Direct Services and Administrative Costs GuidanceGuidance for direct services and administrative costs concerning after school program grants.
Expanded Learning Direct Services and Administrative Costs Guidance
The 85 percent/15 percent rule regarding direct services and administrative costs in expanded learning programs as California Education Code (EC) states:
Section 8483.9(a) A program participant receiving funding pursuant to this article may expend on indirect costs no more than the lesser of the following:
The school district's indirect cost rate, as approved by the department for the appropriate fiscal year.
Five percent of the state program funding received pursuant to this article.
- A program participant receiving state funding pursuant to this article may expend no more than 15 percent of that funding on administrative costs, which funding need not be earned through pupil attendance. For purposes of this section, administrative costs shall include indirect costs, as described above in subdivision A.
- A program participant receiving state funding pursuant to this program shall ensure that no less than 85 percent of that funding is allocated to school sites for direct services to pupils. The cost of a program site supervisor selected pursuant to Section 8483.4 may be included as direct services, provided that at least 85 percent of the site supervisor's time is spent at the program site.
This guidance is being created to assist grant recipients and sub-contractors in identifying direct services and administrative costs, as mentioned above in the EC for the purposes of budgeting and documentation.
The purpose of this guidance is to ensure that the grantee has sufficient and clear information on how to spend and report direct services and administrative costs.
What is the 85 percent/15 percent rule?
The United States Code and the California EC generally require that public educational agencies spend no less than 85 percent of funds on direct services to students. The 21st Century Community Learning Centers (21st CCLC) Program, Title IV Part B, and the After School Education and Safety (ASES) Programs must follow this rule (EC sections 8483.9[b], 8483.9[c] and 8426[c]). The maximum allowable for administrative costs, including indirect costs, is 15 percent.
What is the definition of direct services to students?
Direct services to students are those services that are typically delivered at the school site and where the student is the direct recipient or beneficiary of the services. Expenditures for personnel and services are justified as direct services and can be included in the 85 percent if:
- The personnel are providing direct, hands-on services to students.
- The services being provided are so integral to the program that absence of the services would affect the quality of the program itself and the success of students. Examples of these types of services that are critical to the quality of the programs for students include: professional development for program staff, parent education and involvement activities, staff development, and coaching.
- The funds are used to purchase materials and equipment to be used by eligible students.
- The funds support the analysis and use of student performance data that is then used to inform services for eligible students.
What is the definition of administrative costs?
Administrative costs are defined as any costs, indirect or direct, that are administrative in nature and support the management of a program. Do not confuse direct costs with direct services to students. Just because a cost is a direct cost does not mean it is a direct service to students.
Costs of program administration may encompass both:
- Direct administrative costs include such things as: salaries of program administrators and program monitoring.
- Indirect administrative costs include items critical to operating the organization that provide the program services such as personnel, payroll, accounting, and procurement services.
Expenditures related to program administration may include both direct and indirect costs. Direct costs are those that can be easily attributed to a particular program and cost objective. Activities that result in direct services to students are usually considered to be direct costs. Indirect costs benefit multiple federal and state grant awards, programs, and cost objectives. Thus, indirect costs cannot be easily identified with a particular cost objective.
Expenditures clearly outside the 85 percent “direct services” definition include:
- Curriculum development completed by the grantee or sub-contractor is considered a core administrative activity (see explanation below).
- Staffing and volunteer recruitment.
- District advisory councils, meetings and events.
- District program evaluation or review activities––a percentage of the time spent on discussing the evaluation results with the program staff could be direct services as part of professional development when meeting with the site coordinator to review the program.
- General capital outlay or deferred maintenance costs of program sites.
- General staff development activities not related to specific pupil needs.(An example may be computer training not associated with the program)
The Expanded Learning Division (EXLD) recognizes the fact that the lists above are not exhaustive. The EXLD also recognizes that even after the most diligent application of “common sense”, there remains a group of expenditures which do not fall clearly within or outside the 85 percent limitation. To deal with this so-called “grey area” of expenditures, the EXLD has several suggestions:
- Evaluate carefully the nature and extent of the expenditures benefit to the student. How direct is the benefit? Does the expenditure have a clear impact on the service itself, or is it so critical to the program that not providing it would have a substantive and adverse effect on the direct services? For example, custodians, food service workers, security, etc.––these will be local decisions as to whether they are direct services or administrative. The grantee must document how these services are required to serve the expanded learning program. If there are other activities occurring after school, then costs for these activities would be shared with other programs.
- Determine the origin of the decision to make the expenditure. Was the expenditure determination made at the site level or at the administrative level? We do recognize that, particularly in small districts, site and administrative levels may be the same, in which case this determination may be less relevant to the inclusion or exclusion of the expenditure in question.
- Evaluate the expenditure in relation to the expanded learning programs objectives. Are the direct educational objectives of the expanded learning program furthered by the expenditure?
In cases where the expenditures are in the “grey area” and may make the difference between being in compliance and not being in compliance with the 85 percent limitation, we would advise you to prepare a brief justification statement supporting decisions to place some or all of those expenditures within the 85 percent limitation. Preparing these statements and maintaining them on file will both help clarify the issues and summarize supportive evidence, in case the decisions are subsequently challenged.
NOTE: The cost of a program site supervisor selected pursuant to EC Section 8483.4 may be included as direct services, provided that at least 85 percent of the site supervisor's time is spent at the program site. Also, curriculum development and planning by site coordinators who meet this requirement are considered direct services.
NOTE: In a case where a grantee is using a sub-contractor to operate the program, the 85 percent/15 percent rule applies to the total grant amount. In other words, there can be no more than 15 percent of the grant funds used for administrative and indirect costs, and 85 percent must be spent on direct services to students. The grantee and the subcontractor must make all fiscal and program records available for audit and oversight review.
NOTE: Curriculum Development––either the Community Based Organization (CBO) could pay its staff to develop the curriculum (this would be an administrative cost coming out of the district’s contract to the CBO). Or the CBO may develop the curriculum without charging any cost/salaries/benefits to the program and the districts could buy the materials for their individual sites (this would be cost of direct services to the pupils). In case of a purchase, the grantee must maintain documentation to show evidence of purchase of materials. The documents must be available for audit and state monitoring purposes.
Approved by EXLD Director