Third Party In-Kind Contributions as Match for FHWA Planning Funds

1. Third Party In-Kind Contributions as Match for FHWA Planning Funds How to Fund a Transportation Planning Program in Trying Times Michigan Transportation Planning Association Conference Flint, Michigan July 15, 2011 Connie Morrison, MDOT 517-335-2640 MorrisonC2@michigan.gov Rachael Tupica, FHWA 517-702-1829 Rachael.Tupica@dot.gov

2. How FHWA Planning (PL) Funds are Awarded Federal Government State/Grantee MPO/Subgrantee Local Agency/Third Party Contractor

3. Definitions • Grantee – the government to which a grant is awarded and which is accountable for the use of the funds provided. (MDOT) • Subgrantee – the government or other legal entity to which a subgrant is awarded and which is accountable to the grantee for the use of funds provided. (MPO)

4. Definitions • Third Party – An entity (other than the grantee/subgrantee/Federal government) that is not party to a Federal-aid project agreement, but who may have an interest in the project. • As a grantee, a State cannot be considered a third party • Third Parties: • Local Government (Road Commissions, Municipalities) • Individual/Private Entity • Indian Tribe • Transit Agencies

5. Federal Aid Match Requirements • 23 USC 120 – 80% with sliding scale • Michigan is 81.85% Fed and 18.15% Non-Fed • 49 CFR Part 18 – Common Grant Rule • Establishes uniform administrative rules for Federal grants and cooperative agreements to State, local, and Indian tribal governments. • 49 CFR 18.24 – Matching or Cost Sharing requirements

6. Federal Aid Match Requirements • 49 CFR 18.24(a) - A matching requirement may be satisfied by either or both of the following: • (1) Cash donations from non-Federal third parties • (2) The value of third party in-kind contributions • AKA: Contributions, Donations, Non-Monetary Match, Flexible Match • A combination of the two can be used meet the non-Federal match requirement • In-kind contributions can be applied to a total UPWP basis (recommended) or for specific line items or projects.

7. Third Party In-Kind Contributions • The value of hours of donated services of a third party that is used to cover the non-federal cost of a project or program • Supports the Activities and Products in the UWP • Allows a wide variety of public and private contributions to be counted toward the non-Federal match of Federal-aid projects

8. Eligible In-Kind Contributions • Rule of Thumb: If the MPO did the work, would it be an eligible cost? If not, it’s probably not eligible • Exercise: What’s eligible? • Cost of paving a road • Cost of traffic count data collection • Cost of local master plan development • Aggressive go-kart driving

9. Requirements • Third party must agree to allow the value of the work to be used as the match • Cost of the third party work must not be borne by other Federal funds • Third party contributions must not be used as a match for other Federally funded grants/subgrants • Third party work must be an eligible and necessary activity that benefits the Federally funded work and must be identified in the UWP

10. Requirements • The third party costs must be allowable under the 2 CFR 225 • The third party work must be performed during the period to which the matching requirement applies • The third party in-kind contributions must be verifiable from the records • Records must show how the value placed on the third party in-kind contributions was derived • Prior approval from FHWA must be obtained before the program year

11. Valuation of In-Kind Contributions • 49 CFR 18.24(c) Value the donated services • (1) Volunteer Services – Valued at rates consistent with rates of pay consistent with those ordinarily paid for similar work in the MPO’s organization or in the labor market. A reasonable amount of fringe benefits may be included • (2) Employees of Other Organizations – If donations are for work of an employee in their normal line of work, the services will be valued at the employee’s regular rate of pay exclusive of fringe benefits or overhead costs

12. Valuation Methodology #1 Services of Employees of Other Organizations: • Historical hourly wage information x estimated number of hours to be contributed (fringe benefits not eligible)

13. Valuation Methodology #1 Computation Table

14. Valuation Methodology #2 • For Volunteer Services: • Value of volunteer services when performing comparable work in professional capacity, OR • Statewide wage rate, such as those provided by Bureau of Labor statistics • Use valuation table from Methodology #1

15. Documenting In-Kind Contributions • Valuing In-Kind Contributions • Documentation of the methodology for valuing estimated in-kind contributions • Required for the project authorization phase • Documentation of actual in-kind contributions • Required for the progress billing and audit phases • Activities and Products

16. MPO Process for In-Kind Contributions Step 1: Preliminary Discussions and Request • Read MDOT Guidance • Discussion with your committees • Ensure MPO and third parties can meet requirements • Notify MDOT of your intent to use in-kind; your Pre-UWP meeting is a good time for this • Get MPO approval to use in-kind contributions • Have each third party fill out and sign “Statements and Assurances” • Officially request prior-approval

17. MPO Process for In-Kind Contributions Step 2: Include in UWP • Discuss use of flexible match in introductory section of UWP or within discussion of finances • Indicate (in work item detail) how local agency contributions will produce specified products within relevant program categories • Include flexible match worksheets in UWP (pages 11 and 12 of MDOT guidance)

18. MPO Process for In-Kind Contributions Step 2, continued… • Show flexible match in summary budgets or tables of UWP • Document MPO Committee approval • Include copies of “Statement of Notification and Assurances” for each third party • Provide copy of FHWA letter approving use of third party in-kind contributions

19. MPO Process for In-Kind Contributions Step 3: Check federal regulations! • Ensure use of flexible match meets requirements of federal regulations • Ensure use of flexible match meets requirements of federal regulations • Ensure use of flexible match meets requirements of federal regulations

20. MPO Process for In-Kind Contributions Step 4: Document Methodology • Compile documentation as the flexible match is contributed • Value of donated time • Time sheets • Service descriptions, showing relevance to program activity • Review eligibility • Ask: if MPO did this work, would it be reimbursable?

21. MPO Process for In-Kind Contributions Step 5: Identify and document flexible match in progress billings • Value of flexible match donated throughout the billing period is part of total cost • Provide copies of documentation to MDOT Program Manager • In lieu of providing copies, a letter of agreement may be signed by both the MPO and MDOT staff allowing in-person inspection of documentation • Track value of flexible match donated throughout the program period, in order to compare to estimates at beginning of program

22. MPO Process for In-Kind Contributions Step 5 continued… • Invoices submitted by the MPO to MDOT should show total expenditures by MPO and the third party. • MDOT would then reimburse the MPO for the Federal share, not to exceed the MPO’s portion of the expenditures. • If the total amount of third party expenditures at the end of the program period is not sufficient to match the total expenditure of Federal funds by the MPO, the MPO will need to make up any shortfall with its own funds.

23. MPO Process for In-Kind Contributions Step 6: Identify and document flexible match in Final Acceptance Report • Reconcile value of actual donated services to beginning estimated value • If actual value less than amount needed to cover end-of-year local share, difference must be made up in cash. • If actual value is greater than the amount applied, excess cannot be reimbursed in cash or used as flexible match on another grant.

24. Thank you!