Allowable Pre-award Costs in OMB Circular A-87; Start-up Requests for No-cost Extension
DATE: April 11, 2008
TO: Tribal and State IV-D Directors
FROM: Margot Bean
Office of Child Support Enforcement
SUBJECT: Allowable pre-award costs in OMB Circular A-87; the start date of a start-up grant and when a Tribe should request a no-cost extension
BACKGROUND: As you know, the final regulations governing the Tribal IV-D programs were published in the Federal Register on March 30, 2004 (69 FR 16638). The rule implements section 455(f) of the Social Security Act and sets forth the requirements and related provisions of Tribal IV-D programs. Under the regulation a Tribe may apply for Federal funding in one of two ways. A Tribe may apply to operate a child support enforcement program meeting the requirements of the regulation; or a Tribe that does not meet the requirements of the regulation may apply for start-up funding.
REFERENCES: PIQT-07-01, dated April 20, 2007
QUESTION 1: What pre-award costs are allowable under OMB Circular A-87?
RESPONSE 1: Pre-award costs are allowable in certain circumstances with prior written approval. OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments establishes principles and standards for determining costs for Federal awards carried out through grants, cost reimbursement contracts and other agreements of state and local governments and Federally recognized Indian Tribal governments. This guidance may be accessed at: https://obamawhitehouse.archives.gov/omb/circulars_a087_2004/. Attachment B, Section 31, defines pre-award costs as "…those incurred prior to the effective date of the award directly pursuant to the negotiation and in anticipation of the award where such costs are necessary to comply with the proposed delivery schedule or period of performance. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the award and only with the written approval of the awarding agency."
OMB Circular A-87, Attachment B, Section 33, also addresses pre-award costs when preparing proposals for potential Federal awards. This may be found at: https://obamawhitehouse.archives.gov/omb/circulars_a087_2004/. Section 33 states that the "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."
Before applying for start-up funding, a Tribe must analyze existing laws, procedures and services that are already being provided by the Tribe, determine services that are not being provided, and develop a Program Development Plan (PDP) that includes the steps and timeframes for meeting the requirements that are not currently being met. In Action Transmittal 05-07, Policy Questions and Responses to Miscellaneous Issues regarding Provisions of 45 CFR part 309, Question and Response 13 stated that the pre-award work of a Tribe prior to submitting an application for start-up funding, e.g., analyzing existing laws, procedures and services and developing a Program Development Plan, is not an allowable expenditure of start-up funding. These pre-application costs are not considered to be pre-award costs under OMB Circular A-87.
Please note that the pre-award costs are allowable only with the written approval of the awarding agency (in this case ACF/OCSE). A Tribe that has submitted an application may, during the application review process while negotiations between ACF and the Tribe are on-going, and prior to any grant award, inform ACF of any cost incurred subsequent to the submittal of the application. The grant award letter will inform the Tribe if the reported pre-award costs are allowable under the grant award. Pre-award costs include costs associated with responding to requests for additional information from ACF in writing as noted in the procedures for the review of applications at 45 CFR at §309.35(a) and (b).
QUESTION 2: May a Tribe request a change in the effective date of a start-up grant for a Tribal IV-D Program after the grant has been approved and issued?
RESPONSE 2: No. We have no authority to allow a change in the effective date of a start-up grant. Once the grant is issued it is effective as stated in the notice of the grant award letter. However, once a start-up grant is approved, the Tribe does have some discretion to choose the effective date of the grant. In accordance with regulations at §309.35(f), the effective date of a plan or plan amendment may not be earlier than the first day of the fiscal quarter in which an approvable plan or plan amendment is submitted. If a plan is approved near the end of a fiscal quarter, a Tribe may request that the grant award begin at the beginning of the next fiscal quarter after the approval date. If a Tribe faces a delay in meeting milestones affecting the approvability of the application, a Tribe may need to apply for a no-cost extension.
QUESTION 3: When should a tribe apply for a no-cost extension of a start-up grant?
RESPONSE 3: While this question was addressed in PIQT-07-01, based on continuing inquiries from Tribal IV-D programs, we want to expand the original answer. Our original response to this question was:
"The regulations at §309.16(c)(1) allow the Secretary to grant a no-cost extension of time for a start-up grant if the Tribe or Tribal organization demonstrates to the satisfaction of the Secretary that the extension will result in satisfaction of each requirement established in §309.65(a) by the grantee and completion of the program development plan required under §309.65(b)(2).
Tribes and Tribal organizations may experience unanticipated delays in getting required elements in place. These delays may be outside the control of the IV-D programs, e.g., the required codes are awaiting approval by Tribal Council or Congress that meets at a certain time each year. If it is clear that the approval of codes or laws will not be completed or a decision on a Tribe's application for comprehensive program funding will not be forthcoming until after the end of the two-year start-up period, a Tribe should apply for a no-cost extension prior to the end of the two-year period.
To request a no-cost extension, the Tribe or Tribal organization must submit a written request and detail the actions the Tribe will take to meet the plan requirements in order to demonstrate to the satisfaction of the Secretary that the extension will result in the completion of the requirements established in §309.65(a) by the end of the time period in which the no-cost extension is granted. The request must be submitted to the Office of Child Support Enforcement, Attention: Tribal Child Support Enforcement Program, 370 L'Enfant Promenade, SW, Washington, DC 20447."
A no-cost extension is only appropriate near the end of the second year of a start-up grant when the Tribe has not expended all of its funds and additional time is needed to put in place the required elements of a Tribal IV-D program as required at §309.65(a). A Tribal IV-D program should submit a request for a no-cost extension either separately or along with the application to move from a start-up program to a comprehensive program in the 21st month of the 2-year start-up grant to allow for adequate review time.
Inquiries should be forwarded to the appropriate Regional Office.
CC: OCSE Regional Program Managers