Financial Management & Cost Allocation
A critical element of grants management for Federal Transit Administration (FTA) grantees is financial management: implementing and managing financial control systems, collecting financial data, analyzing financial reporting, and making sound financial decisions. State DOTs and urbanized transit systems are regularly reviewed in this area by FTA as part of the State Management/Triennial Review process. Section 5311 operators are reviewed in this area as part of the state compliance review process. Further, FTA grantees have the dual responsibility of not only being fiscally responsible and accountable to FTA, but also to their local community in order to be good stewards of their resources.
RLS & Associates, Inc. (RLS) has unequalled expertise in this area. First, RLS staff was the primary author and contributor to the the original Multi-State Technical Assistance Program (MTAP) Financial Management Guidelines almost 15 years ago and has taught this course across the country in 16 states and several national transit conferences to over 500 participants. Major topic areas of the original course included development of cost allowability, concepts of direct and indirect costs, and cost allocation. RLS also developed webinar presentations to introduce key concepts related to financial management.
Substantial changes in the financial landscape have occurred since the original course development. Major changes in cost principles, grant management procedures, and audits articulated in 2 CFR § 200 (the “Super Circular”) have dramatically raised the bar in the need to have current, timely, yet understandable guidance for Section 5311 program managers. RLS is leading this update which will include not only curriculum updates, but also a combination of classroom and computer-based and/or on-line training to ensure that all participants successfully receive, retain, and can apply the concepts presented. All of this, including exercises, examples, and assessments to ensure the best outcome of understanding by individual participants, will be reflected in the forthcoming update.
Although included as part of the Financial Management Guidelines course, RLS also provides stand alone, but related training and technical assistance in the area of fully allocated cost accounting and negotiating contract rates.
Additionally, RLS senior staff have completed FTA’s State Management Review workshop—a review of the guidelines and requirements for FTA’s State/Triennial Reviews, including financial management. Finally, RLS has conducted hundreds of compliance reviews of Section 5311 systems across the country and is proficient in assessing and evaluating financial management systems.
FTA subrecipients must comply with all federal, state and local laws, ordinances, regulations, and policies regarding procurement and contracting. Circular 4220.1F documents the FTA’s procurement requirements. When procuring property and services under a federal award, a state (and its subrecipients) must follow the same policies and procedures it uses for procurements from its non-federal funds. Subrecipients must also develop and implement a written procurement policy which, among other requirements, must document the written standards of conduct governing the performance of the subrecipient’s employees engaged in the award and administration of contracts. RLS provides technical assistance and support to State DOTs and their subrecipients to ensure that procurements are conducted in compliance with FTA procurement regulations and requirements.
Cost Allocation Plans
In addition to indirect cost allocation plans, transit agencies may face other cost allocation needs. For example, National Transit Database (NTD) reporting requires that transit systems operating both fixed route and demand response transit allocate their administrative and facilities overhead costs to each respective mode of service. FTA Circular 9040.1G requires that when a recipient receives both Section 5311 and Section 5307 funding, a cost allocation plan be developed to allocate both capital and operating costs to the respective grant programs. Finally, transit agencies that provide transit services under contract to various human service agencies require a mechanism to ensure it is recovering the fully allocated cost of service. RLS has developed numerous cost allocation models that address these needs. RLS also conducts hands-on training specifically designed to not only convey the required principles of cost allocation, but to provide step-by-step instruction for plan development.
Indirect Cost Plans
RLS staff are nationally recognized for their work in assisting agencies with the development, implementation, and on-going monitoring of indirect cost plans. Indirect costs are those: (a) incurred for a common or joint purpose benefiting more than one cost objective, and (b) not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. The term “indirect costs,” applies to costs of this type originating in the grantee department, as well as those incurred by other departments in supplying goods, services, and facilities.
There is no universal rule for classifying certain costs as either direct or indirect. A cost may be direct with respect to some specific service or function, but indirect with respect to the federal award or other final cost objective. Therefore, it is essential that each item of cost be treated consistently in like circumstances either as a direct or an indirect cost. Where an accumulation of indirect costs will ultimately result in charges to a federal award, a cost allocation plan is required. Amounts not recoverable as indirect costs or administrative costs under one federal award may not be shifted to another federal award, unless specifically authorized by federal legislation or regulation.
For organizations that seek reimbursement of indirect costs under their federal grant awards, an indirect cost rate proposal must be prepared and submitted to the cognizant federal agency for indirect costs—an agency designated by Office of Management and Budget (OMB) or assigned responsibility for reviewing, negotiating, and approving indirect cost rate. RLS can assist local entities in accomplishing all these tasks.
Federal grant principles define multiple methods for allocating indirect costs, including a new process, known as the “de minimis” rate – a flat 10 percent indirect cost allocation that essentially eliminates the need to prepare an indirect cost rate proposal. RLS staff provide guidance on the advantages/disadvantages of each method of cost allocation and provide guidance on the preparation of each component of the proposal.
Use of Contributions/Donations as Match to Federal Grant Awards
Non-cash shares such as donations, volunteered services, or in-kind contributions can be a critical component to a subrecipient’s overall financial management system. However, these contributions are eligible to be counted toward the local match only if the value of each is formally documented and supported at the time of donation. Additionally, any donation or volunteer service must represent a cost that would otherwise be eligible under the project.
RLS provides technical assistance to subrecipients in the identification of eligible in-kind match sources, the development of a documentable and compliant in-kind plan, and the process and procedures for ensuring on-going compliance in the use of these donations and/or volunteer services.
Amy RastAssociateMs. Amy Rast works out of the RLS Lyndonville, Vermont office, having joined RLS & Associates, Inc. after a successful career with the Vermont Agency of Transportation (VTrans). Ms. Rast has over 30 years of transportation experience including...
Matt BusseyDirector of Compliance InitiativesMatt Bussey works out of the Washington, DC office of RLS & Associates, Inc. He has over 10 years of experience practicing law, predominantly in the areas of corporate law and regulatory compliance. Matt has over seven...
Robbie L. SarlesPresidentMs. Robbie L. Sarles is President and founder of RLS & Associates, Inc., a transit consulting firm headquartered in Dayton, Ohio, with 40 staff and offices in Indiana, North Carolina, Illinois, Vermont, Georgia, Texas, Arkansas, and...
Rich GarritySenior Associate/Compliance Subject Matter ExpertMr. Rich Garrity is located in the RLS Wilmington, North Carolina office. He has over 44 years of experience in transit and paratransit planning, operations and management evaluation,...
Julie SchaferDirector of State InitiativesMs. Julie Schafer is located in the Dayton, OH Headquarters. A former Section 5311 transit manager of a seven-county public transit system in rural Indiana, she has over 22 years of experience, 15 years of that in transit...
Kelly ShawnSenior AssociateMr. Kelly Shawn is located in the RLS Alexandria, Virginia office. With over 36 years in the transit industry, Mr. Shawn is an experienced trainer, facilitator, and project manager with extensive expertise in small urban, rural, and tribal...
Gregory (Greg) HarnettSenior AssociateMr. Greg Harnett works in the Dayton headquarters and serves as a lead reviewer on the RLS compliance team. He is a key contributor to the Federal Transit Administration’s Comprehensive Oversight Review and Technical...
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