OMB Details ARRA Administrative Cost Flexibilities

Washington, May 13 – In guidance released this week, Office of Management and Budget officials are telling state officials that they can use up to 0.5 percent of the total Recovery Act funds they receive to cover administrative costs associated with overseeing their grant awards.

States are generally repaid by the federal government for administrative expenses after the fact, unlike other grant recipients such as colleges and universities that get money for those costs before beginning their funded activities. Worried that not having any money up front for administrative costs might slow down subgrant distribution and oversight of award money, states asked OMB to revise its guidance on how they can pay for audits, data collection, planning and other grants management costs.

“A majority of Recovery Act dollars are disbursed by the states, who thus play a central role in the prudent, timely and transparent expenditure of Recovery funds,” said OMB Director Peter Orszag. “It is therefore critical that state governments quickly and effectively build the necessary administrative capacities to meet their reporting and other responsibilities under the act.”

States typically submit their requests for reimbursement, called a State-wide Cost Allocation Plan, to the Department of Health and Human Services on an annual basis for review and approval. Having this percentage of money to pay for up-front costs should allow states to move faster with their distribution of grant programs to local subrecipients.

— Andrew White