[Federal Register Volume 66, Number 105 (Thursday, May 31, 2001)]
[Notices]
[Pages 29638-29646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13426]



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Part II





Department of Labor





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Employment and Training Administration



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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; Notice

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

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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.

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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 One-Stop 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 One-Stop 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 One-Stop costs. As discussed in other sections of this paper, 
the efficiencies of scale that will result from the process of

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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 
One-Stop 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 One-Stop 
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 One-Stop. 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

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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. In-kind 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;

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    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 One-Stop 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 One-Stop, 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.

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[GRAPHIC] [TIFF OMITTED] TN31MY01.000

    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 One-Stop 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-
to-work 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

[[Page 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 One-Stop 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 One-Stop 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 One-Stop 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 One-
Stop structure. Further, any grant-specific 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 One-Stop 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.

[[Page 29644]]

    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 One-Stop 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 One-Stop 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

[[Page 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 One-
Stop, 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 One-Stop 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 One-
Stop 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:

----------------------------------------------------------------------------------------------------------------
                                                            Used by program
                                   ----------------------------------------------------------------
  Total bytes on the intake form                                                            All
                                        500           A            B            C         programs
---------------------------------------------------------------------------------------------------
Bytes for Name....................       40           40           40           40          120
Bytes for Street Address..........       80           80           80           80          240

[[Page 29646]]

 
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 One-Stop 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 One-Stop 
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