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Administrative Cost Information but Differences in Cost Caps and 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

December 2014: 

Grants Management: 

Programs at HHS and HUD Collect Administrative Cost Information but 
Differences in Cost Caps and Definitions Create Challenges: 

GAO-15-118: 

GAO Highlights: 

Highlights of GAO-15-118, a report to congressional requesters. 

Why GAO Did This Study: 

The federal government spends billions of dollars on various grants to 
achieve diverse purposes. The total cost of a grant includes both 
program costs that directly support the grant's mission and services 
and administrative costs to run the program. These administrative 
activities, such as managing finances, are essential. It is important 
for agencies to track the cost of these activities to provide 
accountability for efficient use of federal resources. 

GAO was asked to review how costs associated with the administration 
of grants are tracked and the availability of this information. GAO 
examined (1) the extent to which selected federal agencies and 
grantees have mechanisms and guidance in place to distinguish between 
administrative and program costs and to facilitate the availability of 
these data to Congress and the public; and (2) the extent to which 
there are challenges that hinder the comparability of grant 
administrative cost data. For this review GAO selected six grant 
programs—three in HHS and three in the Department of Housing and Urban 
Development (HUD). Agencies and grant programs were selected in part 
based on obligation amounts and grant types. GAO reviewed each program'
s statutes, regulations, guidance, and grant documents, as applicable, 
and interviewed agency officials. Although GAO's findings are not 
generalizable, they are indicative of the wide variation associated 
with the mechanisms and guidance for tracking grant administrative 
costs. 

What GAO Found: 

All six of the grant programs GAO reviewed had mechanisms in place to 
capture the administrative costs charged to their grant programs, 
either via a computerized system or paper reporting. All the programs 
reported that they reviewed their grantees' costs for appropriateness. 
Two of the programs make administrative cost data available online. 
The programs GAO reviewed track administrative costs in different 
ways. For some programs administrative and program costs are reported 
separately, while for others they are included in the same line items. 
Administrative costs reported to the federal government may understate 
the actual cost to administer a grant program. GAO found examples of 
grantees absorbing part of the costs to administer a grant. Some 
primary grant recipients stated that when such costs were not 
reimbursed by the federal grant, they would cover those expenses 
themselves. Another grantee said he relies on state appropriations to 
cover the majority of administrative costs. 

GAO identified two factors that hinder the comparability of 
administrative cost data in the programs it reviewed. First, is the 
existence of cost caps. These caps limit the amount of the grant that 
may be charged as administrative costs, and thereby affect what is 
reported to the federal government as administrative costs. For the 
programs GAO reviewed caps ranged from 5 to 26 percent, with one 
program having no cap. This variation can make some programs look more 
administratively expensive than others. Second, differences in what is 
defined as an administrative cost can present an even greater 
challenge to comparing costs across programs. Programs have different 
missions, priorities, services, and clients; as a result definitions 
of administrative costs vary from program to program. Therefore, 
different programs may treat similar costs differently. A cost that 
may be classified as administrative in one program may be considered a 
direct program delivery cost by another. For example, the salary of an 
employee who enrolls participants in one Department of Health and 
Human Services (HHS) program is considered a program cost but an 
employee who holds a similar position determining the eligibility of 
participants in another HHS program may be considered an 
administrative cost depending on the state where it is administered. 
This variation in definitions means that a program with high 
administrative costs may not be less efficient than a program with low 
administrative costs. 

Given these issues, it is challenging to collect comparable 
information for different grant programs. Any use of information on 
administrative costs needs to recognize these concerns particularly 
when comparing programs with different types of objectives, projects, 
or services. Comparisons of costs may be appropriate when reviewing 
programs that fulfill similar missions or provide similar services. 
However, comparisons across different types of grant programs should 
be made with caution. 

GAO received and incorporated, as appropriate, technical comments from 
HHS. HUD did not provide comments. 

View [hyperlink, http://www.gao.gov/products/GAO-15-118]. For more 
information, contact Susan J. Irving at (202) 512-6806 or 
irvings@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Agencies Reviewed Have Mechanisms in Place to Collect Data on Federal 
Grant Administrative Costs, but These Data May Not Reflect Actual Cost 
of Administration: 

Variations in Administrative Cost Caps and Definitions Hinder 
Meaningful Comparisons of Grant Administrative Cost Data across 
Programs: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Selected Grant Programs, Administrative Costs Caps, and 
Administrative Cost Definitions: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

Table I: Selected Grant Programs: 

Figures: 

Figure 1: Grant Life Cycle for Federal Grant-Making Agencies and Grant 
Recipients: 

Figure 2: Two Options for Charging Administrative Costs under OMB 
Guidance on Cost Principles: 

Abbreviations: 

AITR: Allergy, Immunology and Transplantation Research: 

CCDF: Child Care and Development Fund: 

CDBG: Community Development Block Grant: 

HHS: Department of Health and Human Services: 

HOME: HOME Investment Partnerships Program: 

HUD: Department of Housing and Urban Development: 

MHSC: Multifamily Housing Service Coordinators: 

NIH: National Institutes of Health: 

OMB: Office of Management and Budget: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

December 12, 2014: 

Congressional Requesters: 

The federal government provides grants to a wide range of recipients--
including state and local governments, for-profit and nonprofit 
entities, and public and private universities--to achieve national 
objectives. The government spends a substantial amount of money on 
these grants. According to the Office of Management and Budget (OMB), 
state and local governments alone received about $546 billion in 
federal grants in fiscal year 2013.[Footnote 1] The total cost of a 
grant includes two components: (1) program costs that directly support 
the grant's mission and services; and (2) administrative costs, such 
as payroll and clerical support, to run the grant program. It is 
important for agencies that administer grants to track these costs--
including the portion spent to reimburse grantees for their 
administrative costs--because such tracking allows the agencies to 
provide accountability for efficient use of resources. Further, 
tracking these costs helps agencies assess the changes in the balance 
between grant administrative costs and program costs. However, as 
budgets grow more constrained, this drive for efficiency can create a 
tension between a program's capacity to deliver services and the 
actual administrative costs of doing so. 

The recently enacted Digital Accountability and Transparency Act of 
2014 (DATA Act) is intended to increase accountability and 
transparency of federal spending and establish government-wide 
financial data standards.[Footnote 2] Towards this end, OMB and the 
Department of the Treasury (Treasury) are developing these standards, 
which could include administrative spending.[Footnote 3] In addition, 
legislation has been introduced in Congress that could also affect how 
agencies publicly report on program administrative costs.[Footnote 4] 
As agencies implement the DATA Act and as Congress examines whether to 
require additional reporting on administrative costs, it is important 
to consider what these costs represent, how they are calculated, and 
the challenges in making comparisons across different programs. 

You asked us to review how costs associated with the administration of 
grants are tracked and the availability of this information. This 
report examines (1) the extent to which selected federal agencies and 
grantees have mechanisms and guidance in place to distinguish between 
administrative and program costs and to facilitate the availability of 
these data to Congress and the public; and (2) the extent to which 
there are challenges that hinder the comparability of grant 
administrative cost data. To address these objectives, we selected two 
agencies for this review--the Departments of Health and Human Services 
(HHS) and Housing and Urban Development (HUD). We selected HHS because 
it manages the largest share of federal grants in terms of both 
obligation amount and number of grant programs. We included HUD to 
obtain management perspectives on a different set of programs and 
issues. We then selected three grant programs at each of these 
agencies with the aim of identifying both higher-dollar value grants 
relative to other agency programs as well as a variety of types of 
grants (project and formula) and grantees (state and local 
governments, nonprofit organizations, and for-profit entities). 

At HHS we selected the following grant programs: 

* Child Care and Development Fund (CCDF); 

* Head Start; and: 

* Allergy, Immunology and Transplantation Research (AITR). 

At HUD we selected the following grant programs: 

* HOME Investment Partnerships Program (HOME); 

* Community Development Block Grant (CDBG); and: 

* Multifamily Housing Service Coordinators (MHSC). 

See table 1 in the background for information on each of these 
programs. 

To determine the extent to which selected federal agencies and 
grantees have mechanisms and guidance in place to distinguish between 
administrative and program costs, we reviewed regulations, program 
guidance, grant documents, and statutes as applicable for each 
program. Additionally, we interviewed agency officials responsible for 
each of the selected grant programs to understand how these programs 
collect administrative cost data; the guidance, training, and 
technical assistance they provide grantees; and their requirements and 
experiences with determining and reporting administrative costs. To 
inform our work on government-wide efforts to collect grant 
administrative cost information, we interviewed staff at OMB's Office 
of Federal Financial Management. 

To examine the extent to which there are challenges that hinder the 
comparability of grant administrative cost data we used OMB data on 
federal grants to select states with varying amounts of federal grant 
obligations.[Footnote 5] We selected Massachusetts and New Hampshire 
as states receiving higher and lower amounts of federal grant dollars, 
respectively. We then selected primary grant recipients within those 
states with the highest grant obligation for each selected grant 
program in that state. To better understand grant administrative 
costs, grant management, and cost principles we reviewed our previous 
reports on these topics as well as those by the Congressional Research 
Service and the Congressional Budget Office.[Footnote 6] See appendix 
I for more details on program selection and our overall objectives, 
scope, and methodology. 

We conducted this performance audit from January 2014 to December 2014 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

The federal government provides grants to a variety of recipients as a 
form of financial assistance to accomplish a particular public purpose 
authorized by law. Grant recipients include for-profit and nonprofit 
entities; public and private universities; and state, local, and 
tribal governments. Some grant programs also permit the granting of 
funds from primary grant recipient to subawardees. While there is 
substantial variation among grant types, competitively awarded federal 
grants generally follow a life cycle comprising various stages--pre-
award (announcement and application), award, implementation, and 
closeout--as shown in figure 1. 

Figure 1: Grant Life Cycle for Federal Grant-Making Agencies and Grant 
Recipients: 

[Refer to PDF for image: illustration] 

Stage: 1. Preaward; 
Agency processes: 
Announce opportunity: 
* Provide administrative and technical support; 
Receive applications: 
* Authenticate applicant, apply business rules, and ensure 
administrative compliance; 
Review and decision: 
* Conduct reviews (administrative, budget, policy, merit, business, 
application, certifications, and assurances); 
Recipient processes: 
Find opportunity: 
* Identify potential opportunity; 
* Develop proposal; 
Submit application: 
* Submit application package for competitive grant or other preaward 
documents for noncompetitive grant; 
Status review: 
* Check status of application. 

Stage: 2. Award; 
Agency processes: 
Award notification: 
* Notify the grantee and Congress and publicly announce the award; 
Recipient processes: 
Receive notification of award: 
* Complete award acceptance documents, if required. 

Stage: 3. Implementation; 
Agency processes: 
Disburse payment: 
* Process payments to recipient; 
Management and oversight: 
* Conduct site visits and review recipient reports; 
Recipient processes: 
Request and receive payment: 
* Request disbursement of grant funds; 
Perform grant requirements and submit reports: 
* Comply with award terms and conditions, including general 
administrative requirements and cost principles; 
* Submit appropriate financial, performance, and other reports. 

Stage: 4. Closeout; 
Agency processes: 
Closeout: 
* Review and reconcile final audit and other reports; 
Recipient processes: 
Closeout: 
* Submit final audit and other reports, as required. 

Source: GAO. GAO-15-118. 

[End of figure] 

Grant programs are established through legislation that may specify 
particular objectives, eligibility requirements, and other conditions, 
and grant-making agencies may impose additional requirements on 
recipients. Additionally, grant programs are typically subject to a 
wide range of accountability requirements under their authorizing or 
appropriations statutes and implementing regulations. Congress may 
also impose increased reporting and oversight requirements at the 
agency or recipient level. Grant-making agencies and their programs 
are also subject to crosscutting requirements applicable to most 
assistance programs. 

Administrative Costs: 

Administrative activities such as managing finances and facilities, 
ensuring quality, and reporting project status are essential to the 
operation of grant programs. These administrative costs may be charged 
directly or indirectly to a grant depending on individual program 
guidelines and whether the grantee has an approved indirect rate 
agreement.[Footnote 7] A direct cost is one that can be specifically 
identified with the individual grant objective and is charged to that 
specific grant. Direct costs include, for example, a researcher's 
salary and equipment. Indirect costs represent a grantee's general 
support expenses that cannot be specifically identified with an 
individual grant project. Indirect costs include, for example, 
building utilities and administrative staff salaries (see figure 2). 
To determine the proportion of indirect costs that may be charged to 
federally funded awards, grantees use a mechanism called the indirect 
cost rate. The procedure for requesting an indirect cost rate varies 
based on the type of grantee organization. In the case of higher 
educational institutions, the rate is established based on a 
historical fiscal year of cost data from a school and is applied to 
each of its individual research awards.[Footnote 8] 

Figure 2: Two Options for Charging Administrative Costs under OMB 
Guidance on Cost Principles: 

[Refer to PDF for image: illustration] 

Indirect Cost: 

A financial manager providing administrative services to multiple 
programs within an organization is an Indirect Cost: 

Financial Manager: 
Social Services Program; 
Housing Program; 
Education Program. 

Direct Cost: 

A financial manager dedicated to provide administrative services for 
one program within an organization may be a Direct Cost: 

Financial Manager: 
Education Program. 

Source: GAO analysis of OMB Circular No. A-21. GAO-15-118. 

[End of figure] 

As we have previously reported, there is no government-wide definition 
of what constitutes an administrative cost.[Footnote 9] Programs have 
different missions, priorities, services, and clients, and 
jurisdiction for the programs are spread among numerous congressional 
committees; therefore federal agencies' definitions of allowable (or 
prohibited) administrative costs vary from program to program. We have 
also previously concluded that funding gaps for grant indirect costs 
which, depending on the program, may represent a large portion of 
administrative costs, may compromise the nonprofit sector's ability to 
partner with the federal government to provide services and may 
ultimately risk the viability of the sector.[Footnote 10] In a 2013 
study, the Urban Institute found that limits on administrative costs 
are concerning for nonprofits because they must find other ways to 
cover these expenses. This study also stated that trying to minimize 
overhead costs could lead nonprofits to offer low pay for 
administrative positions, which could make it difficult to recruit and 
retain skilled and experienced staff.[Footnote 11] 

Guidance on Cost Principles: 

OMB is responsible for developing government-wide guidance to ensure 
that grants are managed properly and that grant funds are spent in 
accordance with applicable laws and regulations.[Footnote 12] OMB 
provides guidance on administrative requirements, cost principles, and 
audit requirements for federal awards. Until recently, OMB guidance 
came in the form of circulars for specific grants management areas to 
different types of grantees. For example, OMB Circular No. A-21 
provided the principles for determining the types of direct and 
indirect costs that may be claimed and the methods for allocating such 
costs to federally funded projects at educational institutions. OMB 
had similar guidance on cost principles for state and local 
governments, Indian tribal governments, and nonprofit organizations. 
In December 2013, OMB consolidated its grants management circulars 
into a single document, Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements for Federal Awards (Uniform 
Guidance), to streamline its guidance, promote consistency among 
grantees, and reduce administrative burden on nonfederal entities. 
[Footnote 13] OMB staff told us that although the new Uniform Guidance 
is intended to create a framework for the allocation of grant costs, 
decisions about how these costs are allocated are made at the award 
level.[Footnote 14] The new Uniform Guidance is scheduled to go into 
effect for grantees on December 26, 2014, and officials at both HHS 
and HUD told us they were evaluating the changes and its effects on 
their programs and regulations. 

Selected Agencies and Programs: 

To provide examples for this review, we selected six grant programs at 
two federal grant-making agencies (see table 1). These programs are 
managed by a variety of subagencies and reflect different program 
objectives. 

Table 1: Selected Grant Programs: 

Program name: HOME Investment Partnerships Program; 
Agency/sub-agency: HUD/Community Planning and Development; 
Objectives: To expand the supply of affordable housing, particularly 
rental housing, for low and very low income Americans. 

Program name: Community Development Block Grant (CDBG) program for 
Entitlement Communities; 
Agency/sub-agency: HUD/Community Planning and Development; 
Objectives: To develop viable urban communities by providing decent 
housing, a suitable living environment, and expanding economic 
opportunities, principally for persons of low and moderate income. 

Program name: Multifamily Housing Service Coordinators; 
Agency/sub-agency: HUD/Office of Housing; 
Objectives: To link elderly, especially frail and disabled, or 
disabled nonelderly assisted housing and neighborhood residents to 
supportive services in the general community. 

Program name: Child Care and Development Fund (CCDF); 
Agency/sub-agency: HHS/Administration for Children and Families; 
Objectives: To promote family economic self-sufficiency and to help 
children succeed in school and life through affordable, high-quality 
early care and afterschool programs. 

Program name: Head Start; 
Agency/sub-agency: HHS/Administration for Children and Families; 
Objectives: To promote school readiness by enhancing the social and 
cognitive development of low-income children. 

Program name: Allergy, Immunology and Transplantation Research (AITR); 
Agency/sub-agency: HHS/National Institutes of Health; 
Objectives: To assist public and private nonprofit institutions and 
individuals to establish, expand, and improve biomedical research and 
research training in allergic and immunologic diseases and related 
areas to assist public, private, and commercial institutions to 
conduct developmental research. 

Source: GAO analysis of CFDA and HHS program descriptions. GAO-15-118. 

[End of table] 

Agencies Reviewed Have Mechanisms in Place to Collect Data on Federal 
Grant Administrative Costs, but These Data May Not Reflect Actual Cost 
of Administration: 

Although grant-making agencies are not required to track grant 
administrative cost data specifically, all six of the grant programs 
we reviewed collect grant administrative cost data in some form. Each 
of the grant programs we reviewed had mechanisms in place to capture 
the administrative costs charged to their grant programs, via either a 
computerized system or paper reporting.[Footnote 15] However, each 
program's data collection system varied, as follows: 

* HHS's On-Line Data Collection System used for the CCDF grant and 
HUD's Integrated Disbursement & Information System used for both HOME 
and CDBG are computerized data collection systems available to the 
grantee and agency that capture grant program budgetary information 
and actual post-award expenditure reporting. 

* The Head Start Enterprise System collects grant budget estimates 
electronically during the program's grant application process. 
Reporting of actual expenses incurred is captured in paper form at the 
regional office level. 

* The Multifamily Housing Service Coordinators program uses the Line 
of Credit Control System to disburse and track payment of grant funds. 
The system may be accessed through a voice-response system or a 
computerized system. In addition to these systems, documentation is 
provided in paper form to the regional office where the grant is 
managed. 

* Electronic Research Administration Commons is a web-based interface 
where National Institutes of Health (NIH) grantees share 
administrative information about grants. It also collects AITR 
grantees' Federal Financial Reports. 

Officials for all of the selected programs reported that they use 
these systems to review their grantees' costs for appropriateness. 
Such reviews also help to ensure that the data collected are accurate 
if they are used for evaluating the programs' effectiveness. With the 
exception of the AITR program, which is managed at headquarters, all 
of the programs we reviewed performed compliance checks on fiscal 
reporting at the regional office level where the grants are managed. 
For five of the six programs in our review, officials said their 
analysis of administrative costs was focused on ensuring compliance 
with the grants' administrative cost caps and approved indirect rate 
agreements. Agency officials also told us that when a grantee's total 
federal expenditures exceed an audit threshold, all six programs rely 
on the single audit process to identify deficiencies in grantee 
accounting, internal controls, and financial management.[Footnote 16] 
Two of the six programs we reviewed--CDBG and CCDF--make their grant 
administrative cost data available to the public via their websites. 

The six programs we reviewed track grant expenses in different ways, 
which can make it challenging to identify aggregate administrative 
costs. For some of these programs, administrative costs and program 
costs may be included in the same line items and program officials 
told us that separating these costs would be labor intensive. For 
example, program officials explained that for the AITR program they do 
not specifically track grant administrative costs. Instead, grant 
program costs are reported as either direct or indirect costs because 
recipients are required to use the Federal Financial Report to report 
on grant expenditures and that report captures indirect costs. 
[Footnote 17] NIH officials explained that administrative costs are 
normally charged as indirect costs but if the administrative services 
are integral to a major project and the administrative costs can be 
specifically attributed to the project, they may be charged as direct 
costs to the grant.[Footnote 18] Therefore, interpreting indirect 
costs as administrative costs could miss administrative costs charged 
as direct costs to the grant. 

Further complicating this issue, NIH officials explained that primary 
grant recipients report their subgrantee's direct and indirect 
expenses under the primary recipient's total costs on the Federal 
Financial Report. There is no requirement to specifically track grant 
administrative cost data for a grant's subgrantee and the current 
federal financial reporting mechanism for the AITR grant does not 
facilitate identifying all administrative costs. According to NIH 
officials, identifying administrative costs reported under the total 
cost line item would be onerous under the current financial 
information collection method since this would entail additional 
auditing at both the primary grantee and subgrantee levels. 
Additionally, consistent with OMB guidance, indirect cost rates are to 
be based on historical costs incurred by an institution and applied to 
all grants received by that institution for a set period. While using 
such a rate may prove efficient for reporting purposes, these rates 
are a blunt instrument by which to determine actual administrative 
costs for any one grant program. 

For the grant programs we reviewed, financial reporting systems varied 
in their ability to aggregate program-wide administrative cost 
information. HUD's Integrated Disbursement & Information System--a 
nationwide database that provides HUD with current information on CDBG 
and HOME program activities--includes grant administrative cost 
information. In contrast, the Head Start program does not currently 
have a system in place that allows it to aggregate grant 
administrative cost information across grantees. Instead, Head Start 
grantees report their expenses after they are incurred on a SF-425 
paper form retained at the regional office level. HHS officials are 
planning to collect the SF-425 electronically on the GrantSolutions 
platform beginning in late 2015 and should be able to display these 
data electronically in the Head Start Enterprise System. According to 
HHS officials, the new method of data collection and management should 
enable Head Start staff to aggregate actual expenditure data--
categorized as programmatic or administrative costs--for analysis and 
reporting at the headquarters level, which would potentially 
facilitate reporting these costs. This mechanism should facilitate 
program-wide aggregation of administrative costs and is a necessary 
first step to obtain an overall understanding of a program's 
administrative costs. 

Just as the mechanisms to collect information differ across the grant 
programs we reviewed, there is also variation in guidance and training 
regarding the reporting of grant administrative costs. The six 
programs we reviewed provide some form of written guidance or 
instruction regarding the allocation of administrative and program 
costs. Head Start provides program-specific resources, written guides, 
and interactive training modules on its website--the Early Childhood 
Learning and Knowledge Center. The AITR, CCDF, CDBG, and HOME programs 
also provide resources and guidance online.[Footnote 19] Applicable 
administrative cost definitions for MHSC are not included in the 
management handbook for the grant program. However, officials 
explained that a list of allowable administrative costs does exist in 
the grant's Notice of Funding Availability. With regard to training, 
program officials with Head Start, CDBG, HOME, and CCDF told us they 
provide grantees across the country with training on a wide variety of 
program-specific and fiscal management issues. For example, HUD 
officials explained that they offer training on identifying allowable 
administrative costs and that they plan to provide training in 
financial management via interactive modules online. NIH officials 
told us they provide written guidance and offer special training upon 
request, but NIH does not provide training to all of its grantees for 
the AITR grant program. NIH officials said that grantees tend to hire 
external consultants to assist them with preparing indirect cost rate 
proposals. MHSC officials said that they do not provide centralized 
training on administrative costs to grantees, but training is provided 
by some field offices that determine a need for such training. In 
addition to written guidance on fiscal information, all six of the 
programs we reviewed described processes for providing technical 
support to grantees on request. 

Grant recipients of all the programs we reviewed told us that since 
administrative costs are not always reimbursed by their federal grants 
they must cover some administrative expenses themselves. The Urban 
Institute made the same point in a survey of nonprofits that receive 
government grants.[Footnote 20] This review found that half of survey 
respondents said their government grants and contracts expressly 
excluded or limited reimbursements for their program and 
organizational administrative costs. 

Unreimbursed administrative costs in the programs we reviewed ranged 
from costs related to the grant managers who oversaw the grant program 
to costs that covered centralized business services such as accounting 
or human resources. Functions like these support the administration of 
the grant but are not directly related to its aims or purposes. We 
found examples of grantees absorbing part of the costs to administer a 
grant. An official at a state department of health receiving a CCDF 
grant explained that she analyzes administrative costs and when her 
organization approaches its federal cost cap she pays these expenses 
from the state's general fund. Another CCDF state grantee told us that 
he relies on state appropriations to cover the majority of 
administrative costs, and therefore his organization's federally 
reported administrative costs remain well under the cap set by the 
program. Since state funds were available to cover a portion of the 
administrative expenses, he explained that the organization did not 
have to claim from the federal government all the administrative 
expenses to which they were entitled. To the extent that only 
administrative costs charged to the grant are reported, these reports 
may understate the actual administrative costs. 

The actual cost to administer a grant may also be affected by whether 
oversight responsibilities are extended over long periods, as is 
required by some federal grant programs. If a grantee has oversight 
responsibilities for an ongoing portfolio of work it may incur greater 
administrative costs than a grantee with a shorter-term project with 
defined beginning and end dates. For example, primary grant recipients 
of the HOME program are required to oversee HOME-funded rental 
properties for up to 20 years after construction. According to a HOME 
grantee, as the portfolio of properties grows the HOME oversight 
requirements cause the grantee's oversight costs to increase year 
after year. However, the HOME grant administrative cost cap does not 
increase to cover these increased oversight costs associated with a 
grantee's growing portfolio of properties over time. Because of this, 
a HOME grantee told us that as these costs increase over time she will 
need to absorb these costs, covering them with resources from both 
HOME administrative funds and state funds. In some cases, the grantee 
has reviewed HOME grant amounts and actual HOME administrative costs 
and chosen to allocate funds to fewer units and to fewer projects 
because of the oversight costs that will be incurred over time. 

Variations in Administrative Cost Caps and Definitions Hinder 
Meaningful Comparisons of Grant Administrative Cost Data across 
Programs: 

Two challenges to comparing administrative costs across grant programs 
are the variation in cost caps and differences in administrative cost 
definitions. These two issues are different, but they intersect. The 
variation in administrative cost caps--the limit to the amount of the 
grant that may be charged as administrative costs to the federal 
government--presents challenges to comparing costs across programs. Of 
the six grant programs we reviewed, administrative cost caps ranged 
from 5 percent for CCDF to a 26 percent administrative cost cap for 
education institutions receiving AITR grants.[Footnote 21] The 
Multifamily Housing Service Coordinators grant program has no cap. 
[Footnote 22] As a result of this variation, the administrative costs 
of some programs may appear more expensive than others. For example, 
CDBG's 20 percent cost cap could result in higher administrative 
charges to the grant than the CCDF's 5 percent cost cap. According to 
HUD data, CDBG administrative and planning expenses in fiscal year 
2012 were approximately 16 percent and, according to HHS data, CCDF 
administrative expenses in fiscal year 2012 were approximately 3 
percent.[Footnote 23] As we have previously concluded, because there 
are differences in which activities are defined as administrative 
costs for financial reporting purposes, a program with high 
administrative spending is not necessarily less efficient than a 
program with low administrative spending.[Footnote 24] Programs with 
higher administrative cost caps may be assumed--incorrectly--to have 
higher administrative costs; so it is important to have an 
understanding of individual caps in place before any cross program 
comparisons are made. 

There is no government-wide definition of what constitutes an 
administrative cost. Programs have different missions, priorities, 
services, and clients, and jurisdiction for the programs are often 
spread among numerous congressional committees; federal agencies' 
definitions of allowable (or prohibited) administrative costs vary 
from program to program. Additionally, the definition of 
administrative costs varies across different federal grant programs 
even though many of the same activities are performed.[Footnote 25] 
For example, the salary of an enrollment specialist at Head Start, who 
enrolls children in the program, is considered a program-related cost. 
However, the salary of similar position as an intake specialist for 
the Low Income Home Energy Assistance Program, who determines the 
eligibility and benefit level for participants, may be an 
administrative cost in some states where the program is administered. 
[Footnote 26] When the same expenses are treated differently across 
programs, this results in different administrative cost totals for 
similar functions. Regardless of the reasons for variation in 
definitions of these costs, the existence of differences in 
definitions limits their comparability.[Footnote 27] Monitoring 
programs entails collection and use of program-related operational and 
financial data, but for information to be effective for decision 
making, it has to be pertinent to the individual program. OMB staff we 
spoke with stated that collecting grant administrative cost 
information government-wide would not identify whether funds for 
administrative costs are being spent effectively. Specifically, they 
told us that analysis of administrative costs and the identification 
of potential administrative cost savings should occur at the program 
level. They said that when comparing administrative costs across 
programs it is important to remember that some programs are inherently 
more expensive to administer than others. 

Comparing unlike costs across different programs would lead to 
erroneous comparisons. However, comparisons of costs may be more 
appropriate when comparing programs that fulfill similar missions or 
provide similar services. Additionally, different definitions for 
administrative costs could present a challenge in situations when 
multiple grant programs are consolidated into one program.[Footnote 28] 

Concluding Observations: 

Administrative activities--such as reporting on project status, 
managing finances, and ensuring quality--are an essential part of the 
grant process. Selected programs track administrative costs in 
different ways and not all of the grant programs we reviewed have 
systems in place that could readily aggregate these costs from their 
grant recipients. Additionally, the actual cost of administering a 
given program may be paid by sources other than the federal government 
and the current collection of grant administrative cost data only 
reflects the federally reimbursed portion of these costs. Efficient 
and effective use of federal grant funds has always been important, 
but attention to the balance between program costs and administrative 
costs grows as budgets come under increasing pressures and the 
resources available for achieving federal grants' goals become further 
constrained. Although looking at administrative costs may seem like a 
logical first step when identifying opportunities to reduce expenses 
in such a budgetary environment, our review identified a number of 
factors that hinder the comparability of administrative costs across 
grant programs. Differences in cost caps and definitions are among the 
most important of these factors and make comparisons across grant 
programs very challenging, particularly when comparing programs with 
diverse missions and objectives. Comparing dissimilar costs leads to 
inappropriate conclusions that may have a perverse impact on federal 
policy making. 

Comparisons of costs may be appropriate when reviewing programs that 
fulfill similar missions or provide similar service. However, 
comparisons of administrative costs across grant programs that provide 
different services should be made with caution. Any comparisons of 
administrative cost data should consider variation in administrative 
cost caps and cost definitions. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Secretary of the Department 
of Health and Human Services and the Secretary of the Department of 
Housing and Urban Development. The Department of Health and Human 
Services had technical comments, which we incorporated as appropriate. 
The Department of Housing and Urban Development did not provide 
comments. We also provided an informational copy to the Director of 
the Office of Management and Budget. 

We are sending this report to interested congressional committees, the 
Secretary of the Department of Health and Human Services, the 
Secretary of the Department of Housing and Urban Development, the 
Director of the Office of Management and Budget, and other interested 
parties. In addition, the report is available at no charge on the GAO 
website at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-6806 or irvings@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. Major contributors to this report are 
listed in appendix III. 

Signed by: 

Susan J. Irving: 
Director for Federal Budget Analysis, Strategic Issues: 

List of Requesters: 

The Honorable Thomas R. Carper: 
Chairman: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Tom Coburn, M.D. 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Claire McCaskill: 
Chairman: 
Subcommittee on Financial and Contracting Oversight: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report examines (1) the extent to which selected federal agencies 
and grantees have mechanisms and guidance in place to distinguish 
between administrative and program costs and to facilitate the 
availability of these data to Congress and the public; and (2) the 
extent to which there are challenges that hinder the comparability of 
grant administrative cost data. To address these objectives, we 
selected two agencies for our review--the Departments of Health and 
Human Services (HHS) and Housing and Urban Development (HUD). HHS 
manages the largest share of federal grant making both in terms of 
grant obligation amount and the number of grant programs. We included 
HUD to obtain management perspectives on a different set of programs 
and issues.[Footnote 29] Collectively, the selected agencies provide 
diversity in the number of grant programs and grant obligations and 
management perspectives on administrative and program costs. 

At each selected agency, we identified three programs that provided a 
combination of the high dollar grant obligation in fiscal year 2012 
and different grant types, such as project and formula, as well as 
grantee type, including state and local government and nonprofit and 
for-profit entities.[Footnote 30] At HHS we selected the following 
grant programs: (1) Child Care and Development Fund; (2) Head Start; 
and (3) Allergy, Immunology and Transplantation Research. At HUD we 
selected the following grant programs: (1) HOME Investment 
Partnerships Program; (2) Community Development Block Grant; and (3) 
Multifamily Housing Service Coordinators. There were certain programs 
that met the criterion of high grant obligation at each selected 
agency but we did not consider them for selection for one or more 
reasons, including: administrative features of the grant program that 
made them unique and distinctly atypical of the grants at these 
agencies or planned consolidation of the program that made the review 
less relevant. 

To determine the extent to which selected federal agencies and 
grantees have mechanisms and guidance in place to distinguish between 
administrative and program costs, we reviewed each program's 
authorizing statutes and regulations, where applicable, program 
guidance, and grant documents. We interviewed agency officials 
responsible for each of the selected grant programs to understand how 
these programs collect grant administrative cost data, the type of 
guidance, training, and technical assistance they provide grantees, 
and their requirements and experiences with determining and reporting 
administrative costs. To inform our work on government-wide efforts to 
collect grant administrative cost information, we interviewed staff at 
the Office of Management and Budget's (OMB) Office of Federal 
Financial Management, which oversees the financial management policy 
of the federal government. 

To examine the extent to which there are challenges that hinder the 
comparability of grant administrative cost data we performed work at 
the primary recipient level. Based on fiscal year 2012 grant 
obligation data for selected grant programs to state and local 
governments from OMB's Analytical Perspectives, we selected two 
states--Massachusetts, which receives a relatively high amount of 
federal grant funds and was in the top quarter of fiscal year 2012 
federal grant obligations, and New Hampshire, which receives a 
relatively low amount of federal grant funds and was in the bottom 
quarter of fiscal year 2012 federal grant obligations. We then 
selected primary grant recipients within those states with the highest 
grant obligation for each selected grant program. We next confirmed 
USASpending grant obligation amounts with HHS and HUD officials. We 
subsequently replaced certain primary grant recipients that had met 
the criteria of highest grant obligation for each selected grant 
program within the selected states because we determined that 
USASpending did not fully or correctly identify the grantee. Although 
the results of our review are not generalizable to other grant 
programs in other agencies, they are indicative of the wide variation 
associated with the mechanisms and guidance for tracking grant 
administrative costs and the utility of these costs for program 
management. 

We conducted a literature review to identify issues raised, including 
those in our previous reports as well as the Congressional Research 
Service and the Congressional Budget Office, related to grant 
administrative costs, grants management, and cost principles. 
Additionally, we reviewed research reports from research groups and 
state representative organizations that discuss grant administrative 
costs from the perspective of grantees. We reviewed relevant HHS and 
HUD websites and related agency documents to understand grant 
administrative costs guidance for selected grant programs. 

We conducted this performance audit from January 2014 to December 2014 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Selected Grant Programs, Administrative Costs Caps, and 
Administrative Cost Definitions: 

Program name: HOME Investment Partnerships Program; 
Administrative cost cap: 10%; 
Types of expenses included in administrative cost caps: Includes 
program planning costs and salaries of participating jurisdiction's 
staff who perform activities, including compliance, developing 
interagency agreements, monitoring of HOME-assisted housing, reporting 
to HUD, program evaluation, audit resolution, providing public 
information, and travel costs; third-party audit, legal and accounting 
services; rental and purchase of equipment, insurance, utilities, 
office supplies and office space; the costs of administering tenant-
based rental assistance programs; and indirect costs. 

Program name: Community Development Block Grant (CDBG); 
Administrative cost cap: 20%; 
Types of expenses included in administrative cost caps: Includes 
program planning costs and salaries of staff who perform activities, 
including providing information to the public, preparing budgets, 
monitoring and compliance, developing interagency agreements, 
preparing reports for HUD, audit resolution, program evaluation and 
supervising employees engaged in the same; travel costs incurred for 
official business; third-party legal, accounting and audit services; 
rental or purchase of equipment, insurance, utilities; office supplies 
and office space; and indirect costs. 

Program name: Multifamily Housing Service Coordinators; 
Administrative cost cap: None; 
Types of expenses included in administrative cost caps: No applicable 
regulatory or statutory definitions. 

Program name: Child Care and Development Fund (CCDF); 
Administrative cost cap: 5%; (15% for Indian tribes); 
Types of expenses included in administrative cost caps: Includes 
salaries of administrative and implementation agency staff; 
costs related to planning, developing, and designing the program; 
public outreach and hearings; preparing the application; monitoring 
and reporting on program activities; coordinating with federal, state 
and local officials; official travel; accounting and audit services; 
rental and purchase of equipment, utilities, and office supplies; 
and indirect costs. 

Program name: Head Start; 
Administrative cost cap: 15%; 
Types of expenses included in administrative cost caps: Includes costs 
related to overall management, including salaries of the executive 
director, personnel officer, fiscal officer/bookkeeper, 
payroll/insurance/property clerk, and janitor for administrative 
office space, and costs associated with volunteers carrying out 
administrative functions; fringe benefits, travel, transportation and 
training; expenses related to bookkeeping and payroll services, 
audits, and bonding; administrative office insurance, supplies, copy 
machines, postage, and utilities; and occupying, operating and 
maintaining space for administrative activities. 

Program name: Allergy, Immunology and Transplantation Research (AITR); 
Administrative cost cap: 26%[A]; 
Types of expenses included in administrative cost caps: Indirect 
charges that typically include depreciation on buildings and equipment; 
costs of operating such facilities; salaries of executive officers 
attributable to administrative functions; salaries of clerical staff; 
office supplies; and library expenses. 

Source: GAO analysis of HUD and HHS program regulations. 

[A] AITR grantees do not have statutory or individual program 
administrative cost caps. However, OMB Circular No. A-21 (now codified 
in Title 2 of the Code of Federal Regulations) imposes a 26 percent 
cap on administrative (but not facilities) expenses for universities. 
Costs for administration are limited to 26 percent of total direct 
costs. 

[End of table] 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Susan J. Irving, (202) 512-6806 or irvings@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Peter Del Toro (Assistant 
Director), Keith O'Brien (Analyst-in-Charge), Gerard S. Burke, Stanley 
J. Czerwinski, Catherine Myrick, Carol L. Patey, and George H. 
Schadler III made key contributions. Also contributing to this report 
were Thomas M. Beall, Amy R. Bowser, Robert L. Gebhart, Josephine 
Perez, and Robert Robinson. 

[End of section] 

Footnotes: 

[1] Office of Management and Budget, Analytical Perspectives, Budget 
of the United States Government, Fiscal Year 2015 (Washington, D.C.: 
2014). Federal outlay data for fiscal year 2013 reflects the most 
current available data at the time of this report. These data include 
grants to states for Medicaid, the federal government's largest single 
grant program. 

[2] Pub. L. No. 113-101, 128 Stat. 1146 (May 9, 2014). The DATA Act is 
intended to increase accountability and transparency of federal 
spending and requires federal agencies to publicly report, on at least 
a quarterly basis, certain information about any funding made 
available to, or expended by, an agency or component of the agency. 
This requires a variety of information on the appropriation account, 
including budget authority, obligations, unobligated balances, 
outlays, and any other budget resources--at different levels of 
aggregation and disaggregation: appropriations account, program 
activities, and object classification. The DATA Act also provides for 
the establishment of government-wide financial data standards to, 
among other things, produce consistent and comparable data across 
program activities. Reporting is required to begin no later than May 
9, 2017 (3 years after enactment). 

[3] This information was highlighted in a Data Transparency Town Hall 
meeting hosted by Treasury and OMB on September 26, 2014. 

[4] In early 2014, the House passed a bill that would require agencies 
to provide additional program-level information to be reported 
publicly, including total administrative costs of programs. See 
Taxpayers Right-To-Know Act, H.R. 1423, 113TH Cong. (2014). 

[5] Office of Management and Budget, Analytical Perspectives, Budget 
of the United States Government, Fiscal Year 2014 (Washington, D.C.: 
2013). 

[6] GAO reports include: Biomedical Research: NIH Should Assess the 
Impact of Growth in Indirect Costs on Its Mission, [hyperlink, 
http://www.gao.gov/products/GAO-13-760] (Washington, D.C.: Sept. 24, 
2013); Community Development Block Grants: Reporting on Compliance 
with Limit on Funds Used for Administration Can Be Improved, 
[hyperlink, http://www.gao.gov/products/GAO-13-247] (Washington, D.C.: 
Mar. 21, 2013); Grants to State and Local Governments: An Overview of 
Federal Funding Levels and Selected Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-12-1016] (Washington, D.C.: Sept. 25, 
2012); University Research: Policies for the Reimbursement of Indirect 
Costs Need to Be Updated, [hyperlink, 
http://www.gao.gov/products/GAO-10-937] (Washington, D.C.: Sept. 8, 
2010); Nonprofit Sector: Treatment and Reimbursement of Indirect Costs 
Vary among Grants, and Depend Significantly on Federal, State, and 
Local Government Practices, [hyperlink, 
http://www.gao.gov/products/GAO-10-477] (Washington, D.C.: May 18, 
2010); Human Service Programs: Demonstration Projects Could Identify 
Ways to Simplify Policies and Facilitate Technology Enhancements to 
Reduce Administrative Costs, [hyperlink, 
http://www.gao.gov/products/GAO-06-942] (Washington, D.C.: Sept. 19, 
2006); Budget Issues: Assessing Executive Order 12837 on Reducing 
Administrative Expenses, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-94-15] (Washington, D.C.: Nov. 
17, 1993). 

[7] An entity may establish an indirect cost rate by submitting a 
proposal to its cognizant rate-setting agency. For educational 
institutions, this is determined by which federal agency provides the 
greatest amount of funds to the entity for the most recent 3 years--
using a base year that represents historical costs by fiscal year. 
After the proposal has been reviewed or audited, the cognizant rate-
setting agency and the school negotiate and come to agreement on the 
rate. The rate is then documented in a formal indirect cost rate 
agreement. See [hyperlink, http://www.gao.gov/products/GAO-10-937]. 

[8] GAO has analyzed the indirect cost reimbursement procedures for 
higher education institutions previously. See [hyperlink, 
http://www.gao.gov/products/GAO-10-937]. 

[9] GAO, Homelessness: Information on Administrative Costs for HUD's 
Emergency Shelter Grants Program, [hyperlink, 
http://www.gao.gov/products/GAO-10-491] (Washington, D.C.: May 20, 
2010). 

[10] [hyperlink, http://www.gao.gov/products/GAO-10-477]. 

[11] The Urban Institute, Nonprofit-Government Contracts and Grants: 
Findings from the 2013 National Survey (December 2013). In 2013, the 
Urban Institute surveyed nonprofit organizations regarding their 
experiences with government contracts and grants. This survey was 
based on a national, randomly drawn sample of 501(c)(3) public 
charities taken from the Urban Institute's National Center for 
Charitable Statistics. The sample was limited to organizations that 
are required to file a Form 990 (an annual financial statement) with 
the U.S. Internal Revenue Service and have more than $100,000 in 
expenditures. A total of 4,024 nonprofit organizations completed the 
survey and of that number 2,764 indicated they had government 
contracts and grants. 

[12] OMB guidance is applicable to all grant programs and provides 
policies to be followed by the grant-making agency, not grantee. The 
grant-making agencies codify OMB's guidance into their own grant 
regulations, which then make them binding on the grantee. 

[13] 78 Fed. Reg. 78,590 (Dec. 26, 2013). OMB's final guidance was 
published in Title 2, subtitle A, of the Code of Federal Regulations 
and consolidated eight grants management circulars, including: A-21 
(Cost Principles for Educational Institutions), A-87 (Cost Principles 
for State, Local and Indian Tribal Governments), A-110 (Uniform 
Administrative Requirements for Grants and Agreements With 
Institutions of Higher Education, Hospitals, and Other Non-Profit 
Organizations), A-122 (Cost Principles for Non-Profit Organizations), 
A-89 (Federal Domestic Assistance Program Information), A-102 (Grants 
and Cooperative Agreements with State and Local Governments), A-133 
(Audits of States, Local Governments and Non-Profit Organizations), 
and A-50 (Audit Follow-up). 

[14] The new Uniform Guidance also establishes a de minimis indirect 
cost rate of 10 percent of Modified Total Direct Costs, which means 
all direct salaries and wages, applicable fringe benefits, materials 
and supplies, services, travel, and subawards and subcontracts up to 
the first $25,000 of each subaward or subcontract. This allows 
nonfederal grantees who have never had a negotiated indirect cost rate 
to receive indirect costs without the administrative burden associated 
with applying for, and receiving, such a rate. 

[15] OMB staff explained that they do not have a mechanism in place to 
collect that data centrally across all federal agencies. 

[16] 31 U.S.C. §§ 7501-7507. The Single Audit Act, as amended, 
requires each federal entity that expends a certain amount of federal 
awards, including grants and other assistance, in a fiscal year to 
have a single or program-specific audit conducted by an independent 
auditor. The audit includes the entity's financial statements and a 
schedule of expenditures of federal awards, and a review of related 
internal controls. OMB sets the threshold for reporting. From 2004 to 
2014, the threshold requiring a single or program-specific audit is 
$500,000. The new OMB Uniform Guidance, effective for grantees on 
December 26, 2014 has increased the Single Audit threshold to $750,000 
or more in federal fund expenditures. 

[17] The Federal Financial Report (Standard Form-425) is used for 
reporting grant expenditures for the recipients of federal funding 
assistance. 

[18] For example, OMB guidance on cost principles for educational 
institutions states that the salaries of administrative and clerical 
staff should normally be treated as Facilities and Administrative 
costs. Direct charging of these costs may be appropriate where a major 
project or activity explicitly budgets for administrative or clerical 
services and individuals involved can be specifically identified with 
the project or activity. "Major project" is defined as a project that 
requires an extensive amount of administrative or clerical support, 
which is significantly greater than the routine level of such services 
provided by academic departments. 

[19] AITR's guidance is available in the NIH Grants Policy Statement 
available on NIH's grants management website. CCDF provides its 
resources on the Administration for Children and Families site, while 
CDBG and HOME resources are provided via HUD's OneCPD. 

[20] Urban Institute, Nonprofit-Government Contracts and Grants: 
Findings from the 2013 National Survey, (December 2013). 

[21] CCDF has a 5 percent administrative cost cap that applies to 
states and territories and a 15 percent administrative cost cap for 
tribal communities. 

[22] See appendix II for applicable administrative cost caps and the 
types of expenses they include. Three of the programs we reviewed, 
HOME, CCDF, and Head Start, have a cost cap established by authorizing 
statutes and are included in the program regulations. CDBG has an 
administrative cost cap established in its appropriations and program 
regulations. While the AITR grant does not have a program-specific 
administrative cost cap, a cap may exist depending on the type of 
organization that receives the award. The MHSC grant program has no 
cap for administrative costs and does not have any program-specific 
regulations regarding administrative costs. 

[23] CDBG data are based on expenditures. Compliance with the CDGB 
administrative cap for entitlement communities is based on obligated 
funds. GAO issued a recommendation related to this in [hyperlink, 
http://www.gao.gov/products/GAO-13-247]. 

[24] [hyperlink, http://www.gao.gov/products/GAO-06-942]. 

[25] [hyperlink, http://www.gao.gov/products/GAO-06-942]. In 2006, we 
reviewed seven programs from HHS and the Departments of Agriculture 
and Labor and found that the statutes and regulations for the programs 
define administrative costs differently even though many of the same 
activities were performed. 

[26] States may only use 10 percent of federal funds for planning and 
administering the Low Income Home Energy Assistance Program. The 
program's regulations do not define "costs of planning and 
administration" and therefore states vary in how they interpret these 
costs in determining their administrative expenses. Sample definitions 
for administrative costs include all costs associated with management 
oversight of the program, including participant eligibility for 
assistance. States are considered the primary interpreters and HHS 
defers to the state definitions unless they are considered clearly 
erroneous. This variation could be the result of a difference in the 
complexity in determining applicant eligibility, the amount of 
interaction with beneficiaries, as well as the overall nature of the 
programs. 

[27] [hyperlink, http://www.gao.gov/products/GAO-06-942]. 

[28] For more information on grant consolidations, see GAO, Grant 
Program Consolidations: Lessons Learned and Implications for 
Congressional Oversight, [hyperlink, 
http://www.gao.gov/products/GAO-15-125] (Washington, D.C.: Dec. 12, 
2014). 

[29] To determine which agencies had high grant obligation amounts we 
used USASpending data for fiscal year 2012 and to determine which 
agencies had a high volume of grant programs we used program counts 
from the Catalog of Federal Domestic Assistance. 

[30] A formula grant is allocated to eligible recipients based on 
formula factors, such as state population, established in statutory 
and regulatory provisions. A project grant provides funding for fixed 
or known periods of specific projects. 

[End of section] 

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