Module 8: HHS Cost Principles and 45 CFR Part 75

Learn the administrative requirements, cost principles, and requirements for an ANA grant award.

What do you need to know to make sure you're spending ANA grant funds in a way that is responsible and legal? The HHS Cost Principles, defined in 45 CFR Part 75, Subsection E, describe how to spend ANA grant funds responsibly. In order for any grant funded cost to be allowable, it must be necessary and reasonable, conform to the terms of the award, be accorded consistent treatment, be in accordance with Generally Accepted Accounting Principles, and be adequately documented. Subsection E also describes principles of indirect costs; and delineates between costs that are allowable, allowable with prior approval, and not allowable.

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45 CFR Part 75: Read the full text on eCFR.gov
2021 ANA Post Award Manual: For a deeper dive on 45 CFR Part 75, see pages 127-154 of the manual. Note: Not all content in the ANA Post Award Manual may be relevant to ARP grant recipients.
ANA Grants Management Toolkit: Get tools and samples policies and procedures designed to comply with 45 CFR Part 75.

Speaker 1 (00:00):
Reviewing the ANA cost principles. 45 CFR Part 75,Subsection E describes how to spend ANA funds responsibly.
Speaker 2 (00:15):
Okay. This is a big deal, the cost principles. Frequently,they're the stepchild to the financial management, but cost principles areequally important and deserve attention. The first thing to look at is what arethe factors that affect the allowability of costs? They have to be necessary and reasonable. They might be allowed. They also have to be necessary for your project, and it has to be a reasonable cost. I get calls on reasonableness allthe time from CPAs doing audits. That's one area I know that gets questioned.I've spoken to this a little bit, but also remember if you can approve anexpenditure, it has to be necessary, it has to be reasonable.
Speaker 2 (01:06):
Conform to the cost principles of the federal award, whichis what we're learning right now. Another one that needs to be carefullywatched is be accorded, consistent treatment. If you're renting an office spaceand one program has more money than the others, so you'll say that, "Well,they'll just pay the rent." You can't do that. If you're going to chargeone program rent, you have to charge them all rent. You're going to charge oneprogram, $10 a square foot. You can't charge another program, $5 a square foot,because they don't have much money. You have to have consistent treatment inhow you allocate expenses and how you charge them off. That's a real, realimportant component to look at.
Speaker 2 (01:55):
Another thing is that you have to be in accordance withgenerally accepted accounting principles. Diane's office takes care of that.All costs have to be adequately documented. Please have a rule within yourorganization, I know tribes have this, that if you don't have paper to supportan expense to put behind it, it doesn't go anywhere. You have to have sourcedocumentation. This is for your federal expenditures, it's also for yournon-federal expenditures, the component of this project. Always check these offin your head. I sit there and do necessary, reasonable, I do consistenttreatment, and I do adequately documented. I mean, I use the big three, what Icall the big three you guys, always do the big three. Your system should ensurethat it meets gap requirements, and by doing the big three I'm conforming tocost principles. All right.
Speaker 2 (03:00):
They do speak to indirect cost and the, you do speak toindirect cost and the cost principles. One, the purpose of indirect is toreduce the administrative burden on an organization or a tribe or a state.There is a provision that allows for a one extension up to four years. Those ofyou that deal with indirect know it's very challenging to negotiate every yearand go from provisional to final if that's the way your negotiation. The bigdeal is the de minimis rate. For smaller organizations or organize, I betterqualify that, that do not have a current indirect costs rate, a negotiatedcurrent indirect cost rate, you are allowed to use the de minimis rate of 10%.Now, currently in 45 CFR part 75, it says if you have never had a negotiatedindirect cost rate. That was changed last year within 2 CFR part 200 to say, ifyou do not have a current rate, because we have some smaller groups that weretold they had to negotiate a rate eight years ago, and they were told they hadto negotiate a rate so they did and now they can't get into the de minimis.
Speaker 2 (04:22):
This now, the new, it changed to 2 CFR part 200 allows youto do that. I asked Tim Chappelle if HHS was going to make that change in theircodification, and he didn't answer me, but always talk to Tim, and always put itin your applications. I think Tim would go, I personally think Tim would goalong with it because it's in 2CFR, and he is just such an advocate for all ofyou, for all of the ANA recipients, but again, we'll see. We'll see.
Speaker 2 (05:04):
I'm not going to speak too much. We can indirect isanother topic that we can talk days on, but let's go into the selectiveelements of cost.
Speaker 2 (05:15):
Selective elements of cost, and costs are eitherallowable, allowable with prior approval, or they're not allowable at all. Nowsome of the, I'm focusing on, my red button is not allowable, I am somewhatconscious of allowable with prior approval, and those are usually ones we don'tdo every day, but the definitely not allowable like alcoholic beverages are notallowable, shocker, alumni activities aren't, bad debts aren't, commencementand convocation costs, this really addresses the colleges and universities, butthere's some exceptions. Then contributions and donations, again there's someexceptions. Entertainment costs. If you're inviting entertainment, that doesn'tmean some planned activities you have. What they're referring to is if your ANAprogram specialist comes out and does a site visit when they can travel againand you take them out to dinner, you can't pay for that dinner with your ANAgrant funds.
Speaker 2 (06:18):
Lines or penalties is one, general cost of government,lobbying, read the regulations, and what's another one, student activity costs.If you look in the manual for this on page 175 and 176, I've done a cheat sheetfor you, or we've done a cheat sheet for you where we've listed all of thedifferent selected elements of cost, and then we've checked if it's allowable,if it requires prior approval, like equipment requires prior approval,renovation or conversion requires prior approval, and then those that aren'tallowable. Don't just use this cheat sheet. If you have questions about a cost,go in and look at the actual regulation. Go in and look at the actualregulation. I reference it all the time, and I think I know these things aswell as anybody. I do think it's important to actually use the regulations andgo into the regulation.
Speaker 1 (07:23):
If you have any questions or simply need help with thisprocess, please reach out to your local TTA center for free technicalassistance.
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Up next

Module 9: Semi-Annual ARP Progress Report

Due April 30, Oct. 30 via SmartSheets

Training Videos

Module 1: Getting Started – ARP Grant Recipient Orientation

Module 3: Due Semi-Annually (and Annually) – Financial Financial Report (FFR) (a.k.a. FSR)

Module 4: GrantSolutions Overview

Module 5: Budget Revision Amendments

Module 6: No Cost Extension Amendments

Module 7: Change in Key Personnel Amendments

Module 8: HHS Cost Principles and 45 CFR Part 75

Module 9: Semi-Annual ARP Progress Report

Module 10: Final ARP Post-Project Progress Report

Module 8: HHS Cost Principles and 45 CFR Part 75

Learn the administrative requirements, cost principles, and requirements for an ANA grant award.

Up next

Module 9: Semi-Annual ARP Progress Report

Training Videos

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