Policy Advisory #01-01
Allocating and Billing Central Service Costs to Grants

A college or university, BOCES, or other entity receiving federal and State grants may choose to recognize the cost of "central services" provided to units within their organization or outside, and distribute these costs to grants based on a cost allocation plan or on a basis for billing. This advisory clarifies the requirements that apply for grantees allocating or billing central service costs to federal or State grants.

Central services are those common services that are provided to two or more units of an organization that benefit from the service. Often central services include, but are not limited to, printing, mailing, computer and technical support, and purchasing. There needs to be a process through which the costs of these central services are identified and assigned to the benefiting units on a reasonable and consistent basis. Accordingly, the New York State Education Department (SED) has adopted the federal cost principles as the framework for allocating or billing central service costs. The applicable federal cost principles are referenced below.

  • Entities choosing to allocate or bill central service costs to federal or State grants must have a cost allocation plan that complies with federal requirements. Refer to the applicable federal cost principles for the specific requirements that apply to your entity; however, listed below are several general requirements for developing and implementing cost allocation plans.
  • A plan must include a brief description of each allocated central service, an identification of the unit rendering the service and the units receiving the service, the items of expense included in the cost of the service, the method used to distribute the cost of the service to the benefited units, and a summary schedule showing the allocation of each service to the specific benefited unit.
  • All costs and other data used to distribute the costs included in the plan should be supported by formal accounting and other records that will support the propriety of the costs assigned to federal and State awards. Costs must be distributed on a reasonable and consistent basis.
  • Allocating or billing central service costs must not result in recovering costs in excess of the actual costs of providing the services. A periodic reconciliation of projected costs used to develop the plan and the actual costs of providing services is required. If allocating or billing costs results in an over recovery of actual costs adjustments must be made, whereby the units being charged for the services receive the benefit of the adjustment on a consistent and reasonable basis.
  • Allocated and billed central service costs must exclude those items of cost included in the entity's approved indirect cost rate. The entity is responsible for ensuring recovered costs are not duplicated or over recovered.  (Note:  SED calculates the indirect cost rates for public schools and BOCES.  However, public schools and BOCES are responsible for ensuring the elements included in determining indirect costs are not duplicated in the agency's cost allocation plan.)
  • The plan and related supporting documentation must be maintained at the entity’s administrative offices and made available for audit. Supporting documentation must be maintained in accordance with the applicable records retention requirements, which are specified in schedules published by SED's State Archives and Records Administration (SARA). The schedules are available at http://www.archives.nysed.gov/a/records/mr_retention.shtml.  (Note:  The following general rule for record retention satisfies requirements in most instances: Supporting documentation must be retained for the current year plus six prior years unless otherwise required by specific program requirements. Audit or litigation will "freeze the clock" for records retention purposes. Supporting documentation related to an issue under audit or litigation must be retained until resolved.)
  • A certification statement that the plan was prepared in accordance with the applicable regulations and guidelines is required. It must indicate the plan contains only allowable costs, and was prepared in a manner that treated similar costs consistently among the various Federal awards and between Federal and other non-Federal awards or activities. The certification must be a formal statement signed by the Chief Administrative Officer or his designee.

Budgeting and reporting allocated or billed central service costs to a federal or State award administered by SED will be accomplished through the Financial Summary (FS) forms. Allocated or billed central service costs are to be shown in the category Purchased Services, code 40. Sample forms depicting an example of a completed FS-10, FS-10-A and FS-10-F are displayed below, in addition to instructions pertaining to reporting allocated or billed costs on the FS forms.

The applicable federal cost principles are specified by the type of sub-recipient and are referenced as follows:

Federal Cost Principles Applicable to Grants
Type of Subrecipient
Applicable Cost Principles
State, local or Indian tribal government
(Includes school districts and BOCES)		 Circular A-87 External Link, Cost Principles for State, Local and Indian Tribal Governments
Nonprofit organizations Circular A-122 External Link, Cost Principles for Nonprofit Organizations
Colleges and universities Circular A-21 External Link, Cost Principles for Educational Institutions
Hospitals U.S. Department of Health and Human Services regulations 45 CFR Part 74
For-profit organizations Federal Acquisition Regulations 48 CFR Part 31 External Link

If you have any questions, contact Grants Finance at grantsweb@mail.nysed.gov or (518) 474-4815.

Attachment A - Reporting Allocated or Billed Central Service Costs

Entities that choose to allocate or bill central service costs to a State or federal grant, administered by SED, must comply with the applicable federal requirements for cost allocation plans. The following is an example of how to report allocated costs based on an entity's cost allocation plan. In this example, the entity provides centralized computer support services to grant-funded projects and other units within the organization.

Table A is an illustration of the final calculation of the hourly rate developed for an entity's centralized computer support services. The methodology and documentation of costs and hours of service would be maintained with the entity's cost allocation plan.

Table A
A
B
C
Total Costs of Computer Support Services to be Allocated (Estimated Costs) Total Hours Available (Estimated) Hourly Rate for Computer Support Services
$90,000 3,000 $30


Allocated or billed central service costs should be reported as "Purchased Services" on the Financial Summary (FS-10) forms. In this example, the entity budgeted 100 hours of service at an estimated cost of $30 per hour for a State funded grant.  The estimated cost of the service would be reported on the FS-10 as follows:

PROPOSED BUDGET FOR A
FEDERAL OR STATE PROJECT
FS-10
PURCHASED SERVICES: Code 40

Include consultants (indicate per diem rate), rentals, tuition, and other contractual services. Copies of contracts may be requested by SED. Purchased Services from a BOCES, if other than applicant agency, should be budgeted under Purchased Services with BOCES, Code 49.

Description of Item
Provider of
Services
Calculation
of Cost
Proposed
Expenditure
Allocation of Computer Support Services Internal - Transfer of costs 100 hours x $30/hour
(as per cost allocation plan)		 $3,000
    Subtotal - Code 40 $3,000


Annually the entity reconciles the actual results of providing centralized computer support services with the estimated costs and hours used in calculating the rate applied to the original budget.

The following table illustrates the actual costs and hours available resulting from the annual reconciliation.

Table B
A
B
C
Total Cost of Computer Support Service to be Allocated (Based on Actual Costs) Total Hours Available (Actual) Hourly Rate for Computer Support Services
$97,000 3,300 $29.40

Actual costs of providing computer support services to the grant funded project is reported on the final expenditure report, form FS-10-F. In this example, 95 hours of computer support services were actually provided. The cost of the 95 hours of service using the reconciled hourly rate would be reported on the FS-10-F as follows:

FINAL EXPENDITURE FOR A
FEDERAL OR STATE PROJECT
FS-10-F
PURCHASED SERVICES: Code 40

Encumbrance Date
Provider of Service
Check or Journal Entry #

Amount Expended
06/05/00 Internal Transfer of Allocated Computer Support Services. A00226 $2,793
    Subtotal - Code 40 $2,793


Note: This example did not require a Budget Amendment (FS-10-A). However, the criteria for determining whether a budget amendment is required is the same as for any other change for budgets. Please refer to the Fiscal Guidelines for Federal and State Aided Grants for further details.

Issued 12/01