DSS FISCAL MANUAL Section II - Determination of Allowable/Unallowable Cost

Section II-C Costs Allowable with Prior Federal Approval

The following costs are allowable for state and federal financial participation (SFFP) only when written approval has been granted by the appropriate agency of the state or federal government before the incursion of the costs.

1. Costs Requiring Prior Approval of the Federal Government, Through the Division of Social Services:

a. Prior approval is required for $1,000,000.00 or more noncompetitively acquired data processing equipment and services. For counties, this threshold is based on annual total costs (SFY).

b. Competitively acquired data processing equipment and services to meet county needs and costing $5,000,000 or more per acquisition requires prior approval. For counties, this threshold is based on annual total costs (SFY).

c. Costs of space:

(1) for periods of non-occupancy

(2) acquired under rental-purchase or a lease with option-to-purchase

d. Costs of facilities, equipment, or other capital assets, as well as repairs which materially increase the value or useful life of existing capital assets.

e. Contributions to a reserve for self-insurance.

Prior approval is required for self-insurance plans which are intended to be reserves for the replacement of property (e.g. buildings and equipment).

Self-insurance plans which satisfy the provisions of "employee fringe benefits" do not require prior approval since such plans would be considered "fringe benefits". In addition to satisfying the provisions of page II F-43, the plan must be approved by the County Commissioners, be on file, and be applicable to all county employees (not just DSS employees). The Division of Cost Allocation of the HHS Regional Office recommends that counties include descriptions of the provisions and methodology of the (fringe benefit) self-insurance plan and other fringe benefits in the narrative portion of their indirect cost plan. A description of any applicable (fringe benefit) self-insurance plan should be included (e.g. workmen's compensation, health insurance, etc.).

The following policies apply to self-insurance plans that qualify as employee fringe benefits.

(l) No prior approval from the State Office is required.

(2) No annual adjustment to actual cost is required. An adjustment to the reserve may be necessary if the amount in the reserve exceeds a reasonable amount. There are two acceptable ways of determining if the reserve amount is reasonable: (a) if it has been shown by actuarial study to be reasonable or (b) if the reserve amount does not exceed the amount of actual claims paid for the prior three year period.

(3) All counties are advised to conduct an annual review of their self-insurance plans. The review should indicate whether or not the reserve contains a reasonable amount (as discussed in Item 2 above). A review of the reserve might reveal that adjustments need to be made in the rates (e.g., if the reserve exceeds the amount of claims paid in the prior three year period).

f. Costs of management studies performed by governmental agencies other than the Division of Social Services.

g. Prior Approval Requirement for Automated Data Processing Equipment and/or Services. - Acquisitions of automated data processing equipment (hardware and software) and services are governed by federal regulations of the Department of Health and Human Services (DHHS) and the Department of Agriculture, Food and Nutrition Service (USDA). Prior written approval must be obtained from both the DHHS Division of Information Resource Management (DIRM) and the federal government (if DHHS and/or USDA will be participating in any of the costs) in any of the following circumstances:

(1) The total acquisition cost is $5,000,000 or greater and acquired competitively (45 CFR 95.611, 7 CFR 277.18(c), Policy IIA1).

(2) The total acquisition cost is $1,000,000 or greater, and is acquired non-competitively from non-governmental sources (45 CFR 95.611, 7 CFR 277.18(c), Policy IIA2).

(3) Federal financial participation (FFP) is being requested at an enhanced rate, regardless of the acquisition cost (45 CFR 95.611, 7 CFR 277.18(c)). This applies to equipment being acquired to access the Eligibility Information System (EIS) (Policy IIA3).

If an acquisition does not require DIRM and federal approval under the three circumstances above, DIRM prior written approval is required, regardless of acquisition cost, if the project includes any of the following (Policy IIA4):

(1) Development of software, custom modifications of purchased software, or purchase of software other than off-the-shelf software commercially available to the public for general business or personal use.

DIRM and/or federal approval is obtained by submitting an Advance Planning Document (APD) to the Division of Social Services (45 CFR 95.611, 7 CFR 277.18(c), Policy IIA). Prior written approval thresholds for county acquisitions are determined based on the cumulative total for the fiscal year (Policy IIG).

Prior approval is not required for certain types of acquisitions and FFP is available at the regular rates if the acquisition does not require prior written approval by DIRM and/or the federal government as described above. An ADP Equipment Acquisition Plan (Policy Appendix 1) must be filed with the Division of Social Services prior to the acquisition (Policy IIB). Acquisitions in this category are (Policy IIB1-IIB2):

(1) Terminals, personal computers, personal computer printers or workstations up to the level of one such device per worker.

(2) System printers up to one per three workers or one per floor or one per site, whichever is greater.

(3) Local area networks or minicomputers when necessary to maximize the benefit of such devices and other devices as required to connect to the state network.

(4) Off-the-shelf software commercially available to the public for general business or personal use.

Acquisitions by central county data processing facilities of data processing equipment and services from commercial sources that are acquired primarily to support public assistance programs are subject to the prior written DIRM and federal approval requirements. Data processing equipment and services are considered to be primarily acquired to support public assistance programs when these programs may reasonably be expected to either be billed for more than fifty percent (50%) of the total charges made to all users of data processing equipment and services during the time period covered by the service agreement or directly charged for the total cost of the purchase or lease of data processing equipment or services (45 CFR 95.605).

h. Building space and related facilities. - The cost of space in privately or publicly owned buildings used for the benefit of the grant program is allowable subject to the conditions stated below. The total cost of space, whether in a privately or publicly owned building, may not exceed the rental cost of comparable space and facilities in a privately-owned building in the same locality. The cost of space procured for grant program usage may not be charged to the program for periods of nonoccupancy, without authorization of the grantor Federal agency.

i. Capital expenditures. - The cost of facilities, equipment, other capital assets, and repairs which materially increase the value or useful life of capital assets is allowable when such procurement is specifically approved by the Federal grantor agency. When assets acquired with Federal grant funds are (a) sold; (b) no longer available for use in a federally-sponsored program; or (c) used for purposes not authorized by the grantor agency, the Federal grantor agency's equity in the asset will be refunded in the same proportion as Federal participation in its cost. In case any assets are traded on new items, only the net cost of the newly-acquired assets is allowable.