to adjust or correct the budget, which could happen frequently.
One commenter questioned whether the discussion based on OMB Circular A-87 (Cost Principles for State, Local and Indian Tribal Governments), Attachment A, paragraph C.3.c. and ASMB C-10, the implementation guide for OMB Circular A-87, meant that it was proper to allocate funds based on how much funding individual program partners have available. It appears that the commenter has misinterpreted these provisions; neither OMB Circular A-87 nor ASMB C-10 say that costs can be allocated and paid for based on available budget amounts. Expenditures reported under Federal programs may not be based on budgeted costs.
One commenter suggested that the allocation base for any service normally provided by a partner program should be the normal historical cost of that partner providing the service. While it is possible that the cost that a particular program has normally incurred to provide a service that becomes a common service/activity in the One-Stop environment will be approximately the same as it costs each program to provide the service separately, it is also quite possible that the efficiencies and economies of scale will result in a lower cost. However, the normal historical cost of delivery of a particular service or activity is not a proper allocation base. A cost allocation base should be a factor that has a causal relationship to the costs being allocated and the benefits received by each program.
One commenter indicated that the guidance needs to address the propriety and impact of modifications to the cost allocation and resource sharing methodologies. Discussion of this subject has been added to the third paragraph of the section titled Funding or Paying for a Partner's Allocated Share of One-Stop Costs. The guidance explains that cost allocation and resource sharing methodologies should be modified to reflect actual experience and that such modifications ought to occur as soon as the need is recognized.
A number of commenters expressed concern about whether the guidance was meant to apply to One-Stop centers only or to the One-Stop system as a whole. The guidance included herein is intended to apply to both. One commenter requested clarification as to whether the term One-Stop partners is meant to include only the required partners or all One-Stop partners. The term is meant to include all of the partners for a given local area. In addition to the required One-Stop partners, WIA section 121(b)(2) identifies possible additional partners which may include entities that operate Federal, State, local and private sector programs. This commenter also wondered what basis exists for requiring a partner program that is not financed with any Federal funds to bear its fair share of the common costs of the One-Stop. If any program wants to be a partner in a local One-Stop system, it should be included in the MOU for the local area. To the extent that each partner benefits from the common costs of the One-Stop, it should pay for the allocable share attributable to its program. The same commenter asks whether the Federal funding agencies are either an express or implied partner thus making bilateral MOUs trilateral agreements. The Federal funding agencies are not partners to the local area MOUs.
There were a couple of comments which suggested that the concepts of cost allocation and resource sharing appear to be commingled throughout the document. While one of the objectives of this guidance is to emphasize that cost allocation and resource sharing are two distinctly different concepts, there are many instances where it is almost impossible to talk about one of the concepts without reference to the other. Cost allocation is the measurement of actual costs based on benefits received. Resource sharing is the concept of how these costs will be paid for or funded. The two concepts are intricately interrelated.
We received a few comments that appear to take exception to the ETA vision of integration of partner program services in the One-Stop environment. Other comments expressed concern about the inference that integration was a future expectation while co-location and coordination of services was most typical at the present time. The concern appears to be that local One-Stop systems and centers will not move toward integration if the guidance leads them to believe co-location and coordinated services meets ETA's current expectation. ETA's vision for this program has not changed. While other models are acceptable, ETA will continue to work with States and local areas to help them realize the benefits of a fully integrated system. Language has been added to encourage the movement toward integration, even if done in phases. The changes are intended to eliminate any misperception that ETA is encouraging One-Stop systems to stop short of a fully integrated system.
A couple of commenters suggest that the paper identify which funding streams can be used to cover costs of State and Local Workforce Investment Boards established under WIA. Such costs are not typically common costs of the One-Stop system but rather are costs of the WIA program. However, it is possible that some boards may incur costs for activities that extend beyond the role that title I of WIA requires of them. The costs of such activities may benefit other partner programs and should be treated as shared costs allocated to the partner programs based on benefits received.
A couple of commenters asked if there would be more guidance on in-kind contributions. This guidance addresses the proper allocation among the partner programs of common costs incurred in a One-Stop environment. In-kind contributions, as discussed in the matching or cost sharing sections of the uniform administrative requirements found in OMB Circulars A-102 and A-110, are donations from third parties. They are not to be confused with Start Printed Page 29640contributions to the One-Stop by partner programs of such things as space, equipment, staff or other goods and services for which the partner program incurs a cost. Such partner contributions constitute the resources that they are sharing to cover their allocable share of common costs. In-kind contributions received by partner programs from third parties may also be used by those partners, where permitted by the individual program, as a resource to cover their allocable share of common One-Stop costs. Some programs, e.g., Food Stamps and TANF, do not allow the use of in-kind.
One commenter suggested that the guidance should indicate the level of detail to which the partners are expected to go to determine and document proportionate use. The sections of the uniform administrative requirements which address financial management standards indicate that financial management systems need to be sufficiently documented to permit the tracing to a level of expenditure adequate to establish that federal funds have not been used in violation of the restrictions and prohibitions of the applicable laws. The allowable costs provisions of these requirements indicate that allowability of costs is to be determined in accordance with the OMB Cost Principles Circulars applicable to the type of organization incurring the cost. Thus, the level of detail should be consistent with GAAP as required by the OMB Cost Principles.
One commenter suggested that it is excessive to require that cost allocation be accomplished in accordance with GAAP, the OMB cost principles, and meet the audit testing requirements of OMB Circular A-133. The same commenter suggests that the guidance will require more of such administrative functions as budgeting and accounting, thus diverting funds away from program services. Other commenters indicated agreement with the expectation of compliance with these requirements, and emphasized agreement with the principle that costs must be necessary, reasonable and allocable to the partner programs based on benefit received and consistent with the OMB circulars. The guidance was not changed.
On a related issue, a few commenters suggested that the guidance indicate that it would not be proper to expect partner programs to pay for costs of such things as equipment acquired prior to the date of the MOU agreement. Based on the cost principles, the use of such equipment would need to be paid for by the partner programs that benefitted from it. In such a situation, the partners would not be paying for the acquisition of the equipment but for its use. The guidance was not changed.
A number of the comments related to the methodologies for determining proportionate shares. Some took exception to the propriety of using the data elements [bytes of information] of a common intake and eligibility determination form required by the individual partner programs. However, these commenters apparently failed to understand that this methodology is one that most closely reflects the costs incurred by all programs before the implementation of the WIA One-Stop environment when a potential client visited several partner programs, was found ineligible, and referred to other programs. In fact, distributing shared costs of a common intake and eligibility system using this methodology results in a considerable savings to those programs that found the potential clients to be ineligible. Some comments indicated that the WIA regulations suggest that individuals attributable to the partner's program is the only allowable basis for establishing proportionate shares. One suggested that the basis should be limited to individuals who are accepted by and receive services attributable to the program to which they are referred; however, this is only one of a number of possible ways to identify individuals attributable to a partner's program. While the WIA regulation at 20 CFR 662.270 does use the individuals attributable to a partner's program basis as the standard for establishing whether or not a partner program has to share in a particular cost, the very next sentence in the regulation clearly indicates that there are a number of methods which are consistent with the OMB circulars that may be used for allocating costs that the partners determine are the shared costs of the One-Stop. One of the purposes of this guidance is to clearly establish that a variety of cost allocation methods can be used to determine the amount of One-Stop costs that is proportionate to the use of the One-Stop system by the individuals attributable to the individual partner programs. It must be understood that a count of individuals is not the only way to establish such proportionate shares. In fact, there are a number of potential shared One-Stop costs for which counts of individuals attributable to each of the sharing programs may not be an appropriate basis, e.g., the costs associated with shared space. All of the methods described in this guidance are consistent with the OMB circulars. As previously stated, we intend to provide more details and discuss different examples of methods for determining proportionate shares and selecting appropriate bases for cost allocation in our planned technical assistance guide.
Title I of the Workforce Investment Act of 1998 (WIA) requires each local workforce investment area to establish a One-Stop system for the delivery of certain Federal workforce development services. Entities responsible for the administration of separate Federal workforce investment, educational, and other human resource programs and funding streams (referred to as One-Stop partners) are to collaborate to create a seamless delivery system that will enhance access to services and improve employment outcomes for individuals receiving services. The system must include at least one comprehensive physical center that provides core services and access to the other activities carried out by the partners. The comprehensive center may be supplemented by additional comprehensive centers, a network of affiliated sites, technological and physical linkages with the partners, and specialized centers.
The WIA specifies that the required One-Stop partners include programs funded by the Departments of Labor (Title I of WIA, Wagner-Peyser, Unemployment Insurance, Trade Adjustment Assistance, NAFTA Transitional Adjustment Assistance, Welfare-to-Work, Senior Community Service Employment, and Veterans Workforce Investment programs and activities under 38 U.S.C. Chapter 41), Education (Vocational Rehabilitation, Adult Education, and Postsecondary Vocational Education), Health and Human Services (Employment and Training activities under the Community Services Block Grant) and Housing and Urban Development (Employment and Training activities), and authorizes any other appropriate program to serve as a partner, including the Temporary Assistance to Needy Families and the Food Stamp Employment and Training and Work programs. The partner is the entity responsible for the administration of the program in the local area, which may be a State agency, but is not intended to include each service provider that contracts with or is a subrecipient of the entity responsible for administration.
The responsibilities of the One-Stop partners, which are elaborated below, include:
1. Making available to participants the core services that are applicable to their programs; Start Printed Page 29641
2. Using a portion of their funds to create and maintain the One-Stop system and to provide applicable core services;
3. Entering into a Memorandum of Understanding (MOU) with the Local Workforce Investment Board (Local Board) regarding the operation of the One-Stop system;
4. Participating in the operation of the One-Stop system in a manner consistent with the MOU and the partner's authorizing law; and
5. Providing representation on the Local Board.
The Department of Labor regulations at 20 CFR part 662 (65 FR 49294, 49398 (August 11, 2000)) relate to the requirements of the One-Stop system, and One-Stop requirements are also included in the Final Rule issued by the Department of Education relating to the Vocational Rehabilitation Services program at 34 CFR part 361 (66 FR 4379 (January 17, 2001)).
Because WIA mandates that several employment and training programs funded under different laws by various Federal agencies partner in a One-Stop setting, it has become apparent that it is necessary for the Federal funding agencies to present a uniform policy position on acceptable methodologies for cost allocation and resource sharing (methodologies for paying or funding of allocable costs) in the WIA One-Stop environment. As a result, the Office of Management and Budget (OMB) asked agencies to develop a uniform policy position. The Department of Labor's Employment and Training Administration (ETA) took the lead in developing this guidance in consultation with the Departments of Agriculture, Education, Health and Human Services, as well as Labor's Office of Cost Determination and Office of Inspector General.
The underlying problem for the One-Stop partners is to find an appropriate way of accumulating cost information and assuring appropriate payment for shared costs as they come together in a single location. It must be recognized that cost allocation is a distinctly different requirement from resource sharing. Cost allocation is a concept that is embedded in the OMB Cost Principles Circulars and one which is based on the premise that Federal programs are to bear an equitable proportion of shared costs based on the benefit received by each program. In contrast, resource sharing is the methodology through which One-Stop partner programs pay for, or fund, their equitable share of the costs. This document discusses both concepts and presents acceptable methodologies for both cost allocation and resource sharing.
While this guidance does not make any changes to the OMB cost principles; it helps to describe the flexibility and limitations under those principles for Federal programs to determine equitable proportion.
One-Stop Cost Concepts
Under WIA the local One-Stop center is not a direct recipient of Federal awards. Rather, it is the location through which several workforce development and education programs operate their programs in partnership with other entities and make their services available to the program beneficiaries (participants, students, the unemployed, job seekers, employers, etc.).
These One-Stop center partners are recipients of Federal grant dollars, either directly or from another recipient. They will, in their normal course of business, maintain appropriate accounting and other information in accordance with applicable Federal guidance. This normally includes accounting for indirect costs, through indirect cost rates or cost allocation plans, as well as for direct costs. All costs must be accounted for in accordance with Generally Accepted Accounting Principles (GAAP). For the direct funded organizations, this includes negotiating the necessary indirect cost rate or obtaining approval of their cost allocation plan.
When individual organizations partner in the One-Stop environment, some activities or functions are performed which benefit more than one individual organization, e.g., a common reception area, provision of information on the services available at the One-Stop, or collection of basic information from individuals seeking assistance at the One-Stop. When this occurs, the cost of performing these functions must be allocated to the benefiting programs or cost objectives (grants). This must be done based on benefits received by the benefiting program, and not on availability of funds. When that distribution is accomplished, the individual partners must include these costs (i.e., the allocable share of the common/shared costs) in their total cost picture to determine the total cost of operations to perform the functions for which they were funded. The following diagram shows the relationship of the partner programs to each other and to the One-Stop.Start Printed Page 29642
It should be noted that the unshaded center area is comprised of the shared costs that are applicable to two or more of the partner entities. A provides a service that benefits A, B, C and D; B provides a service that benefits B, C, D and A; C provides a service that benefits C, D, A and B; and D provides a service that benefits D, A, B and C. Allocating these costs to the benefiting activities (grants/programs) does not necessarily relate to the methodology used for payment. Payment of these costs will be discussed later in this guidance. Allocating One-Stop costs is no different from allocating costs incurred by grantees for their individual grant programs. The One-Stop costs have effectively been pooled. The question is what is the best basis for equitable distribution of shared costs without incurring unnecessary additional burden.
While neither the physical One-Stop center itself nor the local area One-Stop system is required to have a Federally approved negotiated indirect cost rate or cost allocation plan, this does not mean that there is no need for cost allocation. The WIA requires that a portion of the funds provided under the various Federal laws authorizing the required partner programs be used to pay for the creation and maintenance of the One-Stop delivery system, and the provision of core services that are applicable to the individual partner programs, and requires participation in the operation of the One-Stop system, in a manner consistent with the terms of the MOU and the partner's authorizing law (WIA sec. 121(b)(1)(A) and 134(d)(1)(B)).
The core services include:
1. Eligibility determination under WIA Title I formula programs;
2. Outreach, intake and orientation to the information and other services available through the One-Stop delivery system;
3. Initial assessment of skill levels, aptitudes, abilities, and supportive service needs;
4. Job search and placement assistance, and career counseling;
5. Employment statistics information;
6. Providing performance and cost information on WIA title I, adult education, postsecondary vocational education and vocational rehabilitation providers;
7. Providing information on the performance of the local One-Stop delivery system;
8. Providing information on the availability of supportive services;
9. Providing information on the filing of UI claims;
10. Providing assistance in establishing eligibility for welfare-to-work activities and for programs of financial aid assistance for training and education programs not funded under WIA; and
11. Providing follow up services for WIA title I participants who are placed in unsubsidized employment.
At a minimum, the core services that are applicable to a partner's program (i.e., are authorized and provided under the program) and that are in addition to the basic labor exchange services traditionally provided in the local area under the Wagner-Peyser Act must be made available by the partner at the comprehensive One-Stop center. The basic labor exchange services are described in the WIA One-Stop provisions of the Employment Service regulations at 20 CFR 652.3 to include assisting job seekers in finding employment, assisting employers in filling jobs, and facilitating the match between job seekers and employers. Many of the One-Stop partner programs include these same, or similar, activities for a specified eligible client population. The WIA regulation at 20 CFR 662.250(a) does not mean that these Start Printed Page 29643partner programs no longer have to provide these services to their respective client populations. Instead, it clarifies that partner programs are not expected to contribute to the costs of Wagner-Peyser Act services. (It should be noted the Adult and Dislocated Worker programs authorized under WIA title I must make all core services available at the One-Stop center). It should also be emphasized that this list of core services is the minimum required to be provided at the comprehensive center, and the partners are encouraged to provide such additional services through the One-Stop centers as may allow them to better serve their customers. For example, providing for a common intake and eligibility determination system, including the development and use of a common application form, can be used for a number of the partner programs at the center to enhance access to the programs. Such a system would be customer friendly, and result in administrative efficiencies. The same cost allocation methods are applicable irrespective of the scope of services provided at a center.
The cost allocation that is necessary relates to the common costs of the local One-Stop system or an individual One-Stop center, which may include such items as space and occupancy costs, utilities, telephone systems, common supplies and equipment, a common resource center or library, perhaps a common receptionist or centralized intake and eligibility determination staff. It must be understood that each local One-Stop system and/or center is unique and that this guidance, which intends to share some of the principles and some basic models of One-Stop cost allocation and resource sharing, does not propose to impose a single methodology on the entire WIA One-Stop system. The fact that the cost allocation and resource sharing methodology used in a particular local area One-Stop system or an individual One-Stop center is not specifically discussed in this document does not mean that the methodology is inappropriate or unallowable. The cost allocation methodology that is used, however, must:
1. Be consistent with GAAP:
2. Be consistent with the applicable OMB cost principles and administrative requirements; and
3. Be accepted by each partner's independent auditors to satisfy the audit testing required under the Single Audit Act and OMB Circular A-133.
Whatever methodology is used, it must be supported by actual cost data. Further, the methodology must not permit the shifting of costs that are not allocable to or do not benefit a specific program to that program. In this regard, the books of account for each partner program should reflect both the actual shared costs for which the program is paying and the resources used to pay for these costs.
In the local One-Stop, the idea of allocating costs and sharing resources can be viewed:
1. In the aggregate, i.e., covering all of the One-Stop center's shared costs;
2. On an activity basis where all of the partners pay their allocable share of the total costs of an activity or function (e.g., a common intake and eligibility determination system); or
3. On an item of cost basis where all programs pay their allocable share of each item of cost (e.g., rent).
It could also be some combination of the above, e.g., when a particular or a number of functions are treated on an activity basis and the remaining items of cost are treated on an aggregate or individual item of cost basis.
The WIA regulations require that each partner must contribute a fair share of operating costs of the One-Stop delivery system proportionate to the use of the system by individuals attributable to the partner's program. This requirement is intended to establish an equitable principle, but it is not intended to prescribe a single method for allocating costs. The regulation goes on to say that there are a number of methods, consistent with the relevant OMB circulars, that may be used for allocating costs among the partners. Any methodology used must:
1. Result in an equitable distribution of costs and not result in any partner paying a disproportionate share of the shared One-Stop costs;
2. Correspond to the types of costs being allocated;
3. Be efficient to use; and
4. Be consistently applied over time.
The methodology used may vary dependent upon the nature of the One-Stop structure. Further, any grant-specific cost and/or administrative constraints are still applicable to the individual grantees.
The basic types of One-Stop systems include:
1. Simple Co-location with Coordinated Delivery of Services: Several partner agencies coordinate the delivery of their individual programs and share space. Each partner retains its own identity and controls its own resources. Each partner provides services in a coordinated manner with other funding sources while paying for its own fixed and variable costs as direct charges to its own funds. The partners pool only those costs that are shared jointly with the other agencies.
2. Full Integration: All partner programs are coordinated and administered under one management structure and accounting system. Full integration is the ETA vision of One-Stop systems. It may be accomplished in phases as the partner programs come to realize the cost savings and efficiencies of integrated services and activities. Under full integration, there is joint delivery of program services and the operation is customer focused. Since resources are combined, the corresponding costs are often collected into cost pools. Pooled costs are later allocated back to individual grant programs using an appropriate method of allocation.
3. Electronic Data Sharing (through satellite offices): Only program information is provided and there are no co-located staff assigned.
While the principles discussed in this guidance may be applied to all three types of structures, the focus of the paper is to address co-located programs with shared space and some common functions or activities whether or not those functions or activities are fully integrated.
Allocation of One-Stop Shared Costs
While the physical One-Stop center itself is not a specific direct recipient of Federal awards as an entity, it is expected that many program operators within a local One-Stop system and/or at an individual One-Stop center, perhaps including the One-Stop operator, are direct recipients of Federal awards and do have federally negotiated indirect cost rates or approved cost allocation plans.
As previously stated, the costs of a One-Stop may be categorized as: (1) Direct costs that benefit one particular cost objective, (2) shared direct costs that can be readily allocated to the sharing cost objectives, and (3) indirect costs incurred for common or joint purposes benefitting more than one cost objective but are not readily assignable to the benefitting cost objective.
Cost pooling may be used to distribute both shared direct costs and indirect costs. Cost pooling involves the accumulation of costs to pools for later allocation to final cost objectives. It may be used for any type of common costs, administrative or program, incurred in a One-Stop center. It is appropriate to use cost pooling when direct charging requires disproportionate effort in order to determine the amount that should be charged to the individual cost objectives. Start Printed Page 29644
After One-Stop shared costs are identified, they may be accumulated by line-item expense categories (also referred to as natural expense classifications and object expense categories). Some examples of line-item expenses are salaries, occupancy costs, telephone, postage and shipping, printing and duplication, and supplies. Shared costs may also be accumulated or grouped by service department such as data processing and management information (MIS), printing and duplicating, mailing and shipping, purchasing and procurement, payroll, personnel, and general legal services. Another method may be accumulating costs based on function or activity such as eligibility determination; outreach, intake and orientation; initial assessment; job search and placement assistance, and career counseling; and follow up services. Whichever grouping or accumulation method is used, it is the actual incurred costs that are accumulated.
Once the costs have been accumulated, they need to be allocated to the benefitting cost objectives (for One-Stop allocation, the final cost objectives will most often be the partner programs) on some basis that will provide for an equitable distribution. The most commonly used allocation bases include:
1. Direct-staff salaries: Percentage of total salary costs of staff assigned to activities.
2. Direct-staff hours: Percentage of time spent by staff assigned to activities.
3. Modified total direct costs: Percentage of total direct costs for activities, less distorting items (e.g., equipment purchases, flow through funds, etc.)
4. Total direct costs: Percentage of total direct costs for activities. (Normally inappropriate unless there are no distorting items. See item 3 above.)
5. Units of service: Percentage of units of service provided.
6. Usage: Percentage of usage of space, equipment, or other assets by activities.
Allocations may be made on a single basis for all categories of costs or on multiple bases that vary by category. When reliable, using a single basis for allocating common costs can be less burdensome. Direct staff salaries is often appropriate when salaries alone represent about half of an entity's total costs and other categories of costs tend to vary according to staff salaries. Cumulative cost pool allocations for the reporting period are often preferable to monthly allocations in achieving equitable sharing among grant funded activities because of various grant periods during the grantee fiscal year. Monthly allocations can be misleading as to results because all costs do not occur evenly on a monthly basis. Regardless of the methodology used, allocations could be accomplished monthly but must be done no less frequently than the required financial reporting period, usually quarterly.
Funding or Paying for a Partner's Allocated Share of One-Stop Costs
Under WIA, the One-Stop partners are required to enter into a written Memorandum of Understanding (MOU) with the Local Board, prior to starting operations. The MOU must include provisions that describe:
1. The services to be provided through the One-Stop delivery system;
2. How the cost of those services and the operating costs of the One-Stop delivery system will be funded (paid for);
3. The methods that will be used to refer individuals between the One-Stop operator(s) and the One-Stop partners for the provision of appropriate services and activities; and
4. The duration of the MOU as well as the procedures for amending it during the term or period covered by the MOU.
In order for the MOU to describe how the costs of services and One-Stop operations will be paid for, the partners will first need to identify those costs and prepare a budget for the common/shared One-Stop activities. This budget will not only describe the shared costs of the One-Stop system and/or One-Stop center in total, but will also include estimates of how much of the total shared cost (personnel, space, telecommunications, etc.) of the One-Stop is allocable to each partner. The budget development process involves all of the One-Stop partners and the One-Stop operator. The budget document does not need to be included in or attached to the MOU. Remember that a budget is a plan, typically based on historical information, that estimates how the anticipated funding level will be spent on the expected costs of the programs. On a periodic basis, no less frequently than quarterly, the actual shared costs and the allocation among the partner programs will need to be reviewed and compared with the planning levels that were included in the budget. Corrections or adjustments to the budget should be made on an ongoing basis to reflect actual levels. At that time, the budget document, including the allocable partner shares of the One-Stop shared costs, may need to be adjusted to conform to actual circumstances. The longer that a One-Stop waits to make adjustments, the greater the likelihood that adjustments will be significant. An adjustment to the budget will not necessarily require a modification of the MOU unless the terms of the MOU are affected.
After the budget is prepared, all of the partners will then agree how each will pay its allocable fair share. One partner may furnish only personnel; another partner may furnish space and telecommunications, etc., or each partner may use its grant funds to pay for its allocable portion of shared costs. This agreement about how the allocable shares of One-Stop shared costs are to be funded (paid for) must be included in the MOU that is to be followed during the operating period. As with cost allocation, the choices that the partner programs make about the methods of payment for the shared costs should be applied consistently over time. However, in some circumstances, the cost allocation and resource sharing methodologies, including the methodologies used to determine proportionate shares, may need to be modified if actual experience is either different from what the partners planned or demonstrates that the methods being used are resulting in inequitable distributions. As with budget modifications, it is often best to modify the methodologies as soon as possible after the need is recognized. Because such changes would constitute changes in methodologies which are a required element of the local MOU, it may also be necessary to modify the MOU when such a change is made.
For many of the partner programs, including the WIA title I-B program, the Federal funds are awarded or passed through to State and local governmental entities subject to the cost principles of OMB Circular A-87. OMB Circular A-87, Attachment A, paragraph C.3.c. states, “Any cost allocable to a particular Federal award or cost objective under the principles provided for in this Circular may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by law or terms of the Federal awards, or for other reasons. However, this prohibition would not preclude governmental units from shifting costs that are allowable under two or more awards in accordance with existing program agreements”. Question 2-16 in ASMB C-10, the implementation guide for OMB Circular A-87, clarifies that the intent of this paragraph is to distinguish between cost allocation and funding allocation. The C-10 goes on to say, “(* * * The term ‘cost shifting’ should not have been used, because cost shifting is unallowable, per se.) A Start Printed Page 29645function or activity within the government organization that benefits two or more programs may be set up as a single cost objective. Costs allocable to that cost objective would be allowable under any of the involved programs which benefit from these activities/costs. The government can make a business decision regarding what combination of funds made available under these programs would be applied to this cost objective.”
This same concept is applicable to the WIA One-Stop environment, even when all program service providers are not governed by OMB Circular A-87, provided that its use is consistent with a program's governing statutes and regulations and is agreed to in the MOU by the partners. As an example of the application of this Circular to a One-Stop, an individual might be eligible for the Food Stamps and TANF Work programs as well as the WIA title I-B adult employment and training program. Further, the services provided to that individual, such as acquiring transportation to the job site, could be allowable under any of the three programs. Where these conditions exist, the cost objective is transportation services for individuals meeting “X” criteria. The grantees for these programs can choose which program to charge for the cost of transportation services for these individuals because they are equally eligible under several programs for essentially the same services. As expressed in the A-87 implementation guide, the reference relates to the management decision of an organization concerning which program will pay for a cost which is allowable under and allocable to more than one program in accordance with existing program requirements. These grantee decisions and agreements are to be reflected in the MOU.
The One-Stop environment also permits partner program operators to agree through their local MOU how they pay their total allocable share of common One-Stop costs (Operator A may provide and pay for 100% of rent and Operator B may provide and pay for 100% of some other shared cost(s) where each partner is paying an amount equal to their respective share of total allowable/allocable costs). This does not allow a program that receives no benefit from a cost to claim incurrence of that cost; it merely provides flexibility in the payment method of each program operator for its fair share of costs according to benefits received. Under no circumstances may any partner program pay more than its total allocable share of total allowable costs. Further, no program may pay for costs that are not allowable under its governing statutes and regulations. Below are examples of situations for which this provision might be used.
1. Services provided prior to determining eligibility for any given program(s) are allocable to the program(s) for which they are allowable. However, in accordance with the above, any program can pay for those services entirely, to the extent they are allowable, provided that the total payments from any given program do not exceed the total costs for various activities and services that were allocated to that program.
2. Similarly, a receptionist is typically a common cost allocable to all programs. However, the salary costs of the receptionist may be borne by any given program where such costs are allowable, provided that the reimbursements or payments made by that program do not exceed, in total, the total organization-wide allocations made to that program.
However, some caution must be exercised and care taken to draw the line in situations when:
1. The activity begins to serve a specific program purpose instead of being general service to the public; or
2. Only one program directly benefits.
When a staff function that is common to more than one but not necessarily all of the One-Stop partner programs, such as intake and eligibility determination, is included in the One-Stop shared costs, it may be more equitable for payment of the program share of the activity to be based on the notion of full time equivalent (FTE) staff position rather than on the aggregate total of staff salaries. The staff of programs in a One-Stop center will likely include State employees, county and/or city employees, as well as employees of educational institutions, non-profit community-based organizations, and for profit commercial entities. Staff who perform the same function for the One-Stop operation will be on different pay scales and pay levels. If all of the programs that require the same specific function provide FTE staff to perform that function in the same proportion as the relative number of individuals attributable to the partner's program (e.g., the referrals to its program), then each would have provided its equitable share of the function. In order to establish the appropriate FTE contribution for each partner, it is first necessary to establish the proportionate share of each of the partner programs. The proportionate share could be established based upon the number of individuals referred to the program compared with the total number of individuals served by the common function. Another methodology, discussed in the paragraph below, establishes the proportionate share of each program based on the number of data elements, included in a common intake and eligibility determination form, that are applicable to and used for the individual partner program. When these programs were operating independently of the One-Stop, such staff would have conducted an intake interview and determined that the individual was not eligible for the program and, hopefully, referred the individual to the appropriate program where they would go through the intake process all over again. In a One-Stop environment using a standardized intake process, it will only be necessary for a client to go through the process once. This will result in a cost savings for the program that actually provides the program services as well as the programs which previously would have incurred the intake cost and not provided service. Obviously, if a particular partner's program is not able to use and does not benefit from the common staff function, then it cannot and should not bear any share of the cost of such function.
An alternative method for determining the proportionate share of a common intake and eligibility system for each of the partner programs could be based on an approach that considers the benefit of individual data elements to each of the benefitting program partners. This can be accomplished by analyzing the data elements and computing the appropriate percentage of effort applicable to each benefitting partner as follows:
|Total bytes on the intake form||Used by program|
|Bytes for Name||40||40||40||40||120|
|Bytes for Street Address||80||80||80||80||240|
|Start Printed Page 29646|
|Bytes for City Address||25||25||25||25||75|
|Bytes for State Address||2||2||2||2||6|
|Bytes for Zip Code||10||10||10||10||30|
|Bytes for Other Information||343||143||183||203||529|
|Percentage of Cost by Program||30||34||36||100|
In the above table, the total number of bytes of information for each item on the form is indicated in the first column. The data in the columns headed “A”, “B”, and “C”, indicates the number of bytes of information used by each of the individual programs. All programs require the data elements related to name and address, but each uses different amounts of the remaining data elements. The fifth column in the table represents the total usage of all of the data elements by all of the participating programs and constitutes the denominator, or base, upon which the proportionate share of the individual program use is calculated.
The FTE methodology discussed above works best in those situations when the common function (e.g., intake and eligibility determination) is being allocated to the sharing partners separate from the other shared costs. When common functions are being allocated as part of the process of allocating total shared costs, use of the FTE methodology for a portion of the total may result in inequitable distribution of the total costs. In such cases, it may be better to base the proportionate share allocation on the actual staff salary cost rather than on FTEs.
This document has described the framework created under the Workforce Investment Act which creates the need for resource sharing and cost allocation methodologies for the shared costs of a One-Stop system. It has been a collaborative effort involving comments and discussions among representatives from the Departments of Agriculture, Education, Health and Human Services, as well as the Department of Labor's Employment and Training Administration, Office of Cost Determination and Office of Inspector General. This guidance separates the identification and determination of One-Stop shared costs from the discussion of how those costs are paid for or funded. While there may be unique One-Stop settings that will require additional guidance, this document provides a framework that all One-Stop systems and/or centers will be able to use to establish their own system for cost allocation and resource sharing. Thus, it is expected that Federal agency auditors will utilize as additional criteria for audit and resolution purposes the agreements reached by One-Stop partners in local Workforce Investment Areas in accordance with this guidance along with other applicable rules. The Federal partners that participated in the preparation of this paper, as well as the Office of Management and Budget, accept the principles discussed herein as appropriate “resource sharing” and “cost allocation” guidance for WIA One-Stop systems and/or centers.Start Signature
Signed at Washington, DC, this 23rd day of May, 2001.
Raymond J. Uhalde,
Deputy Assistant Secretary of Labor, Employment and Training Administration.
[FR Doc. 01-13426 Filed 5-30-01; 8:45 am]
BILLING CODE 4510-30-P