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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Earned Federal Funds and Indirect Cost Reimbursements to the General Revenue Fund (APS 023)

Issued: Nov. 22, 2005
Updated: June 8, 2018 – View Changes

FPP A.017

Overview

Applicable to

State agencies that administer federally funded programs. (Note: This FPP does not apply to institutions of higher education.)

Policy

State agencies are responsible for collecting and depositing Earned Federal Funds (EFF) and indirect cost reimbursements to the General Revenue (GR) Fund.

Legal cite

Government Code, Sections 772.009 (i), 2106.001-2106.007; General Appropriations Act (GAA), Article IX, Section 13.11, 85th Legislature, Regular Session; OMB Circular A-87.

Legend

CAPPS logo

This icon indicates information applicable to the Centralized Accounting and Payroll/Personnel System (CAPPS).

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Definitions

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

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.”

Benefit-related reimbursements

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:

Step 1

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.

Step 2

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.

Step 3

To calculate the amount of additional EFF needed to cover benefits, multiply salaries and wages financed by GR in lieu of EFF by 35.12 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 35.12 percent.

X = Amount of additional EFF revenue needed to cover benefits associated with wages paid from GR.

See Appropriation Year 2018 Earned Federal Funds Benefits Schedule

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:

  1. Describes the costs of each agency’s statewide support services,
  2. Allocates to each state agency an appropriate portion of these costs, and
  3. 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.

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Comptroller Responsibilities

EFF is appropriated to the agencies as GR and should be established as committed. Although the 85th Legislature provided the GR in lieu of EFF, restrictions and amounts appropriated to each agency are identified in GAA, Article IX, Section 13.11.

What does the Comptroller’s office do?

The Comptroller’s Appropriation Control section is responsible for:

  • Establishing Appropriation 70000 in the GR fund to receive all EFF;
  • Establishing Appropriation 25311 in the GR fund to lapse deficient collections or appropriate excess EFF;
  • Monitoring revenues deposited into Appropriation 70000;
  • Providing the Legislative Budget Board (LBB) and Governor a quarterly report identifying EFF deposited by each agency;
  • Monitoring unexpended balance (UB) amounts between AY 18 and AY 19; and,
  • At the end of the third quarter, reducing the appropriated general revenue by the amount that an agency’s EFF collections are insufficient to cover three-fourths of the amount of general revenue appropriated in lieu of EFF. Deposits will continue to be monitored during the fourth quarter and GR will be reinstated/lapsed as appropriate.

The Treasury Operations Division of the Comptroller’s office directs all interest earned on separate federal fund accounts to the administering agency’s EFF Appropriation 70000.

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Depositing Funds

State Agencies’ Responsibilities

Agencies must establish the agency fund profile (D23) where the agency will identify the appropriated fund, GAAP fund and GAAP fund type. Agencies must also establish a program cost account (PCA) on the PCA 26 profile that infers Program Code 3992, AF 0001 or 0369, Generally Accepted Accounting Principles (GAAP) Fund 0001 for Appropriations 70000 and 25311.

Agencies receiving EFF must deposit those funds into Appropriation 70000 in the current appropriation/fiscal year. If the EFF portion is known at the time, the funds should be deposited directly to Appropriation 70000 using, but not limited to, comptroller objects 3602, 3702, 3726, 3745, 3750, 3773, 3851 or 3971. Indirect cost recoveries should be deposited using comptroller object 3726 or reclassified from comptroller object 3702 upon being identified as indirect cost recoveries.

Depositing earned federal funds

The table below explains how to deposit EFF using Document Type D, Batch Type 2:

Agency T-code/title Appropriation Number COBJ Appropriated Fund/Agency Fund/PCA
Affected Agency 195/Record Deposit of Revenue in Treasury 70000 3602/3702/3726/3745/ 3773/3851 0001/0369 Determined by Agency/Determined by Agency
CAPPS logo

CAPPS agencies tracking Appropriation 70000 in CAPPS can create a deposit using T-code 195 in CAPPS, then send that transaction to USAS. T-code 195/195D must be setup in CAPPS before use.

Depositing funds from capital asset sales

The table below explains how to deposit EFF from capital asset sales using Document Type D, Batch Type 2:

Agency T-code/title Appropriation Number COBJ Appropriated Fund/Agency Fund/PCA
Affected Agency 191/Record Bond Proceeds – Sale of Capital Assets 70000 3750 0001/0369 Determined by Agency/Determined by Agency
CAPPS logo

CAPPS agencies tracking Appropriation 70000 in CAPPS should enter the transaction directly into USAS and create a GL journal in CAPPS using a MAN T-code.

Federal Pass-through funds classified as earned federal funds

The table below explains how to reclassify funds originally deposited as federal pass-through funds that should be classified as EFF using Document Type J, Batch Type 2.

Agency T-code/title Appropriation Number COBJ Appropriated Fund/Agency Fund/PCA
Affected Agency 145R Determined by Agency 3971 Determined by Agency/Determined by Agency/Determined by Agency
Affected Agency 145/Deposit of Pass-Thru Revenue in Treasury 70000 3971 0001/0369 Determined by Agency/Determined by Agency

Note: It is important not to cross D23 funds because this results in problems with the reconciliation of interagency activities.

CAPPS logo

CAPPS agencies tracking Appropriation 70000 in CAPPS can create a journal using the T-codes above in CAPPS and send that transaction to USAS. T-code 145D/145R must be setup in CAPPS before use.

Earned federal funds received as federal pass-through funds from another state-agency

The table below explains how to deposit federal pass-through funds received using the RTI process:

Agency T-code/title Appropriation Number COBJ Appropriated Fund/Agency Fund/PCA
Transaction Agency – Transfer EFF 274 Determined by Agency 7971 Determined by Agency/Determined by Agency/Determined by Agency
RTI Agency – Receives EFF 273 70000 3971 0001/0369 Determined by Agency/Determined by Agency
CAPPS logo

CAPPS agencies tracking Appropriation 70000 should enter the transaction directly into USAS and create a GL journal in CAPPS using a MAN T-code.

Transfers to Appropriation 70000

The table below explains how to transfer earned credits/indirect cost recoveries/depository interest from a federal fund to the EFF Appropriation 70000 using Document Type J, Batch Type 2:

Agency T-code/title Appropriation Number COBJ Appropriated Fund/Agency Fund/PCA
Affected Agency Reverse Original Deposit T-code Determined by Agency 3602/3702/3726/3745/ 3773/3851 Determined by Agency/Determined by Agency/Determined by Agency
Affected Agency 195/Record Deposit of Revenue in Treasury 70000 3602/3702/3726/3745/ 3773/3851 0001/0369 Determined by Agency/Determined by Agency

Interest on federal funds previously deposited to a separate federal fund should be immediately moved from the federal fund to Appropriation 70000. However, if there is clear direction in the governing agreement to spend interest earnings on a specific federal program, agencies may transfer that portion of interest earned on federal funds for that program to the appropriation and fund where the federal funds will be expended. Any such transfers must be supported with documentation, and a copy of the agreement must be submitted to your appropriation control officer.

CAPPS logo

CAPPS agencies tracking Appropriation 70000 in CAPPS can create a deposit using T-codes 195/195D/195R in CAPPS, then send that transaction to USAS.

American Recovery and Reinvestment Act (ARRA) in Appropriation 70000

Interest earned from ARRA fund balances is currently placed in Appropriation 70000, AF 0369. These amounts may not be expended or transferred unless specific federal guidelines direct otherwise. Sufficient documentation must be submitted to your appropriation control officer before AF 0369 interest earnings can be transferred.

Earned credits and indirect cost recoveries from ARRA activity can be placed in Appropriation 70000, AF 0369. These amounts may not be expended or transferred unless specific federal guidelines direct otherwise.

ARRA interest, earned credits and indirect cost recovery balances count toward the required collections identified in Senate Bill 1, Article IX, Section 13.11, 85th Legislature, Regular Session, 2017.

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Appropriation Authority for Earned Federal Fund Collections Above the Annual-Level

AY 2018

Agencies depositing EFF into Appropriation 70000 above the level identified in GAA, Article IX, Section 13.11 (b) plus benefits are appropriated amounts above that level subject to the following conditions:

  1. At least 30 days prior to budgeting or expending the EFF above the 2018 level, the agency shall report the anticipated amounts and proposed use of these funds to the LBB.
    • For agencies participating in the faster Comprehensive Annual Financial Report (CAFR) (i.e., simplified reporting agencies),
      1. if the letter to LBB is dated before Aug. 1, Appropriation 25311 will be increased in the current AY, and can be expended, encumbered or the unexpended balances can be rolled over to the next AY, or
      2. if the letter is dated after July 31, but before Aug. 29, then Appropriation 25311 will be increased in the current AY but the unexpended balances must then be rolled over to the next AY, or
      3. if the letter is dated Aug. 29 or later, no additional appropriation can be made.
    • For agencies not participating in the faster CAFR (i.e., full reporting agencies),
      1. if the letter to LBB is dated before Aug. 1, Appropriation 25311 will be increased in the current AY, and can be expended, encumbered or unexpended balances can be rolled over to the next AY, or
      2. if the letter is dated after July 31, but before Oct. 1, then Appropriation 25311 will be increased in the current AY but the unexpended balances must then be rolled over to the next AY, or
      3. if the letter is dated Oct. 1 or later, no additional appropriation can be made.

      Example: If a full reporting agency submits a letter dated July 30, 2018, the agency can expend, encumber or UB the funds. If instead this same agency submits a letter dated Sept. 20, then the agency can only roll over the unexpected balance to the next AY.
  2. Notification shall include information regarding the need that will be served with the additional revenue.
  3. Notification shall also identify the impact on established performance targets and measure capital budget authority and full-time-equivalent positions.

Upon confirmation that conditions have been met, the agency’s Appropriation 25311 will be increased by the Comptroller’s office. If you have questions, please contact your agency’s appropriation control officer.

AY 2019

Agencies depositing EFF into Appropriation 70000 above the level identified in GAA, Article IX, Section 13.11 (b) plus benefits are appropriated amounts above that level subject to the following conditions:

  1. At least 30 days prior to budgeting or expending the EFF above the 2019 level, the agency shall report the anticipated amounts and proposed use of these funds to the LBB.
    • For all agencies, if the letter to LBB is dated before Aug. 1, Appropriation 25311 will be increased in the current AY, and must be expended or encumbered by Aug. 31, 2019.
    • If an agency submits a letter dated after July 31, no additional appropriation can be made.
  2. Notification shall include information regarding the need that will be served with the additional revenue.
  3. Notification shall also identify the impact on established performance targets, measure capital budget authority, and full-time-equivalent positions.

Upon confirmation that conditions have been met, the Agency’s Appropriation 25311 will be increased by the Comptroller’s office. If you have questions, please contact your agency’s appropriation control officer.

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Unexpended Balance Authority

AY 2017

There is no UB across the biennium from AY17 to AY18.

AY 2018

Re-appropriation of unexpended balances

GAA, Article IX, Section 13.11 (f), provides for the re-appropriation of the UBs from the amounts identified in Section 13.11 (b) and Section 13.11 (c). Prior to approval of a re-appropriation of unexpended balances, agencies must demonstrate that the remaining balance found within the direct strategies is EFF. Agencies are required to certify the existence of these balances when they request UB authority on the Certification of Unexpended Balance of General Revenue in Lieu of Earned Federal Funds, 2018–2019 Biennium form PDF provided by the Comptroller’s office.

Upon certification, those excess amounts will be transferred to Appropriation 25311 where the UB can then be rolled over to the next fiscal year within the biennium. The rolled over amounts can then be transferred from the rider appropriation to direct strategies as needed. GAA, Article IX, Section 14.01 will not be applicable.

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End-of-Year Balance Appropriation

Comptroller’s office

End-of-year balances in Appropriation 70000, AF 0001 will be transferred to Agency 902 by the Comptroller’s office.

Agencies

Agencies will transfer end-of-year balances in Appropriation 70000, AF 0369 to Agency 902 via the RTI process using RTI # 000369 (T-code 475, COBJ 7972, Texas Identification Number 39029029020000).

CAPPS logo

CAPPS agencies tracking Appropriation 70000 should enter the transaction directly into USAS, then create a GL journal in CAPPS using a MAN T-code.

For questions, please contact your agency’s appropriation control officer.

Changes to this Document
06/08/2018 Updated for clarity
08/18/2017 Updated through the acts of the 85th Legislature, Regular Session
12/30/2016 Updated Earned Federal Funds Benefits Schedule for 2017
01/28/2016 Updated Earned Federal Funds Benefits Schedule for 2016
08/21/2015 Updated through the acts of the 84th Legislature, Regular Session
10/31/2014 Updated Earned Federal Funds Benefits Schedule for 2015
Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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