Fiscal Guidelines for Federal and State Grants
Funding Cycles for Federal and State Grants
Application and Budgeting Processes for Grants and Special Legislative Projects
Fiscal Forms – Use and Instructions
The Fiscal Guidelines for Federal and State Grants is intended to provide general guidance for the financial management of federal and state grants by local agencies. Another information resource is A Guide to Grants Administration and Implementation Resources. In addition to these guidelines, grants must be conducted in accordance with applicable federal and state laws, regulations and directives, including but not limited to:
- Federal and State Authorizing Legislation
- Title 34 of the Code of Federal Regulations, including Education Department General Administrative Regulations (EDGAR)
- Commissioner's Regulations
- State Education Law and State Finance Law
- State Education Department Policy
All federal and state grant programs adhere to annual funding cycles, although there are significant differences between the state and federal funding calendars. The federal fiscal year runs from October 1 through September 30, although most federal programs are "forward funded" by the federal government and thereby made available to the states on July 1, prior to the start of the federal fiscal year. In addition, most federal grants are governed by carryover provisions, which extend the life of an appropriation for an additional year. Thus, most programs funded through the U.S. Department of Education have an appropriation life of 27 months.
In order to manage local grants projects effectively and identify expenditure and carryover funds on a local and statewide basis, most federal grants to local agencies are awarded on an annual cycle. In fact, most grants are funded on a school year basis of September 1 through August 31, although certain programs may operate on a July 1 through June 30 basis. The State Education Department (SED) also has the option to fund projects for a shorter length.
The state fiscal year runs from April 1 through March 31. Unlike federal programs, state programs do not have carryover provisions unless specifically authorized by the State Legislature. While state funds may be disbursed up until August 31 following the end of the fiscal year, the limited appropriation life does impose severe restrictions on the time permitted for operation and closeout of individual projects. Thus, in order to manage state funds effectively, local grants are confined to a July 1 through June 30 cycle with the exception of special legislative projects which can run through July 31 when necessary. Again, as with federal programs, certain projects may be funded for a shorter duration within that cycle.
Periodically, grant applications or Requests for Proposals (RFPs) are developed by the responsible SED program office. These documents are available on the internet and, upon request, in paper form from the program office.
- Agencies eligible to apply for funding should read the application materials thoroughly and follow all instructions contained in the application.
- A proposed budget will usually be requested as part of the application process. The application will specify what budget form, the FS-10 or FS-20, should be submitted. The proposed budget is submitted to the SED program office along with other required information.
- The SED program office reviews all of the grant application materials and determines the grantees. For competitive (or discretionary) grant programs, SED sends information regarding the grant program to the Office of the State Comptroller for review and approval. Upon approval, the program office notifies applicants of approval or disapproval.
- Awards made through the allocational process are executed through grants. Awards made through the competitive process are executed through either grants or grant contracts. The same fiscal and programmatic requirements must be met under both grants and grant contracts, but individual grant contracts must also be reviewed and approved by the Office of the State Comptroller.
- Following program office review and approval of the FS-10 or FS-20 budget for a grant, the budget is sent to Grants Finance. For grants, a copy of the approved FS-10 or FS-20 budget, accompanied by a grant status report, is mailed to the local agency by Grants Finance. For grant contracts, the approved budget is sent to the local agency as part of the contract, which must be reviewed and agreed to by the local agency, then returned to SED.
- The local agency notes any changes to the budget and establishes project accounting records.
- At the same time, but under separate cover, a formal grant award notice is sent to the local agency by Grants Finance. For grant contracts, the grant award notice is included in the contract.
- Depending upon the grant program, an automatic first payment may be made. The availability and amount of first payments vary due to statutory, regulatory or policy requirements; refer to the grant award notice for each grant regarding the availability and amount of the first payment. For grant contracts, refer to the contract for the grant award notice and a payment schedule.
- The SED program office may notify local agencies of any special conditions of the grant or any requirements to provide additional information, such as performance reports.
- Subsequent budgetary changes requiring prior SED approval are requested by the local agency through Form FS-10-A Proposed Amendment for a Federal or State Project. Submit FS-10-As to the SED program office.
- To request funds from a particular grant, local agencies must submit a Form FS-25 Request for Funds. The amount of funds requested at any one time may only include actual expenditures to date plus, in some cases, anticipated expenditures for the next month. Submit FS-25 Requests for Funds only when reimbursement for expenditures is required or, if permitted, expenditure of the funds will occur within the next month. There is no requirement to submit the form once a month or to submit a form requesting a zero payment.
- Once project activities are completed and all expenditures have been made, the local agency submits an original and one copy of the FS-10-F or FS-10-F Short Form Final Expenditure Report for a Federal or State Project to Grants Finance unless other routing instructions have been provided by the program office. Unless explicitly directed in the application, RFP, or in writing by SED program or Grants Finance staff, use the FS-10-F Short Form provided the report is submitted on time. Final expenditure reports that are submitted after the due date must be submitted on the FS-10-F. When the FS-10-F Short Form is used, agencies must maintain records of grant expenditures in a manner consistent with the FS-10-F and make the records available in a timely fashion to authorized individuals, which include state, federal and local auditors and staff from SED, the Office of the State Comptroller and federal agencies.
- Grants Finance reviews the final expenditure report, determines the final approved total of project expenditures, and reimburses any funds owed to the local agency. The grant is closed.
SED reserves the right to require the timely submission of a complete FS-10-F and any supporting documentation for monitoring or auditing purposes.
Special legislative projects are state-funded grants that are awarded to individual local agencies in accordance with the annual state local assistance budget adopted by the New York State Legislature, and are processed and administered by:
Special Legislative Projects Coordinating Unit
New York State Education Department
Room 132, Education Building
Albany, NY 12234
There are major differences between the approval and administration of grants and special legislative projects:
- The Legislature itself, rather than SED, designates the recipient local agency and the purpose and amount of each special legislative project awarded.
- The Special Legislative Projects Coordinating Unit notifies each designated local agency about its project award, transmits application forms for completion, and receives completed applications, amendments, requests for additional funds and final expenditure reports submitted by such agencies.
- In addition to the approval of SED, such projects must also be approved by the Office of the State Comptroller.
- After all approvals have been obtained, a formal approval letter will be transmitted.
- Final payments requested in accordance with the payment schedule indicated in the project application packet must always be accompanied by a final program narrative report. One signed original final expenditure report plus three copies must be submitted.
- The actual grants for such projects are awarded by the Legislature throughout the school year. However, regardless of the award date, the funding dates for projects will ordinarily encompass the entire school year in which the award occurs. Any exception to the annual school year funding cycle is subject to the approval of the Office of the State Comptroller.
- The funding date for an approved amendment is retroactive to the approved beginning date of the special legislative project.
- If the Legislature reappropriates an individual grant for extension through the succeeding fiscal year, a local agency may then apply for a project extension through June 30 of the succeeding year.
- Assist the local applicant agency in planning for necessary project expenditures.
- Provide SED with a specific itemization of proposed project expenditures.
- Provide SED and the Office of the State Comptroller with the necessary documentation upon which payments can be based.
- Ensure that expenditures made by the local agency have the prior approval of SED.
- Each grant application or RFP will specify whether the FS-10 or FS-20 form should be used.
- The specific deadline date for submittal of application materials and a proposed budget is established by each SED office responsible for program administration.
- Upon approval by SED, projects are assigned an approved "funding date". This is the earliest possible date for encumbrances in the operation of the project and may be found on page 8 of the FS-10 or page 2 of the FS-20. Expenditures based on obligations made prior to the approved funding date of the project will not be reimbursed.
- A copy of the approved FS-10 or FS-20 accompanied by a grant status report will be returned to the agency. In addition, a formal grant award notice is sent to the agency by Grants Finance. Depending upon the grant program, an automatic first payment may be made.
- Report expenditures on federal or state funded projects.
- Request funds for federal or state funded projects.
- Local agencies may request funds to support grant activities by reporting actual expenditures to date plus, in some cases, anticipated expenditures for the next month. Regardless of the amount of anticipated expenditures, requests for funds may total no more than 90 percent of a grant’s budget.
- Certain grant programs allow payment only on a reimbursement basis and do not permit payments for anticipated expenditures. Regardless of the grant program, for-profit organizations are paid only on a reimbursement basis. In addition, any local agency identified as having a cash management system that is not in compliance with federal regulations may be limited to payments on a strictly reimbursement basis.
- For those grant programs that permit payment on anticipated expenditures, payments are allowed only when a local agency can demonstrate willingness and ability to maintain appropriate procedures that minimize the time between receipt and disbursement of the funds.
- Before submitting a Form FS-25 Request for Additional Funds to Grants Finance, a local agency must have a clear understanding of the policies and procedures regarding payments for federal and state grants. The Chief Administrator’s signature on the form will be considered confirmation of the agency’s knowledge of and agreement to meet the requirements.
- Submit FS-25 Requests for Funds only when reimbursement for expenditures is required or, if permitted, expenditure of the funds will occur wiithin the next month. There is no requirement to submit the form once a month or to submit a form requesting a zero payment.
- Request prior approval from SED for budget changes to federal or state funded grants.
- Enable both the local agency and SED to maintain an accurate and up-to-date record of approved changes in a budget.
- The following changes to a budget must receive prior approval from SED:
- An increase in any budget category (salaries, purchased services, travel, etc.) by more than 10 percent or $1,000, whichever is greater.
- Addition of equipment items having a unit value of $5,000 or more.
- Material changes to personnel positions.
- Addition of minor remodeling.
- An increase in the total budget amount.
- The FS-10-A may be submitted at any time between the date the grant receives the written approval of SED and the approved termination date of the grant as long as prior approval requirements are met. However, SED program managers may set an earlier final date for submittal of budget amendment forms. Please check with the appropriate program office regarding possible deadlines.
- The date of receipt of an amendment is the earliest possible funding date for encumbrances based on that amendment. Amendments may not be submitted after the grant's end date.
- Amendments should be submitted directly to the SED office responsible for program administration. Approved amendments are then forwarded to Grants Finance. The necessary changes will be made to Grants Finance records and a copy of the approved amendment will be returned to the local agency.
- Use Form FS-10-A for all amendments regardless of whether original budget was submitted on Form FS-10 or FS-20.
- Report to SED reimbursable expenditures made by the agency in an approved project. The expenditures are compared with approved budget category totals for the purpose of determining final approved expenditures.
- Serve as the basis for reimbursement of funds to the local agency.
- Unless directed in the grant application or RFP or in writing by SED program or Grants Finance staff, the FS-10-F Short Form should be used, provided the report is submitted within stated timelines. Final expenditure reports that are submitted after the due date must be submitted on the FS-10-F.
- When the FS-10-F Short Form is used, local agencies must record project expenditure details in a manner consistent with the internal pages of the FS-10-F. It is recommended that the pages of the FS-10-F (or a comparable format) be used to compile and summarize project expenditures. These details must be readily available upon request from authorized individuals, which include state, federal and local auditors and staff from SED, the Office of the State Comptroller and federal agencies.
- A variety of circumstances could result in SED requiring submission of the FS-10-F. Some of these circumstances include the selection of an agency or a program for detailed review as part of SED's comprehensive audit or monitoring processes, unique requirements of a particular program or the designation of an agency as "high-risk" due to non-compliance with the conditions of one or more grants/grant contracts.
- The final expenditure reports should be prepared after all encumbrances have been liquidated.
- The due date for the final expenditure report is listed on the grant award notice.
- Reports for federal projects are generally due within 90 days following the end of the grant. Reports for state projects are generally due within 30 days following the end of the grant.
- Certain program managers may require earlier submission of final expenditure reports due to unique requirements of the fund source. If this is the case, you will receive notification from the program manager. This program-specific requirement supersedes the standard timelines mentioned above.
- Expenditures for only one project may be reported in each final expenditure report. Copies of supporting documentation such as claim forms, travel vouchers and invoices should not be sent to SED. Such documentation must be retained in the local agency project file. If it is necessary for an auditor to review this material, it will be requested.
- To ensure accuracy, the final expenditure report should be completed by staff of the local agency's business office.
- All costs are to be reported in whole dollar amounts.
- A review of each final expenditure report is conducted by Grants Finance to determine the reimbursable expenditures of the project.
- Upon completion of the review, a copy of the final expenditure report will be mailed to the local agency and any funds owed to the local agency will be reimbursed. If the review results in an overpayment to the local agency, the amount overpaid will be transferred to another of the agency’s eligible projects, if possible, and a Form FS-80 Notice of Overpayment will be sent to the local agency. The notice will identify the grant that was overpaid; the amount overpaid; and the grant charged for overpayment, or will instruct the local agency to submit a refund check. These procedures have been designed to inform local agencies as fully as possible of SED’s review findings and to give local agencies adequate time to review the findings.
- Be necessary and reasonable for proper and efficient operation of the program.
- Be permissible under applicable state and/or federal laws and regulations.
- Conform to any limitations or exclusions set forth in these guidelines, laws or regulations, or other governing limitations as to types or amounts of cost items.
- Be the net amount after applying all applicable credits, such as purchase discounts, project-generated income, and adjustments of overpayments.
- Must not be included as a cost in any other project or grant.
- Acquisition of real or personal property
- The encumbrance is made on the date on which a binding written commitment to acquire the property is made.
- Personal services by an agency employee
- The encumbrance is made when the services are performed.
- Personal services by a contractor who is not an agency employee
- The encumbrance is made on the date on which the agency makes a binding written commitment to obtain the work.
- Performance of work other than personal services
- The encumbrance is made on the date on which the agency makes a binding written commitment to obtain the work.
- Public utility services
- The encumbrance is made when the agency receives the services.
- The encumbrance is made when the travel is taken.
- Rental of real or personal property
- The encumbrance is made when the agency uses the property.
- A description of the equipment, including manufacturer's model or serial number.
- Identification of the grant under which the recipient agency acquired the equipment.
- Acquisition date and unit acquisition cost.
- Information on how the grant share of the cost was determined if the cost was shared by the recipient agency.
- Location, use and condition of the equipment and the date this information was recorded.
- All pertinent information on the ultimate transfer, replacement or disposition of the equipment.
- Restricted Rate - The restricted rate is applicable to all state programs and those federal programs with regulatory language requiring funds to supplement, not supplant state and local funds (e.g., Title I). Restricted rates generally range from one to seven percent.
- Non-restricted Rate - The non-restricted rate is applicable to those federal programs that do not have supplement, not supplant provisions (e.g., National School Lunch Program, School Breakfast Program). Non-restricted rates generally range from 10 percent to 25 percent.
- School Districts - Indirect cost rates for school districts are computed annually by Grants Finance on the basis of data contained in each district's Annual Financial Report (Form ST-3). Districts are then notified of the rates to be used during the subsequent program year.
- BOCES - Indirect cost rates for BOCES are computed annually by Grants Finance on the basis of data contained in the BOCES Annual Financial Report (Form SA-111). BOCES are then notified of the rates to be used during the subsequent program year.
- Other Agencies - Local agencies other than school districts and BOCES may negotiate indirect cost rates through their federal cognizant agency. However, in cases where a restricted rate has not been established, a local agency may use the restricted rate that is established each year by SED for other agencies.
- An agency must contract with an independent auditor prior to the grant's end date.
- The contract must specify a cost for the audit. The agency will then budget the pro rata share of the federal portion of the audit cost to the grant.
- Final reimbursement will be based upon substantiation of the pro rata share of the audit cost, as well as any internal transactions identifying audit charges to the grant.
The Department reserves the right to request at any time the timely submission of a complete FS-10-F and supporting documentation for monitoring or auditing purposes.
Reopening Grant Projects
Once the final expenditure report for a project has been reviewed and the grant closed, the local agency has 90 days to request that the grant be reopened for further review. Requests should be submitted in writing to Grants Finance; under normal circumstances requests are limited to one per grant. With appropriate justification, requests beyond one per grant may be allowed, but they must be received within the original 90-day timeframe.
If there is no request for additional review with the 90-day period, the results are considered final. However, SED reserves the right to reopen a grant after it has been closed to either recover any unallowed costs or reimburse any additional costs that have been disclosed through separate audits or reviews.
Projects must operate under the jurisdiction of the local board of education or other appropriate governing body and are subject to at least the same degree of accountability as all other expenditures of the local agency. The local board of education or other appropriate governing body is responsible for the proper disbursement of, and accounting for, project funds. Written agency policy concerning wages, mileage and travel allowances, overtime compensation, or fringe benefits, as well as State rules pertaining to competitive bidding, safety regulations, and inventory control must be followed. Supporting or source documents are required for all grant related transactions entered into the local agency's recordkeeping system. Source documents that authorize the disbursement of grant funds consist of purchase orders, contracts, time & effort records, delivery receipts, vendor invoices, travel documentation and payment documents, including check stubs.
To be considered allowable for reimbursement, costs must meet the following general criteria:
All encumbrances (or obligations) must be made within the approved funding period of the grant. Encumbrances for both federal and state projects are incurred on the following basis:
It is the practice of SED to use the earliest possible date for funding purposes. This may be as early as the date the grant application is received in SED in substantially approvable form but may not be earlier than the date when the state or federal funds became available for obligation. Due to delays inherent in the project review process, written notification of approval sometimes may not occur until after the approved funding date. However, in such cases, expenditures occurring within the approved project funding dates are still allowable. The grant funding dates are indicated on the back page of the FS-10 or FS-20.
Local agencies must return interest earned on cash advances from federally-funded grants. State and local governments, including school districts, may keep up to $100 per year for administrative expenses. Institutions of higher education, hospitals and other non-profit organizations may retain up to $250 per year for administrative expenses. Interest exceeding the $100 or $250 allowable for administrative expenses must be returned to the federal government. It cannot be retained to offset any direct or indirect program costs.
State and local governments, including school districts, must return any interest owed to the U.S. Department of Education, P.O. Box 979053, St. Louis, Missouri 63197-9000. Institutions of higher education, hospitals and other non-profit organizations must remit to the U.S. Department of Health and Human Services, P.O. Box 6120, Suite 1133, Rockville, Maryland 20852. Any remittance should be accompanied by a letter stating that it is for "interest earned on federal funds" and include the agency's DUNS number. A copy of the letter should also be sent to Grants Finance.
Supporting documentation for grants and grant contracts must be kept for at least six years after the last payment was made unless otherwise specified by program requirements. Additionally, audit or litigation will "freeze the clock" for records retention purposes until the issue is resolved. All records and documentation must be available for inspection by SED officials or its representatives.
Salaries (Codes 15 and 16) - Documentation of Personnel Costs
Documentation beyond regular payroll records is required for an employee who is funded by a federal grant program. If an employee works 100 percent of the time on a federal grant, the employee or a direct supervisor must complete time distribution certification at least once every six months. The certification will include the employee’s name and position, the period of employment, and the name of the federal program. If an employee works on more than one federal grant program, on a federal grant and a State grant, or on a federal grant’s direct cost and indirect cost activities, then personnel activity reports (PARs) must be completed monthly to document the distribution of time worked on the federal programs. PARs have to be completed after the work is done and be signed and dated by the employee. Time distribution certifications and PARs should be maintained with regular payroll records.
Equipment (Code 20)
All equipment items having a unit value of $5,000 or more with a useful life of more than one year must be reported in Code 20.
All organizations must maintain an inventory of capital assets. The inventory must include, but may not be limited to, all items included in the equipment category for grant programs. The inventory listing must contain the following:
Purchased Services (Code 40)
Purchased services include the hiring of personnel from outside the agency as consultants, as well as rentals, admission fees, tuition costs, telephone, repairs to equipment, and contracted services. When budgeting purchased services, include as much information as possible on the purpose of the expenditure and the cost basis. The cost basis may be an amount per day for a certain number of days or an amount per person or item.
Where there exists an employer-employee relationship between the local agency and project personnel, such personnel should not be budgeted as consultants. The existence of an employer-employee relationship is determined by the degree of control exercised by the employer. An employee is usually trained by the employer, is directed in how work is to be performed, and has a continuing work relationship with the employer. An independent consultant decides when, where and how the work is to be performed, is paid according to an agreed-upon performance or result of work and is free to contract with work for others.
Rental costs are allowable only if the local agency is renting from an outside agency or vendor. Rent cannot be charged when the local agency actually owns the space or item involved.
Unless the project necessitates the installation of separate telephone facilities, monthly service charges may not be prorated and charged as an expense; however, toll or local usage charges specifically for grant purposes are allowed.
Supplies and Materials (Code 45)
Purchase orders may not be issued before the approved begin date of the grant or after the end date of the grant. In addition to the actual cost of each item, costs of shipment are considered part of the purchase price of such items and are eligible for reimbursement.
Internal transactions, such as supplies taken from agency stock (warehouse, supply room, etc.), should be included on the final claim. The date of the transaction or requisition date should be maintained along with any identifying data such as journal entry. Where grant personnel have made cash purchases and are reimbursed, the name of the commercial vendor should be available as well as the name of the individual making the purchase.
Travel Expenses (Code 46)
Actual expenses claimed against a grant are limited to the maximum amounts authorized by local participant agency policy. For agencies where such written policy does not exist, expenditures are allowed at no more than the state-approved maximum travel rates that were in effect at the time the travel occurred.
When local agencies provide their own school bus transportation for a project, reimbursements shall be limited to the approved rate per mile for operational costs. Only the salaries of individual bus drivers and monitors will be allowed in addition to such costs. The salaries should be budgeted and claimed under Code 16, Salaries for Support Staff.
Fringe Benefits (Code 80)
Fringe benefit rates for federal and state funded project staff must be the same used for other staff of the local agency. Fringe benefits may only be claimed for the salaries actually expended in the federal or state project.
Unemployment insurance may be claimed by local educational agencies and not-for-profit agencies only if the local agency has elected either the Tax Method or the Direct Reimbursement with Special Revenue Fund options for covering these costs. Payments for direct reimbursement without a reserve fund may not be claimed. All profit-making agencies must be under the Tax Method.
Indirect Costs (Code 90)
Indirect costs can be broadly defined as central administrative costs and certain other organization-wide costs that are incurred in connection with a grant but that cannot readily be identified with the grant (e.g., payroll preparation, central purchasing). Indirect costs generated for a grant is calculated by applying the local agency's indirect cost rate to the modified direct cost base of the grant. These funds are used to support the central administrative costs.
The modified direct cost base is the total direct costs of a grant less equipment, minor remodeling, purchased services with a BOCES, the portion of each subcontract exceeding $25,000, and any flow through funds.
The approved rate is applied against the modified direct cost base and results in an amount available for indirect cost purposes. However, the maximum rate allowable for individual grants may be set by statute, regulations or may be negotiated downward by SED.
The amount of actual reimbursement of indirect costs is computed by applying the approved rate to actual modified direct cost base expenditures. If actual modified direct cost base expenditures are less than those budgeted, the amount of indirect cost funds reimbursed will be reduced accordingly.
Two types of indirect cost rates are used with programs funded through SED:
The procedure to compute indirect cost rates vary depending on the type of local educational agency, as follows:
For school food services programs, procedures for claiming indirect costs vary by agency and program. For specific instructions regarding use of the non-restricted rate in school food service programs, contact:
Child Nutrition Program Administration
New York State Education Department
99 Washington Avenue, Room 1623-OCP
Albany, NY 12234
Special Legislative Projects are frequently extended and, consequently, may span several program years with differing indirect cost rates. The rate used should be the rate in effect when the project begins.
In claiming expenditures for utilities, the cost must be directly identifiable with, and attributable to, the individual grant. Furthermore, the agency must provide the basis for calculating the pro rata charge of the costs to the grant.
Interest and Finance Charges
Interest or finance charges incurred by the local agency are not allowed for reimbursement in federal or state funded projects.
Audit Costs for Federally-Funded Grants
The cost of a single audit performed by the participant agency's independent auditor should be recovered from indirect costs. However, in cases where an agency lacks an indirect cost rate, the pro rata share of the single audit cost may be claimed as a direct cost. Inasmuch as the performance of the audit often occurs after the grant's end date, reimbursement of the audit cost, even though the independent auditor has not yet been paid, is allowable subject to the following conditions:
New York State Sales Tax Allowance
Tax exempt agencies will not be reimbursed for New York State sales tax charges since they are not required to pay tax when purchasing supplies, equipment, etc. for the agency. Likewise, the staff of such agencies, while on official business, are also exempt from New York State sales tax, and reimbursement will not be allowed for those charges. Other persons paid by the project, such as consultants, may be required to pay the New York State sales tax on purchases of food and lodging, and in such cases, are eligible for reimbursement.
School Lunch Reimbursement Under Federal and State Programs
It is SED policy not to pay for costs of any food in federal and state grants in an agency which also conducts a feeding program eligible for reimbursement under the National School Lunch Act, Child Nutrition Act or Summer Food Services Program for Children. However, since the National School Lunch Act does not provide for snacks (except milk), these costs are eligible for reimbursement, if specifically approved, under most grant programs.