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Definition Object 5100

Letter Head: Jack O'Connell, State Superintendent of Public Instruction, Phone number 916-319-0800

December 15, 2006

Attachment A to Letter: Indirect Cost and Accounting Changes Effective Beginning 2007–08.


Record expenditures for subagreements and subawards pursuant to certain contracts, subcontracts, and subgrants. Subagreements are indicated when a part or all of an instructional or support activity for which the local educational agency (LEA) is responsible is conducted by a third party rather than by the LEA. (See CSAM page 910–2, Categories of Costs, for definitions of instructional and support activities.) The LEA's responsibility for the activity may originate from any grant, award, or entitlement.

Some examples of subagreements include contracts with a third party to provide services required by a grant, such as the emergency services required by an Emergency Response Safety Grant; contracts with other entities to provide Home-to-School Transportation for the LEA’s students; contracts with nonpublic schools for services to the LEA’s special education students; and contracts between charter schools and management companies to provide instruction to the charter school’s students.

Subagreements typically include those cooperative projects and pass-through grants in which LEAs have both administrative and direct financial involvement. Subagreements exclude pass-through grants in which LEAs have administrative involvement only. (Refer to CSAM Procedure 750, Pass-through Grants and Cooperative Projects.)

Subagreements generally exclude contracts for central administrative services. (See CSAM page 910–2, Categories of Costs, for a definition of central administration.)

Subagreements exclude routine purchases of standard commercial goods or services from a vendor. (Refer to Object 5800, Professional/Consulting Services and Operating Expenditures.)

When distinguishing between a subagreement and a routine purchase from a vendor, the substance of the transaction is more important than the form. For example, a contract with a vendor to provide home-to-school transportation to the LEA’s students would be a subagreement, but a contract with the same vendor to rent buses for the LEA to transport its own students would be a routine purchase from a vendor. The form of the written agreements might be identical in that they might both be contracts with a transportation vendor, yet the substance of the transactions is different.

For purposes of indirect costs, subagreements must be excluded from the calculation of the indirect cost rate, except that up to $25,000 of an individual subagreement may be coded to Object 5800, Professional/Consulting Services and Operating Expenditures and included in the calculation of the rate. Indirect costs may not be assessed on subagreement expenditures. (Refer to Procedure 915, Indirect Cost Rate.) The $25,000 limit per subagreement applies for the duration of the subagreement.

Last Reviewed: Friday, February 02, 2024

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