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Community Services Block Grant Administrative Expenses Presented by: Carol J. De Vita

The Urban Institute Team Carol De Vita Margaret Simms Erwin de Leon Saunji Fyffe Elaine Morley Carolyn O’Brien Sarah Pettijohn Monica Rohacek Molly Scott Sarah Ting Advisors Elizabeth Boris Steven R. Smith Subcontract with NASCSP. Community Services Block Grant Administrative Expenses

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Community Services Block Grant Administrative Expenses Presented by: Carol J. De Vita

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  1. The Urban InstituteTeamCarol De VitaMargaret SimmsErwin de LeonSaunji FyffeElaine MorleyCarolyn O’BrienSarah PettijohnMonica RohacekMolly ScottSarah TingAdvisorsElizabeth BorisSteven R. SmithSubcontract withNASCSP Community Services Block Grant Administrative Expenses Presented by: Carol J. De Vita Senior Fellow, Urban Institute at Community Action Partnership Annual Convention August 21, 2012

  2. Study’s Objectives • Provide an overview of how the Federal government defines administrative expenses. • Assess CSBG’s use of administrative expenditures.

  3. What we looked at: • How Federal government defines administrative costs. • What percentage of State CSBG funds is spent on administrative expenditures. • What types of guidance do States receive regarding CSBG administrative expenditures. • How CAA administrative expenses compare to those of similar nonprofits. • How administrative expenditures are used to assess the performance of nonprofits.

  4. #1: Definitions and Guidelines • Multiple offices issue definitions and guidelines: • FASB created functional categories that nonprofits use to report their expenses; • IRS gives guidance to nonprofits on completing the Form 990; • OMB (Circular A-122) gives guidance to grantees; • OCS/HHS (IM 37) focuses on CSBG requirements. • Guidelines are complex; sometimes inconsistent. • Grantees must reconcile the differences.

  5. #2: State spending on CSBG administrative expenditures is restricted • By statute, States may spend no more than $55,000 or 5% of their CSBG grant on admin expenses. • However, States have authority to spend CSBG funds within a 24-month time frame. • So, if a State has carry-over funds from the previous year, admin expenses may exceed the 5% threshold.

  6. States Reported a Range of CSBG Administrative Expenses in FY2008 • States’ admin expenses ranged from 0.87% to 6.61% in FY 2008. • Four States (SD, TN, MO, and IN) reported less than 2% of the CSBG allocation on admin expenses. • Eight States (GA, MA, NM, OH, NC, AZ, NJ, and AL) exceeded the 5% threshold in FY2008.

  7. #3: The National CSBG Network provides States training/guidance • There are multiple opportunities for States to learn about budgeting, allocation, and reporting of CSBG funds. • Some of the training sessions are conducted by highly respected accounting and consulting firms.

  8. #4: CAAs keep CSBG admin expenses low • While there are no legislative restrictions on how CAAs may use their CSBG dollars, CAAs are motivated to keep their CSBG admin expenses low. • In FY 2009, OCS/HHS set a target that 19% of CSBG funds could be used for admin expenses. • CAAs, on average, met this goal, reporting admin burdens of 17% in FY2009 and 16% in FY 2010.

  9. #5: CAAs are relatively good stewards of their resources • UI created a comparable set of nonprofit organizations that did not receive CSBG funds. • In terms of overall, agency-wide administrative expenses, CAAs had lower admin burdens than their counterparts. • On average, CAAs spent 6.8% of their total funds on admin expenses compared with 8.2% for comparable nonprofits.

  10. Factors to consider when developing efficiency measures • There is no accepted standard for designating the appropriate level of resources that should be spent on admin expenditures. • The assumption that “lower is better” can undermine an organization’s ability to build its capacity and ultimately serve its clientele. • Program outcomes are also important in assessing performance.

  11. Recommendations • Further clarify the distinction between admin and program expenses. • Continue training and technical assistance for States and CAAs, especially for smaller entities. • Consider permitting a range of admin expense levels based on organizational size – i.e., smaller nonprofits would be allowed higher percentages than larger nonprofits.

  12. For Copies of the Report • The report has been posted on the UI website at: http://www.urban.org/publications/412601.html • Send questions/comments to: Carol De Vita Urban Institute 2100 M Street NW Washington, DC 20037 cdevita@urban.org

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