This is the second part of a web page that
provides guidance for local educational agencies (LEAs) about consolidating
administrative funds for eligible federal grant programs awarded under the No
Child Left Behind Act of 2001 (NCLB). The authorizing statute is the Elementary and Secondary Education Act
of 1965 (ESEA), Title IX, Part B, Sec. 9201 and Sec. 9203.
Please note that all of
the examples on this page are provided by TEA for informational purposes only.
You should not interpret the items or amounts as anything other than sample
To budget for a consolidation of administrative
funds, your LEA must first decide which eligible programs it will include in its administrative cost pool.
Next, your LEA must estimate the total cost (direct
and indirect) of administering the programs to be consolidated for the coming school
year. The process you use to estimate administrative needs every year should
not change simply because you are consolidating administrative funds. Your LEA should
estimate its administrative needs while estimating the programmatic needs of
all of your consolidated programs. The process should be a part of creating an
overall budget for your LEA so that you can strike a balance between your LEA’s
administrative needs and its required programmatic activities.
Your estimate must only include administrative
activities that are allowable under any one of the programs that you are
consolidating, and the costs must be reasonable and necessary.
Your estimate should include all direct and
indirect administrative costs. More information about indirect costs (PDF, 495.5 KB) is
available online from TEA.
The following example shows a school district’s
estimated budget of administrative costs for the federal programs included in
its administrative cost pool for a school year.
Administrative Costs Budget
Administrative Cost Pool
2015–2016 School Year
| || ||Amount|
|Direct Administrative Costs||Salaries (one federal programs director)||$75,000|
|Salaries (one Title I coordinator)||$60,000|
|Salaries (one migrant education coordinator)||$60,000|
|Salaries (two administrative assistants)||$80,000|
|Supplies for administrative staff ||$25,000|
|Training for district internal auditor ||$1,000|
| Indirect Administrative Costs||Indirect costs||$120,000|
| Total|| ||$421,000|
This example includes one item, training for the
district’s internal auditor, that is only considered an allowable
administrative cost because the district is consolidating its administrative
funds. This “extra” allowable administrative cost is one of the advantages to
consolidating administrative funds. However, the district still followed the
“reasonable and necessary” principle to estimate the cost, as described below.
Establishing “Reasonable and Necessary”
To establish “reasonable and necessary”
percentages for administrative costs, your LEA must determine that the specific
expenses that you plan to charge to the administrative cost pool are reasonable
Title 2 of the Code of Regulations (CFR),
200.404 indicates that a cost is reasonable if “in its nature and amount, it
does not exceed that which would be incurred by a prudent person under the
circumstances prevailing at the time the decision was made to incur the cost.”
The same section of the CFR also provides the following specific factors your
LEA can use to determine if a particular cost is reasonable:
- Whether the cost is of a
type generally recognized as ordinary and necessary for the operation of the
non-federal entity or the proper and efficient performance of the federal
- The restraints or
requirements imposed by such factors as: sound business practices; arm's-length
bargaining; federal, state, local, tribal, and other laws and regulations; and
terms and conditions of the federal award.
- Market prices for
comparable goods or services for the geographic area.
- Whether the individuals
concerned acted with prudence in the circumstances considering their
responsibilities to the non-federal entity, its employees, where applicable its
students or membership, the public at large, and the federal government.
- Whether the non-federal
entity significantly deviates from its established practices and policies
regarding the incurrence of costs, which may unjustifiably increase the federal
For auditing and monitoring purposes, you must
maintain detailed documentation that demonstrates that the administrative costs
included in the your LEA’s administrative cost pool are reasonable and
Distributing Funds to
the Administrative Cost Pool
Next, you must decide how much money from each
eligible program you will consolidate in the administrative cost pool to meet your estimated administrative needs. You
must make sure that no amount exceeds the maximum percentage for
administrative costs given in statute, or exceeds a percentage that is
reasonable and necessary.
For those programs that do not have a specific
maximum, the percentage you use for administrative costs should not increase significantly
simply because you are consolidating your administrative funds. As mentioned
above, you must still ensure that your program budgets contain sufficient funds
to carry out required programmatic activities. Both TEA monitors and your
independent auditor may require your LEA to provide detailed justifications for
administrative costs that appear to make the percentages of consolidated funds
Your LEA must maintain documentation that shows
the amount of administrative funds from each program for each grant year that your
LEA consolidated for administrative activities, and that the amount
consolidated from each program does not exceed any statutory or regulatory maximum
percentage on administrative funds. The table below is an example of
documentation your LEA should maintain:
Consolidation of Administrative Funds
2015–2016 School Year
|Eligible NCLB Programs||Maximum Percentage for Administrative Costs||Total District Allocation||Amount of Administrative Funds Consolidated||Percentage of Allocation Consolidated|
|Title I, Part A—|
Improving Basic Programs
|Reasonable and necessary||$3,000,000||$270,000||9%|
|Title I, Part C—|
|Reasonable and necessary||$2,500,000||$125,000||5%|
|Title II, Part A—|
|Reasonable and necessary||$400,000||$16,000||4%|
|Title III, Part A—|
| || ||Total||$421,000|| |
Please note that your LEA must ensure that this table
is updated as necessary throughout the school year. For example, if your allocation
of funds for a specific eligible program increases because of carryover funds, or
if you need to increase your administrative costs (staying within any statutory
or regulatory maximum percentage), your table should reflect the change.
LEAs must also consider any limits of direct and
indirect costs. More
information about indirect costs (PDF, 495.5 KB) is
available online from TEA. You should also consult the program guidelines for
each grant for more specific information about direct and indirect costs for
Please go to the third part of this web page for information about
TEA approval and accounting requirements for consolidating administrative
For more information about
the consolidation of administrative funds, please contact the TEA Help Desk and enter “consolidation of
administrative funds” in the subject field.
For more information about
the federal flexibility initiative, please contact Terry Reyes in the Office
for Grants and Federal Fiscal Compliance at firstname.lastname@example.org.