Adult Education and Literacy
Budget Development and Cost
Allocation
Budget Development
• Budgets are financial plans on how a project will be
completed. The more accurate the budget is, the
more successful the program will be.
• Budgets should include anticipated expenses such as
potential increases in rent and annual salary
increases, as well as any earned income that may be
generated during the course of the project.
• Budgets are best estimates of what a project will cost
therefore, they often need adjusted (the Agency
recommends that budget-to-actual comparisons be
conducted at least quarterly).
Supplement Not Supplant
The AEL program requires that federal AEL funds
supplement and not supplant other state or local
public funds expended for adult education and
literacy activities. Federal funds must not result in
a decrease in state or local funding that would
have been available to conduct the activity had
federal funds not been received. In other words,
federal funds may not free up state or local dollars
for other purposes but should create or augment
programs to an extent not possible without
federal funds.
Cost Allocation
The process of assigning to two or more
programs the costs of an item shared by the
programs.
Purpose
To ensure that costs are equitably distributed to
benefitting cost objectives and funding streams
so that all programs contribute their fair share
Basic Considerations
• Allowable expenses must be allocable to a particular cost objective
in accordance with the relative benefits received.
• Allocable costs must:
» Be incurred specifically for and benefit the award
» Be reasonable and necessary for proper and efficient
performance of the award.
» Not be shifted to other awards to overcome funding
deficiencies, or to avoid restrictions imposed by law or by the
terms of the award
Direct Costs
Direct costs are costs that can be specifically
identified with a final cost objective that
receives the full benefit of those costs. Examples
are salaries for program instructors, the costs of
materials and supplies consumed in the class,
equipment used specifically in the class; and
travel expenses incurred to carry out the award.
Indirect Costs
Indirect costs (called Facilities and Administrative
(F&A) costs for educational and non-profit
institutions) are costs that are incurred for common
or joint objectives and cannot be identified readily
and specifically with a particular project. Costs
typically charged as indirect costs are depreciation
on building and equipment, O & M, library, and
general administration (administration that does
not relate solely to the program or any major
function of the institution).
Cost Allocation – Steps
1) Create a written plan. Begin by identifying all
amounts and sources of funding by reporting cost
category.
Example:
AEL (fed)
$100,000
AEL (state)
$200,000
TANF (fed) TANF (state) EL Civics
$300,000 $400,000
$500,000
Total Program Costs: $2,100,00
Pro. Dev.
$600,000
2) Estimate the number of students to be served
by each class based on available slots.
AEL federal + AEL state = 400
TANF federal + TANF state = 500
EL Civics = 600
Total = 1,500
3) For each funding source, calculate the
percentage of the of the total budget.
AEL federal = $100,000/$2,100,000 = 4.8%
AEL state = $200,000/$2,100,000 = 9.5%
TANF federal = $300,000/$2,100,000 = 14.2%
TANF state = $400,000/$2,100,000 = 19.1%
EL Civics = $500,000/$2,100,000 = 23.8%
Professional Development = $600,000/$2,100,000 = 28.6%
4) Determine the allowable costs and assign a fair share to each
program. Pick a distribution base that accurately assigns the
costs in accordance with the relative benefits attributable to
each program.
Sample allocation bases:
•
•
•
•
Accounting: Number of transactions; direct labor hours
Auditing: Direct audit hours; expenditures audited
Budgeting: Direct labor hours
Payroll: Number of checks issued; direct labor hours; number of
employees
• Office machines: Direct labor hours and equipment maintenance
• Office space: square feet of space occupied; staff salary distribution
•
•
•
•
Personnel services: number of employees
Postage: direct usage; acceptable survey methods
Printing/reproduction: direct labor hours; job basis; pages printed
Procurement: number of transactions processed; direct hours of
purchasing agent’s time
• Telephone: number of instruments; staff salary distribution
• Travel Mileage: actual expenses; direct labor hours
• Utilities: square feet of space occupied; staff salary distribution
5) Document the methodology used and the rationale.
*Allocation bases will generally not be questioned if they are reasonable and
consistently applied.
6) Identify the cost categories (payroll, professional and
contracted services, supplies and materials, capital outlays,
and other operating expenses) by program AND separate
these costs by administrative and program costs.
Example:
Administrative
AEL federal - $50,000
Payroll – $30,000
Supplies and materials - $10,000
Other operating expenses - $10,000
AEL state - $100,000
Payroll – $60,000
Supplies and materials - $10,000
Other operating expenses - $30,000
TANF federal - $150,000
Payroll – $30,000
Supplies and materials - $10,000
Other operating expenses - $10,000
TANF state - $200,000
Payroll – $30,000
Supplies and materials - $10,000
Other operating expenses - $10,000
EL Civics - $250,000
Payroll – $200,000
Supplies and materials - $25,000
Other operating expenses - $25,000
Professional Development - $300,000
Payroll – $100,000
Supplies and materials - $50,000
Other operating expenses - $150,000
Program
AEL federal - $50,000
Payroll – $30,000
Supplies and materials - $10,000
Other operating expenses - $10,000
AEL state - $100,000
Payroll – $60,000
Supplies and materials - $10,000
Other operating expenses - $30,000
TANF federal - $150,000
Payroll – $30,000
Supplies and materials - $10,000
Other operating expenses - $10,000
TANF state - $200,000
Payroll – $30,000
Supplies and materials - $10,000
Other operating expenses - $10,000
EL Civics - $250,000
Payroll – $200,000
Supplies and materials - $25,000
Other operating expenses - $25,000
Professional Development - $300,000
Payroll – $100,000
Supplies and materials - $50,000
Other operating expenses - $150,000
7) Multiply the amount of each funding source by cost category by the
percentage calculated in step #3
Example:
Administration
AEL federal:
Payroll – $30,000 x 4.8% = $14,40
Supplies and materials - $10,000 x 4.8% = $480
Other operating expenses - $10,000 x 4.8% = $480,000
AEL state:
Payroll – $60,000 x 9.5% = $5,700
Supplies and materials - $10,000 x 9.5% = $950
Other operating expenses - $30,000 x 9.5% = $2,850
TANF federal:
Payroll – $30,000 x 14.2% = $4,260
Supplies and materials - $10,000 x 14.2% = $1,420
Other operating expenses - $10,000 x 14.2% = $1,420
TANF state:
Payroll – $30,000 x 19.1% = $5,730
Supplies and materials - $10,000 x 19.1% = $1,910
Other operating expenses - $10,000 x 19.1% = $1,910
EL Civics:
Payroll – $200,000 x 23.8% = $47,600
Supplies and materials - $25,000 x 23.8% = $5,950
Other operating expenses - $25,000 x 23.8% = $5,950
Professional Development:
Payroll – $100,000 x 28.6% = $28,600
Supplies and materials - $50,000 x 28.6% = $14,300
Other operating expenses - $150,000 x 28.6% = $42,900
The total funds available by each funding source
divided by the anticipated number of students =
cost per student per program.
8) Develop a system of internal control to disburse funds by funding
stream – keep in mind the administrative cost caps. Each
disbursement must be tracked to the appropriate cost category and
documented. Funds must not be co-mingled!!
For current contracts, TANF state funds must be expended by the
end of each fiscal year (August 31, 2015) to prevent recapture!!
9) Monitor the budget plan - compare actual cost to the budget and
make periodic adjustments. At the end of a project, the budget must
reflect all reimbursed costs by cost category and funding stream.
Documentation Requirements for Personnel
Support the distribution of wages among specific
activities or cost objectives. Records indicating the
total number of hours worked each day are also
required for nonexempt employees.
Reports must reflect actual activity - budget
estimates do not qualify as support but may be
used for interim accounting purposes. Each report
must account for the total activity for which each
employee is compensated.
Questions?
Please email questions to Fiscal Technical
Assistance at fiscal.ta@twc.state.tx.us.