29638 Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices

DEPARTMENT OF LABOR

Employment and Training

Administration

Resource Sharing for Workforce

Investment Act One-Stop Centers:

Methodologies for Paying or Funding

Each Partner Program’s Fair Share of

Allocable One-Stop Costs

AGENCY: Employment and Training

Administration, Labor.

ACTION: Notice.

SUMMARY: This final notice is intended

to provide guidance on resource sharing

methodologies for the shared costs of a

One-Stop service delivery system,

which is required to be established

under the Workforce Investment Act of

1998 (WIA) for a number of Federal

employment and training programs. The

guidance has been revised, in part,

based on the comments received on the

notice published in the Federal Register

on June 27, 2000. In order to effectively

present this concept, this document

discusses the two distinctly different

concepts of cost allocation and resource

sharing. We anticipate that the primary

users of this guidance will be the

financial and accounting staff, as well as

auditors, of the One-Stop partner

programs and the One-Stop operators.

However, we also expect that this

guidance will have a much broader

audience and will provide program

operators and others with a fuller

understanding of cost allocation

principles and possible ways through

which each partner program can pay for

its fair share of common One-Stop costs.

As the participating programs have

come together to work out the details of

service delivery in a One-Stop setting, a

number of questions have arisen about

how costs can be allocated and

resources shared. This notice provides

general guidance that all One-Stop

centers and their partner programs will

be able to follow in establishing their

own system for cost allocation and

resource sharing. It describes ways to

identify and determine One-Stop shared

costs and, as a separate issue, describes

alternative ways to pay for and fund

these costs. This guidance is intended to

be used in conformance with WIA

requirements and the requirements

applicable to each of the partner

programs. It is expected that the

principles included herein will be used

to meet the needs of both individual

One-Stop centers and the local OneStop system as a whole. This framework

may not be applicable for all One-Stop

settings, and additional guidance will be

provided as needed.

This notice is the result of a

collaborative effort involving

representatives from the Departments of

Agriculture, Education, Health and

Human Services, as well as the

Department of Labor’s Employment and

Training Administration, Office of Cost

Determination and Office of Inspector

General. The Federal partners that

participated in the preparation of this

paper, as well as the Office of

Management and Budget, accept the

principles discussed herein as

appropriate cost allocation and resource

sharing guidance for WIA One-Stop

centers.

EFFECTIVE DATE: May 31, 2001.

ADDRESSES: All comments received

during the comment period following

the publication of the initial guidance

(65 FR 39760, et seq.) are available for

public inspection and copying during

normal business hours at the

Employment and Training

Administration, Office of Financial and

Administrative Management, 200

Constitution Avenue, NW., Room N–

4716, Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT: Mr.

Edward J. Donahue, Jr. at 202–693–3157

(This is not a toll-free number) or 1–

800–326–2577 (TDD). This document

will also be found at the website—http:/

/usworkforce.org after publication.

SUPPLEMENTARY INFORMATION:

I. Summary and Explanation

This section contains a discussion of

the comments received on the initial

guidance during the comment period.

We received a total of 103 comments

from twenty-two different entities.

There was some duplication of

comments including a virtually

identical letter with five comments sent

by two different entities. Five of the

entities submitting comments were

units of federal agencies (one—U.S.

Department of Education, two—U.S.

Department of Labor, and two—U.S.

Department of Health and Human

Services); five of the commenting

entities represent vocational

rehabilitation services programs; five of

the commenting entities represent adult

and vocational education programs; five

of the commenting entities represent the

WIA title I–B program; two of the

commenting entities represent programs

for older individuals; two of the

commenting entities represent the

temporary assistance for needy families

program, and two of the commenting

entities were unions. Some of the

twenty-two entities are counted in

multiple categories in the previous

sentence.

A number of commenters suggested

that the document ought to include both

more examples and more detail for the

examples provided. This notice is

intended to outline a basic framework

for cost allocation and resource sharing

that would be acceptable to all of the

federal partner program agencies. We

intend to provide more detailed

examples in a One-Stop system

financial management technical

assistance guide. The process for

development of the cost allocation and

resource sharing section of the technical

assistance guide will provide a forum

through which States and local OneStop systems that have implemented

successful cost allocation and resource

sharing procedures and/or those that

have identified potential pitfalls will

share that information as ETA proceeds

with the development of the guide.

A few commenters indicated that

there will be programs that are linked to

the One-Stop centers through electronic

or other technology-based means only.

These commenters suggest the need

for more specific guidance or examples

for such situations. One of these

commenters also expressed a desire to

see examples for satellite and affiliated

sites. As indicated in the previous

paragraph, ETA anticipates that it will

include more specific examples in its

technical assistance guide. However, it

should be noted that the costs of

computer-based, telephonic or other

technological linkages that are shared by

partner programs should be allocated to

those partner programs based on the

benefits derived therefrom in

accordance with the basic guidance

presented in this paper.

We received several comments that

suggested that administrative cost limits

of other programs (e.g., the Carl Perkins

five percent (5%) limit) would preclude

them from contributing what is

perceived to be an open ended

percentage share of the common/shared

costs of the One-Stop. One commenter

suggested that the guidance could be

interpreted in a way that would result

in a partner paying for costs that are

unallowable under its program. Some of

the comments suggested that the only

way that their program could participate

was by establishing a fixed

predetermined amount of contribution

in advance. While it may be true that

many of the shared costs will be

classified as administrative under the

individual partner programs, it should

also be noted that there are many

program activities that could be

integrated and treated as common OneStop costs. As discussed in other

sections of this paper, the efficiencies of

scale that will result from the process of

Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices 29639

integrating the common activities and

costs of the several partner programs

should result in reduced costs,

including reduced administrative costs,

for the individual partner programs.

Whatever the nature of the shared cost

(program or administrative, direct or

indirect, allowable or unallowable),

each partner program must be assessed

its proportionate share based on the

benefit received by that program. Also,

this paper clearly indicates that no

partner may use federal funds to pay for

a cost in violation of its statutory and

regulatory provisions. Therefore, it may

be necessary for local One-Stops to

supplement the federal resources with

non-federal resources. While it may be

necessary for the partner programs to

identify the limits of their ability to

contribute to the common costs of the

One-Stop, in no case would it be proper

for a predetermined budgeted amount to

be set as the actual cost for any program.

Cost allocation is always based on

actual costs, which may be greater or

less than the budget planning levels.

One commenter thought that the

statement in this guidance that the OneStop budget does not need to be

included in the MOU was contrary to

the provisions at WIA section 121(c)(2)

and the regulation at 20 CFR 662.300.

Both of those provisions require that the

MOU include a description of the

methods for funding the costs of

program services and the operating costs

of the One-Stop, but they do not require

the inclusion of a budget in the local

MOU. If a local area chooses to include

its One-Stop budget in the MOU, it may

do so. However, care should be taken to

assure that the MOU is written so as not

to require modification every time there

is a need to adjust or correct the budget,

which could happen frequently.

One commenter questioned whether

the discussion based on OMB Circular

A–87 (Cost Principles for State, Local

and Indian Tribal Governments),

Attachment A, paragraph C.3.c. and

ASMB C–10, the implementation guide

for OMB Circular A–87, meant that it

was proper to allocate funds based on

how much funding individual program

partners have available. It appears that

the commenter has misinterpreted these

provisions; neither OMB Circular A–87

nor ASMB C–10 say that costs can be

allocated and paid for based on

available budget amounts. Expenditures

reported under Federal programs may

not be based on budgeted costs.

One commenter suggested that the

allocation base for any service normally

provided by a partner program should

be the normal historical cost of that

partner providing the service. While it

is possible that the cost that a particular

program has normally incurred to

provide a service that becomes a

common service/activity in the OneStop environment will be approximately

the same as it costs each program to

provide the service separately, it is also

quite possible that the efficiencies and

economies of scale will result in a lower

cost. However, the normal historical

cost of delivery of a particular service or

activity is not a proper allocation base.

A cost allocation base should be a factor

that has a causal relationship to the

costs being allocated and the benefits

received by each program.

One commenter indicated that the

guidance needs to address the propriety

and impact of modifications to the cost

allocation and resource sharing

methodologies. Discussion of this

subject has been added to the third

paragraph of the section titled Funding

or Paying for a Partner’s Allocated Share

of One-Stop Costs. The guidance

explains that cost allocation and

resource sharing methodologies should

be modified to reflect actual experience

and that such modifications ought to

occur as soon as the need is recognized.

A number of commenters expressed

concern about whether the guidance

was meant to apply to One-Stop centers

only or to the One-Stop system as a

whole. The guidance included herein is

intended to apply to both. One

commenter requested clarification as to

whether the term One-Stop partners is

meant to include only the required

partners or all One-Stop partners. The

term is meant to include all of the

partners for a given local area. In

addition to the required One-Stop

partners, WIA section 121(b)(2)

identifies possible additional partners

which may include entities that operate

Federal, State, local and private sector

programs. This commenter also

wondered what basis exists for requiring

a partner program that is not financed

with any Federal funds to bear its fair

share of the common costs of the OneStop. If any program wants to be a

partner in a local One-Stop system, it

should be included in the MOU for the

local area. To the extent that each

partner benefits from the common costs

of the One-Stop, it should pay for the

allocable share attributable to its

program. The same commenter asks

whether the Federal funding agencies

are either an express or implied partner

thus making bilateral MOUs trilateral

agreements. The Federal funding

agencies are not partners to the local

area MOUs.

There were a couple of comments

which suggested that the concepts of

cost allocation and resource sharing

appear to be commingled throughout

the document. While one of the

objectives of this guidance is to

emphasize that cost allocation and

resource sharing are two distinctly

different concepts, there are many

instances where it is almost impossible

to talk about one of the concepts

without reference to the other. Cost

allocation is the measurement of actual

costs based on benefits received.

Resource sharing is the concept of how

these costs will be paid for or funded.

The two concepts are intricately

interrelated.

We received a few comments that

appear to take exception to the ETA

vision of integration of partner program

services in the One-Stop environment.

Other comments expressed concern

about the inference that integration was

a future expectation while co-location

and coordination of services was most

typical at the present time. The concern

appears to be that local One-Stop

systems and centers will not move

toward integration if the guidance leads

them to believe co-location and

coordinated services meets ETA’s

current expectation. ETA’s vision for

this program has not changed. While

other models are acceptable, ETA will

continue to work with States and local

areas to help them realize the benefits

of a fully integrated system. Language

has been added to encourage the

movement toward integration, even if

done in phases. The changes are

intended to eliminate any

misperception that ETA is encouraging

One-Stop systems to stop short of a fully

integrated system.

A couple of commenters suggest that

the paper identify which funding

streams can be used to cover costs of

State and Local Workforce Investment

Boards established under WIA. Such

costs are not typically common costs of

the One-Stop system but rather are costs

of the WIA program. However, it is

possible that some boards may incur

costs for activities that extend beyond

the role that title I of WIA requires of

them. The costs of such activities may

benefit other partner programs and

should be treated as shared costs

allocated to the partner programs based

on benefits received.

A couple of commenters asked if there

would be more guidance on in-kind

contributions. This guidance addresses

the proper allocation among the partner

programs of common costs incurred in

a One-Stop environment. In-kind

contributions, as discussed in the

matching or cost sharing sections of the

uniform administrative requirements

found in OMB Circulars A–102 and A–

110, are donations from third parties.

They are not to be confused with

29640 Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices

contributions to the One-Stop by partner

programs of such things as space,

equipment, staff or other goods and

services for which the partner program

incurs a cost. Such partner

contributions constitute the resources

that they are sharing to cover their

allocable share of common costs. Inkind contributions received by partner

programs from third parties may also be

used by those partners, where permitted

by the individual program, as a resource

to cover their allocable share of common

One-Stop costs. Some programs, e.g.,

Food Stamps and TANF, do not allow

the use of in-kind.

One commenter suggested that the

guidance should indicate the level of

detail to which the partners are

expected to go to determine and

document proportionate use. The

sections of the uniform administrative

requirements which address financial

management standards indicate that

financial management systems need to

be sufficiently documented to permit

the tracing to a level of expenditure

adequate to establish that federal funds

have not been used in violation of the

restrictions and prohibitions of the

applicable laws. The allowable costs

provisions of these requirements

indicate that allowability of costs is to

be determined in accordance with the

OMB Cost Principles Circulars

applicable to the type of organization

incurring the cost. Thus, the level of

detail should be consistent with GAAP

as required by the OMB Cost Principles.

One commenter suggested that it is

excessive to require that cost allocation

be accomplished in accordance with

GAAP, the OMB cost principles, and

meet the audit testing requirements of

OMB Circular A–133. The same

commenter suggests that the guidance

will require more of such administrative

functions as budgeting and accounting,

thus diverting funds away from program

services. Other commenters indicated

agreement with the expectation of

compliance with these requirements,

and emphasized agreement with the

principle that costs must be necessary,

reasonable and allocable to the partner

programs based on benefit received and

consistent with the OMB circulars. The

guidance was not changed.

On a related issue, a few commenters

suggested that the guidance indicate

that it would not be proper to expect

partner programs to pay for costs of

such things as equipment acquired prior

to the date of the MOU agreement.

Based on the cost principles, the use of

such equipment would need to be paid

for by the partner programs that

benefitted from it. In such a situation,

the partners would not be paying for the

acquisition of the equipment but for its

use. The guidance was not changed.

A number of the comments related to

the methodologies for determining

proportionate shares. Some took

exception to the propriety of using the

data elements [bytes of information] of

a common intake and eligibility

determination form required by the

individual partner programs. However,

these commenters apparently failed to

understand that this methodology is one

that most closely reflects the costs

incurred by all programs before the

implementation of the WIA One-Stop

environment when a potential client

visited several partner programs, was

found ineligible, and referred to other

programs. In fact, distributing shared

costs of a common intake and eligibility

system using this methodology results

in a considerable savings to those

programs that found the potential

clients to be ineligible. Some comments

indicated that the WIA regulations

suggest that individuals attributable to

the partner’s program is the only

allowable basis for establishing

proportionate shares. One suggested that

the basis should be limited to

individuals who are accepted by and

receive services attributable to the

program to which they are referred;

however, this is only one of a number

of possible ways to identify individuals

attributable to a partner’s program.

While the WIA regulation at 20 CFR

662.270 does use the individuals

attributable to a partner’s program basis

as the standard for establishing whether

or not a partner program has to share in

a particular cost, the very next sentence

in the regulation clearly indicates that

there are a number of methods which

are consistent with the OMB circulars

that may be used for allocating costs

that the partners determine are the

shared costs of the One-Stop. One of the

purposes of this guidance is to clearly

establish that a variety of cost allocation

methods can be used to determine the

amount of One-Stop costs that is

proportionate to the use of the One-Stop

system by the individuals attributable to

the individual partner programs. It must

be understood that a count of

individuals is not the only way to

establish such proportionate shares. In

fact, there are a number of potential

shared One-Stop costs for which counts

of individuals attributable to each of the

sharing programs may not be an

appropriate basis, e.g., the costs

associated with shared space. All of the

methods described in this guidance are

consistent with the OMB circulars. As

previously stated, we intend to provide

more details and discuss different

examples of methods for determining

proportionate shares and selecting

appropriate bases for cost allocation in

our planned technical assistance guide.

II. Background

Title I of the Workforce Investment

Act of 1998 (WIA) requires each local

workforce investment area to establish a

One-Stop system for the delivery of

certain Federal workforce development

services. Entities responsible for the

administration of separate Federal

workforce investment, educational, and

other human resource programs and

funding streams (referred to as One-Stop

partners) are to collaborate to create a

seamless delivery system that will

enhance access to services and improve

employment outcomes for individuals

receiving services. The system must

include at least one comprehensive

physical center that provides core

services and access to the other

activities carried out by the partners.

The comprehensive center may be

supplemented by additional

comprehensive centers, a network of

affiliated sites, technological and

physical linkages with the partners, and

specialized centers.

The WIA specifies that the required

One-Stop partners include programs

funded by the Departments of Labor

(Title I of WIA, Wagner-Peyser,

Unemployment Insurance, Trade

Adjustment Assistance, NAFTA

Transitional Adjustment Assistance,

Welfare-to-Work, Senior Community

Service Employment, and Veterans

Workforce Investment programs and

activities under 38 U.S.C. Chapter 41),

Education (Vocational Rehabilitation,

Adult Education, and Postsecondary

Vocational Education), Health and

Human Services (Employment and

Training activities under the

Community Services Block Grant) and

Housing and Urban Development

(Employment and Training activities),

and authorizes any other appropriate

program to serve as a partner, including

the Temporary Assistance to Needy

Families and the Food Stamp

Employment and Training and Work

programs. The partner is the entity

responsible for the administration of the

program in the local area, which may be

a State agency, but is not intended to

include each service provider that

contracts with or is a subrecipient of the

entity responsible for administration.

The responsibilities of the One-Stop

partners, which are elaborated below,

include:

1. Making available to participants the

core services that are applicable to their

programs;

Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices 29641

2. Using a portion of their funds to

create and maintain the One-Stop

system and to provide applicable core

services;

3. Entering into a Memorandum of

Understanding (MOU) with the Local

Workforce Investment Board (Local

Board) regarding the operation of the

One-Stop system;

4. Participating in the operation of the

One-Stop system in a manner consistent

with the MOU and the partner’s

authorizing law; and

5. Providing representation on the

Local Board.

The Department of Labor regulations

at 20 CFR part 662 (65 FR 49294, 49398

(August 11, 2000)) relate to the

requirements of the One-Stop system,

and One-Stop requirements are also

included in the Final Rule issued by the

Department of Education relating to the

Vocational Rehabilitation Services

program at 34 CFR part 361 (66 FR 4379

(January 17, 2001)).

Because WIA mandates that several

employment and training programs

funded under different laws by various

Federal agencies partner in a One-Stop

setting, it has become apparent that it is

necessary for the Federal funding

agencies to present a uniform policy

position on acceptable methodologies

for cost allocation and resource sharing

(methodologies for paying or funding of

allocable costs) in the WIA One-Stop

environment. As a result, the Office of

Management and Budget (OMB) asked

agencies to develop a uniform policy

position. The Department of Labor’s

Employment and Training

Administration (ETA) took the lead in

developing this guidance in

consultation with the Departments of

Agriculture, Education, Health and

Human Services, as well as Labor’s

Office of Cost Determination and Office

of Inspector General.

The underlying problem for the OneStop partners is to find an appropriate

way of accumulating cost information

and assuring appropriate payment for

shared costs as they come together in a

single location. It must be recognized

that cost allocation is a distinctly

different requirement from resource

sharing. Cost allocation is a concept that

is embedded in the OMB Cost Principles

Circulars and one which is based on the

premise that Federal programs are to

bear an equitable proportion of shared

costs based on the benefit received by

each program. In contrast, resource

sharing is the methodology through

which One-Stop partner programs pay

for, or fund, their equitable share of the

costs. This document discusses both

concepts and presents acceptable

methodologies for both cost allocation

and resource sharing.

While this guidance does not make

any changes to the OMB cost principles;

it helps to describe the flexibility and

limitations under those principles for

Federal programs to determine equitable

proportion.

One-Stop Cost Concepts

Under WIA the local One-Stop center

is not a direct recipient of Federal

awards. Rather, it is the location

through which several workforce

development and education programs

operate their programs in partnership

with other entities and make their

services available to the program

beneficiaries (participants, students, the

unemployed, job seekers, employers,

etc.).

These One-Stop center partners are

recipients of Federal grant dollars,

either directly or from another recipient.

They will, in their normal course of

business, maintain appropriate

accounting and other information in

accordance with applicable Federal

guidance. This normally includes

accounting for indirect costs, through

indirect cost rates or cost allocation

plans, as well as for direct costs. All

costs must be accounted for in

accordance with Generally Accepted

Accounting Principles (GAAP). For the

direct funded organizations, this

includes negotiating the necessary

indirect cost rate or obtaining approval

of their cost allocation plan.

When individual organizations

partner in the One-Stop environment,

some activities or functions are

performed which benefit more than one

individual organization, e.g., a common

reception area, provision of information

on the services available at the OneStop, or collection of basic information

from individuals seeking assistance at

the One-Stop. When this occurs, the

cost of performing these functions must

be allocated to the benefiting programs

or cost objectives (grants). This must be

done based on benefits received by the

benefiting program, and not on

availability of funds. When that

distribution is accomplished, the

individual partners must include these

costs (i.e., the allocable share of the

common/shared costs) in their total cost

picture to determine the total cost of

operations to perform the functions for

which they were funded. The following

diagram shows the relationship of the

partner programs to each other and to

the One-Stop.

29642 Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices

It should be noted that the unshaded

center area is comprised of the shared

costs that are applicable to two or more

of the partner entities. A provides a

service that benefits A, B, C and D; B

provides a service that benefits B, C, D

and A; C provides a service that benefits

C, D, A and B; and D provides a service

that benefits D, A, B and C. Allocating

these costs to the benefiting activities

(grants/programs) does not necessarily

relate to the methodology used for

payment. Payment of these costs will be

discussed later in this guidance.

Allocating One-Stop costs is no different

from allocating costs incurred by

grantees for their individual grant

programs. The One-Stop costs have

effectively been pooled. The question is

what is the best basis for equitable

distribution of shared costs without

incurring unnecessary additional

burden.

While neither the physical One-Stop

center itself nor the local area One-Stop

system is required to have a Federally

approved negotiated indirect cost rate or

cost allocation plan, this does not mean

that there is no need for cost allocation.

The WIA requires that a portion of the

funds provided under the various

Federal laws authorizing the required

partner programs be used to pay for the

creation and maintenance of the OneStop delivery system, and the provision

of core services that are applicable to

the individual partner programs, and

requires participation in the operation

of the One-Stop system, in a manner

consistent with the terms of the MOU

and the partner’s authorizing law (WIA

sec. 121(b)(1)(A) and 134(d)(1)(B)).

The core services include:

1. Eligibility determination under

WIA Title I formula programs;

2. Outreach, intake and orientation to

the information and other services

available through the One-Stop delivery

system;

3. Initial assessment of skill levels,

aptitudes, abilities, and supportive

service needs;

4. Job search and placement

assistance, and career counseling;

5. Employment statistics information;

6. Providing performance and cost

information on WIA title I, adult

education, postsecondary vocational

education and vocational rehabilitation

providers;

7. Providing information on the

performance of the local One-Stop

delivery system;

8. Providing information on the

availability of supportive services;

9. Providing information on the filing

of UI claims;

10. Providing assistance in

establishing eligibility for welfare-towork activities and for programs of

financial aid assistance for training and

education programs not funded under

WIA; and

11. Providing follow up services for

WIA title I participants who are placed

in unsubsidized employment.

At a minimum, the core services that

are applicable to a partner’s program

(i.e., are authorized and provided under

the program) and that are in addition to

the basic labor exchange services

traditionally provided in the local area

under the Wagner-Peyser Act must be

made available by the partner at the

comprehensive One-Stop center. The

basic labor exchange services are

described in the WIA One-Stop

provisions of the Employment Service

regulations at 20 CFR 652.3 to include

assisting job seekers in finding

employment, assisting employers in

filling jobs, and facilitating the match

between job seekers and employers.

Many of the One-Stop partner programs

include these same, or similar, activities

for a specified eligible client population.

The WIA regulation at 20 CFR

662.250(a) does not mean that these

Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices 29643

partner programs no longer have to

provide these services to their

respective client populations. Instead, it

clarifies that partner programs are not

expected to contribute to the costs of

Wagner-Peyser Act services. (It should

be noted the Adult and Dislocated

Worker programs authorized under WIA

title I must make all core services

available at the One-Stop center). It

should also be emphasized that this list

of core services is the minimum

required to be provided at the

comprehensive center, and the partners

are encouraged to provide such

additional services through the OneStop centers as may allow them to better

serve their customers. For example,

providing for a common intake and

eligibility determination system,

including the development and use of a

common application form, can be used

for a number of the partner programs at

the center to enhance access to the

programs. Such a system would be

customer friendly, and result in

administrative efficiencies. The same

cost allocation methods are applicable

irrespective of the scope of services

provided at a center.

The cost allocation that is necessary

relates to the common costs of the local

One-Stop system or an individual OneStop center, which may include such

items as space and occupancy costs,

utilities, telephone systems, common

supplies and equipment, a common

resource center or library, perhaps a

common receptionist or centralized

intake and eligibility determination

staff. It must be understood that each

local One-Stop system and/or center is

unique and that this guidance, which

intends to share some of the principles

and some basic models of One-Stop cost

allocation and resource sharing, does

not propose to impose a single

methodology on the entire WIA OneStop system. The fact that the cost

allocation and resource sharing

methodology used in a particular local

area One-Stop system or an individual

One-Stop center is not specifically

discussed in this document does not

mean that the methodology is

inappropriate or unallowable. The cost

allocation methodology that is used,

however, must:

1. Be consistent with GAAP:

2. Be consistent with the applicable

OMB cost principles and administrative

requirements; and

3. Be accepted by each partner’s

independent auditors to satisfy the audit

testing required under the Single Audit

Act and OMB Circular A–133.

Whatever methodology is used, it

must be supported by actual cost data.

Further, the methodology must not

permit the shifting of costs that are not

allocable to or do not benefit a specific

program to that program. In this regard,

the books of account for each partner

program should reflect both the actual

shared costs for which the program is

paying and the resources used to pay for

these costs.

In the local One-Stop, the idea of

allocating costs and sharing resources

can be viewed:

1. In the aggregate, i.e., covering all of

the One-Stop center’s shared costs;

2. On an activity basis where all of the

partners pay their allocable share of the

total costs of an activity or function

(e.g., a common intake and eligibility

determination system); or

3. On an item of cost basis where all

programs pay their allocable share of

each item of cost (e.g., rent).

It could also be some combination of

the above, e.g., when a particular or a

number of functions are treated on an

activity basis and the remaining items of

cost are treated on an aggregate or

individual item of cost basis.

The WIA regulations require that each

partner must contribute a fair share of

operating costs of the One-Stop delivery

system proportionate to the use of the

system by individuals attributable to the

partner’s program. This requirement is

intended to establish an equitable

principle, but it is not intended to

prescribe a single method for allocating

costs. The regulation goes on to say that

there are a number of methods,

consistent with the relevant OMB

circulars, that may be used for allocating

costs among the partners. Any

methodology used must:

1. Result in an equitable distribution

of costs and not result in any partner

paying a disproportionate share of the

shared One-Stop costs;

2. Correspond to the types of costs

being allocated;

3. Be efficient to use; and

4. Be consistently applied over time.

The methodology used may vary

dependent upon the nature of the OneStop structure. Further, any grantspecific cost and/or administrative

constraints are still applicable to the

individual grantees.

The basic types of One-Stop systems

include:

1. Simple Co-location with

Coordinated Delivery of Services:

Several partner agencies coordinate the

delivery of their individual programs

and share space. Each partner retains its

own identity and controls its own

resources. Each partner provides

services in a coordinated manner with

other funding sources while paying for

its own fixed and variable costs as direct

charges to its own funds. The partners

pool only those costs that are shared

jointly with the other agencies.

2. Full Integration: All partner

programs are coordinated and

administered under one management

structure and accounting system. Full

integration is the ETA vision of OneStop systems. It may be accomplished in

phases as the partner programs come to

realize the cost savings and efficiencies

of integrated services and activities.

Under full integration, there is joint

delivery of program services and the

operation is customer focused. Since

resources are combined, the

corresponding costs are often collected

into cost pools. Pooled costs are later

allocated back to individual grant

programs using an appropriate method

of allocation.

3. Electronic Data Sharing (through

satellite offices): Only program

information is provided and there are no

co-located staff assigned.

While the principles discussed in this

guidance may be applied to all three

types of structures, the focus of the

paper is to address co-located programs

with shared space and some common

functions or activities whether or not

those functions or activities are fully

integrated.

Allocation of One-Stop Shared Costs

While the physical One-Stop center

itself is not a specific direct recipient of

Federal awards as an entity, it is

expected that many program operators

within a local One-Stop system and/or

at an individual One-Stop center,

perhaps including the One-Stop

operator, are direct recipients of Federal

awards and do have federally negotiated

indirect cost rates or approved cost

allocation plans.

As previously stated, the costs of a

One-Stop may be categorized as: (1)

Direct costs that benefit one particular

cost objective, (2) shared direct costs

that can be readily allocated to the

sharing cost objectives, and (3) indirect

costs incurred for common or joint

purposes benefitting more than one cost

objective but are not readily assignable

to the benefitting cost objective.

Cost pooling may be used to distribute

both shared direct costs and indirect

costs. Cost pooling involves the

accumulation of costs to pools for later

allocation to final cost objectives. It may

be used for any type of common costs,

administrative or program, incurred in a

One-Stop center. It is appropriate to use

cost pooling when direct charging

requires disproportionate effort in order

to determine the amount that should be

charged to the individual cost

objectives.

29644 Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices

After One-Stop shared costs are

identified, they may be accumulated by

line-item expense categories (also

referred to as natural expense

classifications and object expense

categories). Some examples of line-item

expenses are salaries, occupancy costs,

telephone, postage and shipping,

printing and duplication, and supplies.

Shared costs may also be accumulated

or grouped by service department such

as data processing and management

information (MIS), printing and

duplicating, mailing and shipping,

purchasing and procurement, payroll,

personnel, and general legal services.

Another method may be accumulating

costs based on function or activity such

as eligibility determination; outreach,

intake and orientation; initial

assessment; job search and placement

assistance, and career counseling; and

follow up services. Whichever grouping

or accumulation method is used, it is

the actual incurred costs that are

accumulated.

Once the costs have been

accumulated, they need to be allocated

to the benefitting cost objectives (for

One-Stop allocation, the final cost

objectives will most often be the partner

programs) on some basis that will

provide for an equitable distribution.

The most commonly used allocation

bases include:

1. Direct-staff salaries: Percentage of

total salary costs of staff assigned to

activities.

2. Direct-staff hours: Percentage of

time spent by staff assigned to activities.

3. Modified total direct costs:

Percentage of total direct costs for

activities, less distorting items (e.g.,

equipment purchases, flow through

funds, etc.)

4. Total direct costs: Percentage of

total direct costs for activities.

(Normally inappropriate unless there

are no distorting items. See item 3

above.)

5. Units of service: Percentage of units

of service provided.

6. Usage: Percentage of usage of space,

equipment, or other assets by activities.

Allocations may be made on a single

basis for all categories of costs or on

multiple bases that vary by category.

When reliable, using a single basis for

allocating common costs can be less

burdensome. Direct staff salaries is often

appropriate when salaries alone

represent about half of an entity’s total

costs and other categories of costs tend

to vary according to staff salaries.

Cumulative cost pool allocations for the

reporting period are often preferable to

monthly allocations in achieving

equitable sharing among grant funded

activities because of various grant

periods during the grantee fiscal year.

Monthly allocations can be misleading

as to results because all costs do not

occur evenly on a monthly basis.

Regardless of the methodology used,

allocations could be accomplished

monthly but must be done no less

frequently than the required financial

reporting period, usually quarterly.

Funding or Paying for a Partner’s

Allocated Share of One-Stop Costs

Under WIA, the One-Stop partners are

required to enter into a written

Memorandum of Understanding (MOU)

with the Local Board, prior to starting

operations. The MOU must include

provisions that describe:

1. The services to be provided through

the One-Stop delivery system;

2. How the cost of those services and

the operating costs of the One-Stop

delivery system will be funded (paid

for);

3. The methods that will be used to

refer individuals between the One-Stop

operator(s) and the One-Stop partners

for the provision of appropriate services

and activities; and

4. The duration of the MOU as well

as the procedures for amending it

during the term or period covered by the

MOU.

In order for the MOU to describe how

the costs of services and One-Stop

operations will be paid for, the partners

will first need to identify those costs

and prepare a budget for the common/

shared One-Stop activities. This budget

will not only describe the shared costs

of the One-Stop system and/or One-Stop

center in total, but will also include

estimates of how much of the total

shared cost (personnel, space,

telecommunications, etc.) of the OneStop is allocable to each partner. The

budget development process involves

all of the One-Stop partners and the

One-Stop operator. The budget

document does not need to be included

in or attached to the MOU. Remember

that a budget is a plan, typically based

on historical information, that estimates

how the anticipated funding level will

be spent on the expected costs of the

programs. On a periodic basis, no less

frequently than quarterly, the actual

shared costs and the allocation among

the partner programs will need to be

reviewed and compared with the

planning levels that were included in

the budget. Corrections or adjustments

to the budget should be made on an

ongoing basis to reflect actual levels. At

that time, the budget document,

including the allocable partner shares of

the One-Stop shared costs, may need to

be adjusted to conform to actual

circumstances. The longer that a OneStop waits to make adjustments, the

greater the likelihood that adjustments

will be significant. An adjustment to the

budget will not necessarily require a

modification of the MOU unless the

terms of the MOU are affected.

After the budget is prepared, all of the

partners will then agree how each will

pay its allocable fair share. One partner

may furnish only personnel; another

partner may furnish space and

telecommunications, etc., or each

partner may use its grant funds to pay

for its allocable portion of shared costs.

This agreement about how the allocable

shares of One-Stop shared costs are to

be funded (paid for) must be included

in the MOU that is to be followed

during the operating period. As with

cost allocation, the choices that the

partner programs make about the

methods of payment for the shared costs

should be applied consistently over

time. However, in some circumstances,

the cost allocation and resource sharing

methodologies, including the

methodologies used to determine

proportionate shares, may need to be

modified if actual experience is either

different from what the partners

planned or demonstrates that the

methods being used are resulting in

inequitable distributions. As with

budget modifications, it is often best to

modify the methodologies as soon as

possible after the need is recognized.

Because such changes would constitute

changes in methodologies which are a

required element of the local MOU, it

may also be necessary to modify the

MOU when such a change is made.

For many of the partner programs,

including the WIA title I–B program, the

Federal funds are awarded or passed

through to State and local governmental

entities subject to the cost principles of

OMB Circular A–87. OMB Circular A–

87, Attachment A, paragraph C.3.c.

states, ‘‘Any cost allocable to a

particular Federal award or cost

objective under the principles provided

for in this Circular may not be charged

to other Federal awards to overcome

fund deficiencies, to avoid restrictions

imposed by law or terms of the Federal

awards, or for other reasons. However,

this prohibition would not preclude

governmental units from shifting costs

that are allowable under two or more

awards in accordance with existing

program agreements’’. Question 2–16 in

ASMB C–10, the implementation guide

for OMB Circular A–87, clarifies that the

intent of this paragraph is to distinguish

between cost allocation and funding

allocation. The C–10 goes on to say,

‘‘(* * * The term ‘cost shifting’ should

not have been used, because cost

shifting is unallowable, per se.) A

Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices 29645

function or activity within the

government organization that benefits

two or more programs may be set up as

a single cost objective. Costs allocable to

that cost objective would be allowable

under any of the involved programs

which benefit from these activities/

costs. The government can make a

business decision regarding what

combination of funds made available

under these programs would be applied

to this cost objective.’’

This same concept is applicable to the

WIA One-Stop environment, even when

all program service providers are not

governed by OMB Circular A–87,

provided that its use is consistent with

a program’s governing statutes and

regulations and is agreed to in the MOU

by the partners. As an example of the

application of this Circular to a OneStop, an individual might be eligible for

the Food Stamps and TANF Work

programs as well as the WIA title I–B

adult employment and training

program. Further, the services provided

to that individual, such as acquiring

transportation to the job site, could be

allowable under any of the three

programs. Where these conditions exist,

the cost objective is transportation

services for individuals meeting ‘‘X’’

criteria. The grantees for these programs

can choose which program to charge for

the cost of transportation services for

these individuals because they are

equally eligible under several programs

for essentially the same services. As

expressed in the A–87 implementation

guide, the reference relates to the

management decision of an organization

concerning which program will pay for

a cost which is allowable under and

allocable to more than one program in

accordance with existing program

requirements. These grantee decisions

and agreements are to be reflected in the

MOU.

The One-Stop environment also

permits partner program operators to

agree through their local MOU how they

pay their total allocable share of

common One-Stop costs (Operator A

may provide and pay for 100% of rent

and Operator B may provide and pay for

100% of some other shared cost(s)

where each partner is paying an amount

equal to their respective share of total

allowable/allocable costs). This does not

allow a program that receives no benefit

from a cost to claim incurrence of that

cost; it merely provides flexibility in the

payment method of each program

operator for its fair share of costs

according to benefits received. Under no

circumstances may any partner program

pay more than its total allocable share

of total allowable costs. Further, no

program may pay for costs that are not

allowable under its governing statutes

and regulations. Below are examples of

situations for which this provision

might be used.

1. Services provided prior to

determining eligibility for any given

program(s) are allocable to the

program(s) for which they are allowable.

However, in accordance with the above,

any program can pay for those services

entirely, to the extent they are

allowable, provided that the total

payments from any given program do

not exceed the total costs for various

activities and services that were

allocated to that program.

2. Similarly, a receptionist is typically

a common cost allocable to all

programs. However, the salary costs of

the receptionist may be borne by any

given program where such costs are

allowable, provided that the

reimbursements or payments made by

that program do not exceed, in total, the

total organization-wide allocations

made to that program.

However, some caution must be

exercised and care taken to draw the

line in situations when:

1. The activity begins to serve a

specific program purpose instead of

being general service to the public; or

2. Only one program directly benefits.

When a staff function that is common

to more than one but not necessarily all

of the One-Stop partner programs, such

as intake and eligibility determination,

is included in the One-Stop shared

costs, it may be more equitable for

payment of the program share of the

activity to be based on the notion of full

time equivalent (FTE) staff position

rather than on the aggregate total of staff

salaries. The staff of programs in a OneStop center will likely include State

employees, county and/or city

employees, as well as employees of

educational institutions, non-profit

community-based organizations, and for

profit commercial entities. Staff who

perform the same function for the OneStop operation will be on different pay

scales and pay levels. If all of the

programs that require the same specific

function provide FTE staff to perform

that function in the same proportion as

the relative number of individuals

attributable to the partner’s program

(e.g., the referrals to its program), then

each would have provided its equitable

share of the function. In order to

establish the appropriate FTE

contribution for each partner, it is first

necessary to establish the proportionate

share of each of the partner programs.

The proportionate share could be

established based upon the number of

individuals referred to the program

compared with the total number of

individuals served by the common

function. Another methodology,

discussed in the paragraph below,

establishes the proportionate share of

each program based on the number of

data elements, included in a common

intake and eligibility determination

form, that are applicable to and used for

the individual partner program. When

these programs were operating

independently of the One-Stop, such

staff would have conducted an intake

interview and determined that the

individual was not eligible for the

program and, hopefully, referred the

individual to the appropriate program

where they would go through the intake

process all over again. In a One-Stop

environment using a standardized

intake process, it will only be necessary

for a client to go through the process

once. This will result in a cost savings

for the program that actually provides

the program services as well as the

programs which previously would have

incurred the intake cost and not

provided service. Obviously, if a

particular partner’s program is not able

to use and does not benefit from the

common staff function, then it cannot

and should not bear any share of the

cost of such function.

An alternative method for

determining the proportionate share of a

common intake and eligibility system

for each of the partner programs could

be based on an approach that considers

the benefit of individual data elements

to each of the benefitting program

partners. This can be accomplished by

analyzing the data elements and

computing the appropriate percentage of

effort applicable to each benefitting

partner as follows:

Total bytes on the intake form

Used by program

500 A B C All programs

Bytes for Name ........................................................................................ 40 40 40 40 120

Bytes for Street Address .......................................................................... 80 80 80 80 240

29646 Federal Register / Vol. 66, No. 105 / Thursday, May 31, 2001 / Notices

Total bytes on the intake form

Used by program

500 A B C All programs

Bytes for City Address ............................................................................. 25 25 25 25 75

Bytes for State Address ........................................................................... 2 2 2 2 6

Bytes for Zip Code ................................................................................... 10 10 10 10 30

Bytes for Other Information ..................................................................... 343 143 183 203 529

Total Bytes ........................................................................................ 500 300 340 360 1,000

Percentage of Cost by Program .............................................................. .................... 30 34 36 100

In the above table, the total number of

bytes of information for each item on

the form is indicated in the first column.

The data in the columns headed ‘‘A’’,

‘‘B’’, and ‘‘C’’, indicates the number of

bytes of information used by each of the

individual programs. All programs

require the data elements related to

name and address, but each uses

different amounts of the remaining data

elements. The fifth column in the table

represents the total usage of all of the

data elements by all of the participating

programs and constitutes the

denominator, or base, upon which the

proportionate share of the individual

program use is calculated.

The FTE methodology discussed

above works best in those situations

when the common function (e.g., intake

and eligibility determination) is being

allocated to the sharing partners

separate from the other shared costs.

When common functions are being

allocated as part of the process of

allocating total shared costs, use of the

FTE methodology for a portion of the

total may result in inequitable

distribution of the total costs. In such

cases, it may be better to base the

proportionate share allocation on the

actual staff salary cost rather than on

FTEs.

Conclusion

This document has described the

framework created under the Workforce

Investment Act which creates the need

for resource sharing and cost allocation

methodologies for the shared costs of a

One-Stop system. It has been a

collaborative effort involving comments

and discussions among representatives

from the Departments of Agriculture,

Education, Health and Human Services,

as well as the Department of Labor’s

Employment and Training

Administration, Office of Cost

Determination and Office of Inspector

General. This guidance separates the

identification and determination of OneStop shared costs from the discussion of

how those costs are paid for or funded.

While there may be unique One-Stop

settings that will require additional

guidance, this document provides a

framework that all One-Stop systems

and/or centers will be able to use to

establish their own system for cost

allocation and resource sharing. Thus, it

is expected that Federal agency auditors

will utilize as additional criteria for

audit and resolution purposes the

agreements reached by One-Stop

partners in local Workforce Investment

Areas in accordance with this guidance

along with other applicable rules. The

Federal partners that participated in the

preparation of this paper, as well as the

Office of Management and Budget,

accept the principles discussed herein

as appropriate ‘‘resource sharing’’ and

‘‘cost allocation’’ guidance for WIA OneStop systems and/or centers.

Signed at Washington, DC, this 23rd day of

May, 2001.

Raymond J. Uhalde,

Deputy Assistant Secretary of Labor,

Employment and Training Administration.

[FR Doc. 01–13426 Filed 5–30–01; 8:45 am]

BILLING CODE 4510–30–P