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

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 citation

Government Code, Sections 772.009 (i), 2106.001-2106.007; General Appropriations Act (GAA), Article IX, Section 13.10, 88th Legislature, Regular Session; OMB Uniform Guidance 2 CFR part 200.

Legend

Definitions

Earned federal funds (EFF)

EFF are defined in GAA, Article IX, Section 13.10 (a), as:

“…all moneys received in connection with each entitlement period of a federally funded contract, grant or program, excluding reimbursements under Section 13.05 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 13.10 (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 13.10 (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:

Step 2

Calculate the amount of salaries and wages financed by GR in lieu of EFF as follows:

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 30.33 percent.

See Appropriation Year 2024 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.

Comptroller Responsibilities

EFF are appropriated to the agencies as GR and should be established as committed. Although the 88th Legislature provided the GR in lieu of EFF, restrictions and amounts appropriated to each agency are identified in GAA, Article IX, Section 13.10.

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 28310 in the GR fund to reduce 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 24 and AY 25; 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/reduced 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.

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 28310.

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

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

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.

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

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.

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 GAA, Article IX, Section 13.10, 88th Legislature, Regular Session, 2023.

Federal legislation related to coronavirus relief in Appropriation 70000

Interest earned on fund balances from the federal Coronavirus Relief Fund (CRF) appropriated from the U.S. Treasury to the state of Texas under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as well as earned credits and indirect cost recoveries from CRF activity, should be deposited to Appropriation 00000, AF 0325 and then, as soon as practicable, transferred to the office of the governor. Interest, earned credits and indirect cost recovery balances related to the federal CRF do not count toward the required collections identified in GAA, Article IX, Section 13.10, 88th Legislature, Regular Session, 2023.

Interest earned on fund balances from other federal coronavirus relief funding—including from provisions of the CARES Act unrelated to the federal CRF appropriation, the Families First Coronavirus Response Act (FFCRA), or the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act—as well as earned credits and indirect cost recoveries from related activity, can be expended by the recipient agencies only in accordance with federal guidelines. Interest, earned credits and indirect cost recovery balances related to other federal coronavirus relief funding do not count toward the required collections identified in GAA, Article IX, Section 13.10, 88th Legislature, Regular Session, 2023.

American Rescue Plan Act of 2021 (ARPA)

Interest, earned credits, and indirect cost recoveries from ARPA must be deposited to General Revenue as follows:

• Earned credits and indirect cost recoveries from ARPA activity must be transferred to Appropriation 70000, AF 0001 in the current appropriation/fiscal year.
• Interest earned on ARPA fund balances by ARPA prime grant recipients, must be transferred to Appropriation 70000, AF 0001 in the current appropriation/fiscal year.
• Interest earned on ARPA fund balances by ARPA subrecipients must be returned to the governor’s office as part of the pass-through grant agreement for this funding. Subrecipients should contact the governor’s office for instructions on transferring the interest earned on ARPA balances.

Appropriation Authority for Earned Federal Fund Collections Above the Annual Level

AY 2024

Agencies depositing EFF into Appropriation 70000 above the level identified in GAA, Article IX, Section 13.10 (b) plus benefits are appropriated amounts above that level subject to the following conditions:

1. At least 30 days before budgeting or expending the EFF above the 2024 level, the agency shall report the anticipated amounts and proposed use of these funds to the LBB.
   • For GR consolidated agencies,
     1. if the letter to LBB is received by Aug. 1, Appropriation 28310 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 received after Aug. 1, but before Aug. 31, then Appropriation 28310 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 received Aug. 31 or later, no additional appropriation can be made.
   • For full reporting agencies,
     1. if the letter to LBB is received by Aug. 1, Appropriation 28310 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 received after Aug. 1, but before Oct. 1, then Appropriation 28310 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 received Oct. 1 or later, no additional appropriation can be made.
     
     Example: If a full reporting agency’s letter is received on July 30, 2024, the agency can expend, encumber or UB the funds. If instead this same agency’s letter is received on Sept. 20, 2024, 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 28310 will be increased by the Comptroller’s office. If you have questions, please contact your agency’s appropriation control officer.

AY 2025

Agencies depositing EFF into Appropriation 70000 above the level identified in GAA, Article IX, Section 13.10 (b) plus benefits are appropriated amounts above that level subject to the following conditions:

1. At least 30 days before budgeting or expending the EFF above the 2025 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 received by Aug. 1, Appropriation 28310 will be increased in the current AY, and must be expended or encumbered by Aug. 31, 2025.
   • o If an agency’s letter is received after Aug. 1, 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 28310 will be increased by the Comptroller’s office. If you have questions, please contact your agency’s appropriation control officer.

Unexpended Balance Authority

AY 2024

Re-appropriation of unexpended balances

GAA, Article IX, Section 13.10 (f), provides for the re-appropriation of the UBs from the amounts identified in Section 13.10 (b) and Section 13.10 (c). Prior to approval of a re-appropriation of unexpended balances, agencies must demonstrate 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, 2024–2025 Biennium form PDF provided by the Comptroller’s office.

Upon certification, those excess amounts will be transferred to Appropriation 28310 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 transferability limitations will not be applicable.

AY 2025

There is no UB across the biennium from AY25 to AY26.

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).

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