1. PURPOSE: To inform SCSEP grantees of changes in grant financial management cost classification procedures that will take place on July 1, 2001.

2. REFERENCES: Title V of the Older Americans Act as amended by PL 106-501; Older Worker (OW) Bulletin 97-26: SCSEP Cost Classification and Cost Categories.

3. BACKGROUND: ETA is working to develop and publish regulations incorporating the changes made in the SCSEP program by the OAA amendments of November 2000. The current schedule calls for publishing proposed draft regulations in September, 2001, and final regulations in February 2002. A number of provisions of the OAA amendments can be implemented beginning July 1, 2002, in the absence of final regulations, however. One of these provisions concerns changes in cost categories and cost accounting procedures that are followed by SCSEP grantees. ETA feels that grantees should be permitted to take immediate advantage of the liberalized provisions concerning administrative expenses found in the OAA amendments. Therefore, grantees should begin to implement the new cost classification procedures outlined below as of July 1, 2001.

4. CHANGES IN SCSEP COST CATEGORIES:

a. Prior to the OAA Amendments of 2000, costs incurred by grantees under the SCSEP program were classified into three categories:

• Administration included the direct and indirect costs of program management, oversight, audits, information systems, monitoring and reporting, and staff training and technical assistance. Administrative costs could be no more than 13.5 percent of the total Federal grant unless ETA approved a waiver raising the ceiling to no more than 15.0 percent.
• Enrollee Wages and Fringe Benefits paid to enrollees while working in community service jobs or receiving training. Not less than 75 percent of total Federal grant funds must be used to pay EWFB.
• Other Enrollee Costs included the costs of such activities as enrollee recruitment, assessment, orientation, training, supportive services like transportation, job development and placement. Between 10.0 and 11.5 percent of Federal grant funds could be allocated to this cost category.

SCSEP grantees have been required to budget and report their expenditures in these three cost categories.

b. The recent OAA amendments seek to align SCSEP's cost management system with that used by programs administered under the Workforce Investment Act (WIA) of 1998. In doing so, the amendments have changed SCSEP cost accounting procedures in several ways:

• Certain types of expenses were removed from the "Administration" cost category. For example, the costs of (1) developing and operating management information systems (MIS) that involve program participants and activities, and (2) planning, developing, monitoring and oversight of program activities need no longer be charged to the "Administration" cost category. Note, however, that the costs of MIS and monitoring of administrative functions and activities must still be charged to the "Administration" cost category. The cost ceiling for Administrative costs remains at 13.5 percent of the total grant unless ETA approves a waiver raising it to 15 percent.
• The cost categories of Enrollee Wages and Fringe Benefits (EWFB) and Other Enrollee Costs (OEC) have been combined into a new category called Program Costs. All expenses not specifically classified as Administrative Costs may be charged to this new category. This includes (a) Enrollee Wages and Fringe Benefits; (b) enrollee assessment, training, placement, supportive services and other costs formerly charged to the Other Enrollee Cost category; and (c) certain other costs, such as those mentioned above, formerly charged to the Administration cost category. Note, however, that the Title V program still retains the requirement that 75 percent of total grant funds must be spent on Enrollee Wages and Fringe Benefits.
• For financial budgeting and reporting purposes, grantees should now assign expenses to the following categories: Administration, Program/EWFB, and Program/Other. Existing forms may still be used; re-title the "OEC" expenses column as "Program/Other" expenses.

c. The cost allocation principles in OW Bulletin 97-26 should be applied to the new cost categorization. Staff of SCSEP projects, especially small ones, regularly perform activities that can be categorized as both "Administrative" and "Programmatic" (which now include activities formerly categorized as OEC). Staff should be careful to correctly record their time and other expenses in the proper category. Grantees should have in place a system to facilitate this record keeping.

5. ACTION REQUIRED: Please circulate this information to subgrantees, program operators and others involved in the Title V SCSEP program.

6. INQUIRIES: Questions should be directed to your Federal Representative at (202) 693-3842.

ERICH W. ("RIC") LARISCH Chief Division of Older Worker Programs

SHIRLEY M. SMITH Administrator Office of Adult Services

TDNO:RLarisch/MJ/6-26-01/7-11-01/RmN4644/33842

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