Without knowledge of a federal grant's true cost – direct PLUS indirect costs – an agency cannot sustain grant-funded projects. Learn how HdL can support your city with indirect cost recovery.
How do local governments account for the time a payroll clerk spends managing grant-funded projects? Or track the costs associated with IT’s efforts to manage new police body cameras procured with federal grants? Is the general fund subsidizing grant-funded programs? City and county finance departments lack the resources and time to diligently track and calculate the answers. Without knowledge of the true cost – direct PLUS indirect (often hidden) costs – of a grant, an agency cannot sustain it.
Case in Point…
Equipping law enforcement with body cams became the new norm several years ago. They facilitate transparency, accountability, and protection for police officers and civilians, thus proving to be a highly valuable asset. One particular City’s* police force applied for a police body camera grant from the federal government and did not do an assessment of what it was going to cost to implement before applying. Regardless, the application was reviewed and approved by the Department of Justice, and the City was awarded the funds.
The body camera equipment was purchased and the program was implemented, but the agency quickly realized it was creating a burden on their general fund. Indirect costs were incurred across multiple departments – the City Clerk was burdened with a significant increase in open records requests for body cam footage, IT dealt with the unexpected extra storage costs and efforts to maintain the camera footage, and the City Attorney saw an increase in litigation associated with the increased transparency of the program. These are just a few examples contributing to a general fund subsidy of over $2.6 million annually. This was over 5 times more than the City actually received for the grant.
Had the City known the indirect costs involved, they could have 1) passed on the grant, 2) put it on the ballot for public vote, or 3) possibly raised sales tax to cover some or all of the increased general fund cost. Going forward, they have the awareness to prevent such subsidies and remain sustainable with gained insight into the true cost of their grant programs.
Indirect Costs Revealed…
HdL’s recent collaboration with eCivis, the most widely used Saas-based grants management solution in government, has enabled us to problem solve for the hidden costs associated with federal grants. Together, we walk agencies through a Cost Allocation Plan (CAP), an Indirect Cost Rate Proposal, and a Negotiated Indirect Cost Rate Agreement (NICRA).
In plain English, we provide insight about applying for and accepting grants, handle the data collection and analysis thus alleviating pressure on staff, and calculate all of the subsidized staff functions and time spent managing grant funded programs. We help agencies better understand the true cost so they can be properly reimbursed.
We start the process by collecting an agency’s financial statements and CAP. For agencies without a CAP in place, we create one. Additional information about the extent of work that central support departments, such as IT, finance, building maintenance and others provide is gathered at this point as well.
We funnel all data through eCivis’ proprietary software to generate an indirect cost rate that is then used for rate negotiations, an often-overlooked step in indirect cost recovery. We then review the agency’s grant portfolio, with a two-year look-back, through the lens of the newly negotiated indirect cost rate. This allows us to identify drawdown claims, requests to transfer money from the grant fund to the agency, ensuring maximum reimbursement for a program. The agency receives reimbursements into the general fund un-restricted, leaving no ‘money on the table.’
*The City requested to remain anonymous.
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