Non-Federal Share

1. Non-FederalShare Presented by: Belinda Rinker, JD Senior Advisor, Office of Head Start belinda.rinker@acf.hhs.gov Note: Play presentation as a PowerPoint slide show to activate hyperlinks.

2. Definition of Non-Federal Share Non-Federal Share: That portion of the total costs of the program provided by the grantee agency in the form of in-kind donations or cash match received from third parties or contributed by the agency. In-kind contributions must be provided and cash expended during the project period along with Federal funds to satisfy the matching requirements.

3. Criteria for Acceptable Non-Federal Share • To be accepted, all cost sharing or matching contributions, including cash and third party in-kind, shall meet all of the following criteria: • Are verifiable from the recipient's records; • Are not included as contributions for any other federally-assisted project or program; • Are necessary and reasonable for proper and efficient accomplishment of project or program objectives; • Are allowable under the applicable cost principles; • Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for cost sharing or matching; • Are provided for in the approved budget; and • Conform to other provisions of this part, as applicable. 45 CFR§74.23 and 45 CFR§92.24

4. Sources of Non-Federal Share In-Kind: Property or services that benefit a grant supported project or program and are contributed by non-Federal third parties without charge to the grantee. In-kind contributions may consist of the value of real property and equipment and the value of goods and services directly benefiting the grant program and specifically identifiable to it. In-kind match is counted for the period when the services are provided or when the donated goods are received and used. Cash Contributions: The grantee's cash outlay, which is generated by the grantee or donated by a third party, and is expended to fund allowable program costs. Cash match counts toward the non-Federal share requirement when expended, not when donated to or generated by the grantee.

5. Fiscal and Non-Federal Share Citations • 45 CFR Part 74.23 • Institutions of Higher Education, Hospitals, Other Non-Profit Organizations, and Commercial Organizations • 45 CFR Part 92.24 • States, Local Governments and Indian Tribal Governments • Performance Standards • All Grantees • Mostly 45 CFR 1301 • Improving Head Start for School Readiness Act of 2007 • All Grantees • Much in Sec. 642

6. Allowable Cost Requirement Allowable Cost: Third party in-kind contributions shall count toward satisfying a cost-sharing or matching requirement only where, if the party receiving the contribution were to pay for them, they would be an allowable cost. Allowable costs are determined by the tests of reasonableness, necessity and allocability as defined in Title 2 of the Code of Federal Regulations (2 CFR 220, 2 CFR 225, and 2 CFR 230), commonly called the cost principles.

7. Cost Principle Citations • 2 CFR Part 220 • Cost Principles for Educational Institutions • 2 CFR Part 225 • Cost Principles for State, Local, and Indian Tribal Governments • 2 CFR Part 230 • Cost Principles for Non-Profit (Commercial) Organizations • 48 CFRSubpart 31.2 • Cost Principles for For-Profit Organizations

8. Head Start Act Sec. 640(b) Financial assistance extended under this subchapter for a Head Start program shall not exceed 80 percent of the approved costs of the assisted program or activities, except that the Secretary may approve assistance in excess of such percentage if the Secretary determines that such action is required in furtherance of the purposes of this subchapter. 45 CFR §1301.20(b): The non-Federal share will not be required to exceed 20 percent of the total costs of the program.

9. Calculating Non-Federal Share Method 1: (80/20) Method 2: General • Federal Funds x .25 = Non-Federal Share • $2,000,000 (Federal Funds) x .25 = $500,000 (Non-Federal Share) • Total Grant = $2,500,000 • Federal Funds ÷ Federal Share = Total Grant – Federal Funds = Non-Federal Share • $2,000,000 ÷ .80 = $2,500,000 - $2,000,000 = $500,000 • $2,000,000 ÷ .85 = $2,352,941 - $2,000,000 = $352,941 • Use with a waiver or Non-Federal share over 20%

10. Allowable Non-Federal Share Costs • Allowable Cost: Third party in-kind contributions shall count toward satisfying a cost-sharing or matching requirement only where, if the party receiving the contribution were to pay for them, they would be an allowable cost. • Cash Contributions: The grantee's cash outlay, which is generated by the grantee or donated by a third party, and is expended to fund allowable program costs. Cash match counts toward the non-Federal share requirement when expended, not when donated to or generated by the grantee.

11. Elements of an Allowable Cost • Reasonable for the performance of the award. • Allocable to the award. • Conform to any applicable limitations or exclusions. For example: • Use of Head Start funds to assist, promote or deter union organizing. Head Start Act, Sec. 644(e). • Alcoholic beverages. 2 CFR Part 230, Appendix B(3). • Consistent with policies and procedures that apply to both Federally funded and other activities. • Accorded consistent treatment. • Meet generally accepted accounting principles (GAAP). • Not included as a cost or cost sharing for any other Federally funded program. • Adequately documented. 2 CFR Part 230, Appendix A(2)

12. Reasonableness of Costs • A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs. • Generally recognized as ordinary and necessary. • Exemplifies sound business practices, arms length bargaining, complies with laws, rules, regulations and grant awards. • Whether the individuals involved acted in meeting their responsibilities with prudence under the circumstances. • Significant deviation from established practices of the organization. 2 CFR Part 230, Appendix A(3)

13. Allocable Costs • A cost is allocable to a particular cost objective, such as a grant, contract, project, service, or other activity, in accordance with the relative benefits received. A cost is allocable to a Federal award if it is treated consistently with other costs incurred for the same purpose in like circumstances and: • Is incurred specifically for the award. • Benefits both the award and other work and can be distributed in reasonable proportion to the benefits received, or • Is necessary to the overall operation of the organization, although a direct relationship to any particular cost objective cannot be shown. 2 CFR Part 230, Appendix A(4)

14. Prudent –adjective 1. wise or judicious in practical affairs; sagacious; discreet or circumspect; sober. 2. careful in providing for the future; provident: a prudent decision. Dictionary.com A prudent person is attentive, vigilant, cautious, perceptive, and generally governed by common sense. ND State Government Website.

15. Primary Benefit Analysis OHS – PC – A – 077 Is the value of parent involvement in a Head Start program an allowable cost for in-kind match? To determine if a parent involvement activity is allowable as an in-kind match a Head Start program should ask these questions: • Does the parent involvement activity primarily benefit the parent or child? If the answer is yes, then the activity is not allowable as an in-kind match. • Does the parent involvement activity provide a good or service to benefit the program? If the answer is yes, then the activity is allowable as an in-kind match.

16. Other Policy Clarifications • Allowability of parent activities • PC – A – 022 (valuation and record keeping) • PC – A – 033 (walking to and from Center) • PC – A – 040 (home-based curriculum activities) • PC – A – 049 & 058 (parent transportation of home based children to socialization activities) • PC – A – 060 (having lunch with child) • PC – A – 076 (babysitting for a parent volunteer) • PC – A – 078 (volunteering for governing body or policy council)

17. Managing Non-Federal Share Document Carefully and Completely Budget Effectively Monitor Monthly

18. Disallowance of Non-Federal Share • Funded • Federal Share: $ 800,000 • Non-Federal Share: 200,000 • Total Grant Award: $1,000,000 • Actual • Federal Share Spent: $ 800,000 • Allowed Non-Federal Share: 180,000 • Actual Grant Amount: $ 980,000 • Maximum Federal Share • $980,000 x .80 = $784,000 • If waiver in place, multiplier changes to reflect actual federal share. • Disallowance • $800,000 - $784,000 = $16,000 • See PI-HS-12-02: Non-Federal Share Issues

19. Waivers of Non-Federal Share • Grantees must actively seek to generate Non-Federal Share through in-kind donations and cash match. • Grantees facing challenges in generating necessary Non-Federal Share can submit a written request for waiver (reduction) of Non-Federal Share. • Can be submitted with the proposed annual budget. • May also be submitted during the program fiscal year. • Waiver only applies to one budget period. • Waiver requests can be re-submitted for subsequent budget periods.

20. Waiver Criteria The lack of resources available in the community that may prevent the Head Start agency from providing all or a portion of the Non-Federal contribution that may be required. The impact of the cost the Head Start agency may incur in initial years it carries out such program. The impact of an unanticipated increase in the cost the Head Start agency may incur to carry out such program. Whether the Head Start agency is located in a community adversely affected by a major disaster. The impact on the community that would result if the Head Start agency ceased to carry out such program. Head Start Act, Sec. 640(b)(1)-(5)

21. Questions and Comments