Separate Account for Each Grant | Insuring AFP Funds | Investing in Stocks | Grant Funds used for Resource Development - Fund Raising | Grant Funds used for Resource Development - Grant Writing | Use of Grant Funds to Pay for Audit
From Jeremy Buzzell July 3, 2006
Question: If a state receives more than one AFP grant, does each grant need to go into a separate account or can the grants be combined into a single separate permanent account?
Answer: Given that 303(b)(5)(A) of title III requires that "all funds that support the alternative financing program" be placed in a permanent separate account, it is permissible to combine AFP funds from multiple awards into one account. However, the grantee needs a mechanism in place to account for each year's funding within that combined account.
From Jeremy Buzzell July 3, 2006
Question: Do all AFP funds need to be fully insured?
Answer: This question has been posed in the past. Generally, grantees are concerned that, according to title III they must administer their funds "with the same judgment and care that a person of prudence, discretion, and intelligence would exercise in the management of the financial affairs of such person." However, because the Federal Deposit Insurance Corporation (FDIC) will not insure more than $100,000 placed in an account at a single bank, they fear they are not being prudent if they cannot insure the entirety of their funds.
Regardless of FDIC policy, neither the Assistive Technology Act of 1998 as in effect prior to the 2004 amendments (AT Act) or the grant priority published in the Federal Register place a specific limitation on the amount of grant funds that may be placed in a single bank or credit union.
This does not mean, however, that a CBO need not take into account any potential risks in investing funds, including not keeping more than $100,000 in a single lending institution, when making its decisions about administering the AFP. A grantee must be able to justify those decisions under the "prudence" standard stated in the AT Act.
Further, you are reminded that, according to title III, you are limited to investing your funds "in low-risk securities in which a regulated insurance company may invest under the law of the State..." so investment strategies and requirements will be state-specific.
Some of your colleagues have found in their state that having their funds designated as "public funds" allows for deposited funds to be insured under public rule rather than by FDIC guidelines. However, the Department of Education does not have the authority to determine whether or not AFP/Telework funds are public funds for the purposes of Federal Deposit Insurance. Whether or not such funds are considered public funds for those purposes would be a determination made by the FDIC or others, so the question would be better posed to them directly. Any AFP needing more information is urged to contact the FDIC directly to discuss this policy and how it applies to your situation.
From Jeremy Buzzell July 3, 2006
Question: Is there a limitation on investing AFP funds in stocks?
Answer: Again, you are limited to investing your funds "in low-risk securities in which a regulated insurance company may invest under the law of the State..." so investment strategies and requirements will be state-specific. However, we know of no hard restriction (such as a dollar amount or percentage) on investment of funds in stocks in particular.
From Jeremy Buzzell July 3, 2006 and July 5, 2006
Question: Can grant funds be used for "resource development"?
Answer: This is a difficult question to answer without a delineation of what activities constitute "resource development." For a thorough answer, I would encourage people to explore what activities they include in "resource development," as each activity may have a different answer.
However, one such activity brought up as an example is "fundraising." The answer to whether grant funds can be used for fundraising is clear.
Because CBOs funded through title III must follow the rules by which their Lead Agencies must abide, (these are covered under) OMB Circular A-87 and A-21.
According to A-21 (which covers universities):
20. Fund raising and investment costs.
a. Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred solely to raise capital or obtain contributions, are unallowable.
b. Costs of investment counsel and staff and similar expenses incurred solely to enhance income from investments are unallowable.
c. Costs related to the physical custody and control of monies and securities are allowable.
According to A-87 (which covers state agencies):
17. Fund raising and investment management costs.
a. Costs of organized fund raising, including financial campaigns, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions are unallowable, regardless of the purpose for which the funds will be used.
b. Costs of investment counsel and staff and similar expenses incurred to enhance income from investments are unallowable. However, such costs associated with investments covering pension, self-insurance, or other funds which include Federal participation allowed by this Circular are allowable.
Please note that in both of the above it is stated that costs of investment counsel and staff to enhance income from investments are unallowable. This may be information of significance to you.
The Circular that applies to you depends on whether your Lead Agency is a state agency or a university.
Question: As a form of "resource development," can AFP funds be used to prepare proposals for other grants?
Answer: The answer depends on whether your Lead Agency (this is the agency to whom RSA awarded the grant and whom subsequently contracted with you as the CBO) is a state agency or a university. However, as a general rule, costs associated with applying for grants are treated as indirect costs rather than direct costs.
If your Lead Agency is a state agency, the following applies:
33. Proposal costs.
Costs of preparing proposals for potential Federal awards are allowable. Proposal costs should normally be treated as indirect costs and should be allocated to all activities of the governmental unit utilizing the cost allocation plan and indirect cost rate proposal. However, proposal costs may be charged directly to Federal awards with the prior approval of the Federal awarding agency.
If your Lead Agency is a university, the following applies:
38. Proposal costs.
Proposal costs are the costs of preparing bids or proposals on potential federally and non-federally-funded sponsored agreements or projects, including the development of data necessary to support the institution's bids or proposals. Proposal costs of the current accounting period of both successful and unsuccessful bids and proposals normally should be treated as F&A costs and allocated currently to all activities of the institution, and no proposal costs of past accounting periods will be allocable to the current period. However, the institution's established practices may be to treat proposal costs by some other recognized method. Regardless of the method used, the results obtained may be accepted only if found to be reasonable and equitable.
Please note that "F&A" costs are synonymous with "indirect costs."
From Jeremy Buzzell, July 3, 2006
Question: Can grant funds be used to pay for an audit?
Answer: According to OMB circular A-122 -
4. Audit costs and related services
a. The costs of audits required by, and performed in accordance with, the Single Audit Act, as implemented by Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations" are allowable.
b. Other audit costs are allowable if included in an indirect cost rate proposal, or if specifically approved by the awarding agency as a direct cost to an award.