Earned Federal Funds and Indirect Cost Reimbursements to the General Revenue Fund (APS 023)
Earned federal funds (EFF)
EFF are defined in GAA, Article IX, Section 13.11 (a), as:
“…all moneys received in connection with each entitlement period of a federally funded contract, grant or program, excluding reimbursements under Section 13.06 of this Article, which are not required by the governing agreement to be distributed thereon. Typically, EFF arise from recoveries of costs previously paid from a nonfederal fund source, indirect cost allocations, interest earned on federal funds, and minor sources such as the sale of fixed assets purchased with federal funds.…”
EFF are also defined in Government Code, Section 772.009 (i) (1), as:
“…funds that are received or earned in connection with a federally funded program but that are not required by the governing agreement to be distributed on that program. The term includes indirect cost receipts and interest earned on advances of federal funds.”
Indirect costs are defined in Government Code, Section 772.009 (i) (3), as:
“…costs, as defined by Federal Management Circular A-87 or subsequent revisions of that circular, that are incurred by state agencies in support of federally funded programs and that are eligible for reimbursement from the federal government.”
Federally reimbursable indirect cost is defined in Government Code, Section 2106.001 (1), as:
“…a cost, as defined by the Office of Management and Budget Circular Number A-87 or a subsequent revision of or successor to that circular, that is:
(A) incurred by a state agency in support of a federally funded program, other than a research program funded by a federal grant at an institution of higher education; and
(B) eligible for reimbursement from the federal government.”
Indirect cost is defined in Government Code, Section 2106.001 (2), as:
“…the cost of administering a state or federally funded program and includes a cost of providing a statewide support service. The term does not include the actual costs of the program.”
Federally reimbursed benefits for active and retired state employees are not considered Earned Federal Funds.
Active Employee Reimbursement
Benefit reimbursements for active employees should be returned to the original source of payment. Benefits include:
- Old Age and Survivors Insurance (OASI)
- Old Age and Survivors Insurance and Disability Insurance (OASDI)
- Benefit Replacement Pay (BRP)
- Group Insurance
- Retirement Benefits
Retired Employee Reimbursement
Federally reimbursable expenses for retired employees are limited to group insurance. Benefit reimbursements for retired employees must be deposited to unappropriated General Revenue as required by GAA, Article IX, Section 13.11 (h). Agencies will transfer reimbursements for retired employees in Appropriation 00000, Appropriated Fund (AF) 0001 to Agency 902 via the RTI process using RTI # 103973 (T-code 475, COBJ 7973, Texas Identification Number 39029029020 000).
Calculation of benefit costs
GAA, Article IX, Section 13.11 (g), requires that agencies generate EFF revenue that at a minimum pays for the cost of benefits. To maintain consistency, all agencies shall compute the associated benefits as follows:
Calculate the GR in lieu of EFF ratio as follows:
EFF identified in Section 13.11 (b) divided by Total Method of Finance (MOF) identified in the GAA.
Calculate the amount of salaries and wages financed by GR in lieu of EFF as follows:
Multiply the salaries and wages identified in the GAA by the GR in lieu of EFF ratio.
To calculate the amount of additional EFF needed to cover benefits, multiply salaries and wages financed by GR in lieu of EFF by 33.43 percent.
The formula for calculating the benefits is (B/A * C) * D = X.
A = Total MOF identified in the GAA (excludes any riders and/or bills increasing or reducing appropriations).
B = EFF identified in Section 13.11 (b).
C = Salaries and wages identified in the GAA.
D = Benefits percentage of 33.43 percent.
X = Amount of additional EFF revenue needed to cover benefits associated with wages paid from GR.
Statewide cost allocation plan
Federal law allows state and local governments that administer federal programs to recover indirect costs attributable to managing these programs. State agencies receiving federal funds are also required to prepare an annual indirect cost recovery proposal to recover indirect costs, including the portion of statewide support services allocated to the agency.
The Governor’s Office must prepare a Statewide Cost Allocation Plan (SWCAP) annually that:
- Describes the costs of each agency’s statewide support services,
- Allocates to each state agency an appropriate portion of these costs, and
- Identifies the amount of federally-reimbursable indirect costs in each allocated portion.
Government Code, Chapter 2106 and GAA, Article IX, Section 15.04, provide for the billing of state agencies for statewide costs. The billing procedures, outlined in General Revenue Reimbursements for Statewide Allocated Cost (FPP A.022), ensure that each state agency is billed for support services allocated to the agency under the statewide allocation plan.
When an agency recovers its indirect costs from the federal government, the agency must deposit the amount of money received for federally reimbursable indirect costs into a restricted account, to the credit of the GR fund.