The Energy Commission is pleased to offer additional flexibility and reduced administrative burden related to the invoice review and budget amendment processes. With these improvements, Recipients are reminded that all items included on a budget or an invoice must be necessary to accomplish the Scope of Work and meet other Agreement Requirements, and invoices must represent Actual Costs. In addition, a CAM may request additional information that he or she feels is necessary to support an invoice or budget reallocation.
The Energy Commission defines Direct Labor as “unloaded” labor rates – it is the base rate calculated without fringe benefits, indirect overhead, general & administrative, or any other added-on costs. This is the salary or wage rate that is actually paid to the employee.
Direct Labor Budget Considerations
- The Recipient should include all likely job classifications that may be utilized over the life of the grant
- There are three positions that are helpful to most project types, but are often overlooked: a project manager that keeps all project tasks on track, administrative technical support to keep track of budgets, invoicing, etc., and a technical writer for translating technical material in reports into language that can be disseminated to a wider audience.
- When estimating rates, the Recipient should account for likely salary increases that will occur over the life of the grant. Estimates should be set at the high end in order to avoid budget reallocations in the future. Please note, however, that these estimates are not “negotiated rates” - Recipients, Subrecipients and vendor can only be reimbursed with CEC funds for Actual Costs paid even if the estimates in the Budget are higher.
- The Recipient should ensure the job classifications included in the Direct Labor Category are appropriate. Some job classifications are typically included in Indirect Costs (i.e. Overhead, or General & Administrative) instead of Direct Labor because individuals in these positions typically do not keep detailed timesheets that track hours charged to specific activities – a requirement for Direct Labor expenses. Examples include:
- Executive Officers
- Personnel Officers
- Administrative or Clerical staff
However, charges for these individuals are acceptable if a Recipient can provide detailed timesheets. See “requirements for acceptable timesheets” below.
Also, if counted in Direct Labor, a Recipient should ensure that these job classifications are not double counted in the Indirect Costs.
Requirements for Acceptable Timesheets
If you are audited, the Auditor will ask you to provide documentation to support your Direct Labor charges. Timesheets can be hard copy or electronic, and must:
- track all hours worked by an individual;
- be broken down into specific activities/projects, including leave, training, administrative time, etc.;
- support that time billed is directly related to the grant scope of work; and
- include evidence that they are completed by the employee, approved by a supervisor, and maintained in a format that cannot be changed after approval.
Direct Labor Invoicing Considerations
- Recipients may not bill at estimated labor rates. Instead, all reimbursable and match expenses must be invoiced at Actual Costs.
- If you are seeking reimbursement for Actual Costs that exceed the estimated labor rates included in your budget, you will need to carefully track spending to ensure that you do not exceed your budget for this category. While a budget reallocation may be requested, you will be required to justify the reason for the reallocation and show that the project can still be successfully completed if you have to take money from another budget category to cover your labor costs. If a budget reallocation is not feasible, you may charge the additional labor costs to match.
Fringe benefits are allowances and services provided by employers to their employees as compensation in addition to regular salaries and wages. (Source: Electronic Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 2, Section 200.431.) Examples of fringe benefits include vacation, sick leave, medical and dental insurance, unemployment benefit plans, payroll taxes, and pension plans. Recipients will provide a Fringe Benefit "rate" that is demonstrated as a percentage of Direct Labor.
A Fringe Benefit Rate is very entity-specific and the items included in that rate can vary widely.
To calculate a fringe benefit rate, a Recipient will add up the annual cost of any benefit provided to employees or any tax that is required by the government in order to employ staff such as payroll taxes. The total of those annual costs is divided by the total annual gross payroll. The result is the fringe benefit rate.
Annual Recalculation of Fringe Benefits
- A Recipient should recalculate the fringe benefit rate each year since benefit costs and total payroll will change each year.
- If, after recalculation of a fringe benefit rate, the Recipient discovers they over-claimed fringe benefit expenditures, discuss with the CAM to determine if the amount should be remitted or credited against the next reimbursement request.
- If, after recalculation of a fringe benefit rate, the Recipient discovers they under-claimed fringe benefits, discuss with the CAM to determine if a reimbursement request for the adjusted amount should be submitted. Additional claims are subject to the budget category limit.
If Consultants are included in Direct Labor, Fringe Benefits should not be charged to that labor. Companies do not typically pay for benefits such as medical insurance or payroll taxes for consultants. Therefore, companies should exclude consultant labor costs when calculating the amount of fringe benefits to claim.
Acceptable Supporting Documentation
In the event of an audit, the Auditor will request documentation to support that the Fringe Benefit expenses charged are Actual Costs. The auditor will also confirm that the types of expenditures included in the rate are appropriate: only costs that actually benefit an employee or are required to hire an employee should be included.
Supporting documentation must comply with OMB rules. (See Section 200.431: https://www.ecfr.gov/cgi-bin/text-idx?SID=5c3db28847a91cd02783ad85cfde4….)
- You may only claim the actual fringe benefit rate; the rate estimated on your budget is not a "negotiated rate."
- Verify that the Fringe Rate has been properly calculated for both CEC Funds and Match Funds. (FR x DL CEC Funds and FR x DL Match Funds). CEC Funds may not be used to pay Fringe Benefits for Direct Labor charged to Match Funds.
The Energy Commission will reimburse travel that has been approved as necessary to accomplish a task in the Scope of Work. For Recipients using the existing budget forms, any travel that is not identified as “pre-approved” must obtain approval in order to be paid. For Recipient’s using the new budget forms, travel that is included as a line item in the Budget Worksheet is deemed approved. Travel that is not identified as either pre-approved or included in the Budget Worksheet must be approved using the Travel Form. Approval for travel may be sought before travel or after travel. However, the Energy Commission recommends securing approval prior to travel because costs for unapproved travel will be incurred at the Recipient’s risk. Pre-approval ensures that the Energy Commission has determined that the travel is necessary to accomplish a task in the Scope of Work.
Receipts are required only for:
- Rental car (including gasoline expenses)
Invoiced Amount Does Not Have To Match Budget Worksheet Estimates
The Energy Commission recognizes that the amounts listed in the agreement budget or Travel Form (if submitted for pre-approval) are estimates. CAMs may approve actual travel costs that are reasonably similar to the estimates. If the actual expenses are substantially greater than estimated, CAMs should request an explanation for the difference. CAMs must have supervisor approval to dispute an invoice that reflects actual travel costs.
Travel Expense Details
The Energy Commission will reimburse lodging expenses at standard room rates. The Energy Commission will not reimburse for luxury accommodations.
For all cities and counties in California (except San Francisco) actual lodging expenses will be covered up to $200 per room per night, plus tax.
For San Francisco, actual lodging expenses will be covered up to $300 per room per night plus tax.
If actual lodging expenses exceed the maximum rate set above, CAMs should request an explanation for why the expense is reasonable under the circumstances. CAMs have the authority to approve additional expenses with reasonable justification.
The Energy Commission will not reimburse any expenses added to the standard room rate and taxes. For example, the Energy Commission will not reimburse for movies or activities charged to the room.
The Energy Commission will reimburse at coach rates on commercial carriers. The Energy Commission will not reimburse for upgrades on flights.
The Energy Commission will reimburse expenses for vehicles appropriate for the purpose of the travel. The Energy Commission will not reimburse for luxury automobiles.
The Energy Commission will not reimburse the cost of vehicle insurance using CEC Funds, but a Recipient may charge the cost of insurance to Match Funds.
The Energy Commission will reimburse for standard coach rates. The Energy Commission will not reimburse for upgrades.
Personal Vehicle Mileage (No receipt required)
When driving a personal vehicle, the current reimbursable mileage rate can be found at https://www.irs.gov/tax-professionals/standard-mileage-rates
Per Diem (No receipts required)
A base maximum daily per diem is allowable for actual expenses up to $100 per day for the following expenses:
- Incidentals (i.e. tips for hotel staff and taxi/ride share drivers)
- Taxi/ride share
Note: Alcoholic beverages are NOT considered an agreement-appropriate expense when claimed either as a reimbursable expense or as a match share expense.
Out of State Travel
As of October 2020, the following states are currently subject to California’s ban on state-funded and state-sponsored travel:
- North Carolina
- South Carolina
- South Dakota
Travelers are required to check the California State Attorney General website for the most recent list of affected states.
If there are circumstances where travel to these states is necessary to accomplish the grant requirements, the CAM, working with management, can determine if a limited exception applies. (See Gov. Code § 11139.8 subdivision (c))
Equipment is defined as a purchase of a tangible item with a unit cost of $5,000 or more and a useful life of one year or more.
The Energy Commission will reimburse for the Actual Cost of equipment that has been approved as necessary to accomplish a task in the Scope of Work. Equipment listed in Budget is deemed approved.
If a Recipient would like to seek reimbursement for equipment that is not included in the budget, a “Form to Add Equipment/M&M” must be submitted by the Recipient and approved by the CAM. Adding new equipment may require a budget reallocation.
Equipment for the project, regardless of whether it is actually purchased by a Recipient, Subrecipient, or Vendor, will be included under a Recipient’s budget if the equipment is:
- Off-the-shelf – not being built specifically for this project by Subrecipient; and
- Purchased from a third-party through an arms-length transaction - not purchased from a parent/subsidiary/sister company, family, or close friend.
This equipment will not count towards the $100,000 threshold that distinguishes "major subrecipients" from "minor subrecipients."
Equipment that is built by a Subrecipient specifically for the project is to be listed on the Subrecipient's budget. The time and materials and other expenses to build this equipment will count towards the $100,000 threshold for "major subrecipients." Major subrecipients are required to provide a detailed budget that breaks out all category expenses. This is required to ensure that a Subrecipient can support a "costs of goods sold" assessment by the Auditor.
Equipment Purchased by a Subrecipient from a parent, subsidiary or sister company, or from a family member or close friend, is to be treated the same way. In this situation, a Subrecipient would just provide the related company's costs to manufacture the product broken down by budget category on the Subrecipient's budget. The Subrecipient would be expected to provide supporting documentation for the related company's expenses if audited.
- Budget amounts are estimates. An amount listed for a piece of equipment in the Agreement Budget is still to be considered an estimate and does not represent a maximum amount the Energy Commission can pay for an item.
- Supporting Documentation must be provided. For equipment that is equal to or greater than $100,000 per line item total (including both CEC and Match Funds), documentation showing the payment terms must be provided to the CAM.
- For example, a single line item with 10 widgets at $12,000 each, which equals $120,000, would require supporting documentation, even if $60,000 was covered by Match Funds and $60,000 by CEC Funds.
- Acceptable supporting documentation includes an invoice, a bill, or a receipt for equipment that has been paid or equipment costs have been incurred (meaning the expense is legally binding even if not actually paid yet). A purchase order, without either an invoice, bill, or receipt, is not sufficient.
- If, on a previous invoice, the CEC pre-paid an incurred cost of equipment with a total line item cost of $100,000 or more, and this invoice includes an additional payment on the equipment, the Recipient must provide proof of payment for the previous installment.
- There may be occasional circumstances when a Recipient may not be able to provide proof of payment because it has not yet received funds from a prior invoice to pay the installment. When the Energy Commission pre-pays an expense such as equipment or a subcontractor’s invoice, Agreement terms and conditions require a Recipient to pay that entity within 14 days of recipient of payment from the Energy Commission. If a Recipient has not received payment prior to submitting another invoice, the Energy Commission will pay one additional installment without requiring proof of payment for the previous installment.
- To add equipment to budget, Recipient must submit a “Form to Add Equipment/Materials and Miscellaneous”
- The Form can be included with an invoice, and if the equipment is approved, the expense can be paid without completing a budget amendment first AS LONG AS adding the equipment will not trigger a budget reallocation (i.e., this new equipment is replacing existing equipment that is no longer required for the project.)
- If a budget reallocation will be required, the new equipment expense cannot be paid until the budget reallocation is complete.
- If the invoice can be paid without a budget reallocation, a budget reallocation will still need to be completed to ensure that the budget properly reflects the actual equipment for the project, but can be done so after the invoice is paid. The ECAMS Team recommends that the budget reallocation be submitted by the next quarterly progress report.
Independent Verification of Large Equipment Expenditures
A CAM must independently verify equipment purchases with the vendor for: 1) equipment with a per line item incurred cost of $500,000 or greater; or 2) a single equipment vendor with $500,000 or more in equipment incurred costs.
The Equipment Verification Email Form will be used as a tool for the Recipient to connect the CAM to the Vendor who may otherwise be hesitant to share financial information such as payment details with the Energy Commission.
If the e-mail verification option presents a challenge, a Recipient can use another option to verify equipment purchases of $500,000 or more. Proof of payment can be a copy of a check or wire transfer and a bank statement to verify the funds were actually paid. If progress payments are made, the equipment provider's invoice may include amounts already paid along with amounts currently due. A copy of those invoices along with the bank statement to verify the amounts paid would also work.
Materials are any tangible items purchased that do not conform to the definition of Equipment. Materials have an acquisition UNIT cost of less than $5,000 or a useful life of less than one year. Examples of materials include: feedstock, sheet metal, motors.
Miscellaneous items are items of cost that do not fall under other budget categories. Miscellaneous costs must be directly allocable to the CEC-funded project. Examples of miscellaneous costs include: lab or facility rental, av equipment rental, software licenses, printing (brochures/pamphlets),
Are Items Listed In Your Budget Proper for the Category?
- Unless it is clear that the cost is incurred to further the scope of work, the Recipient should not direct bill items such as paper, printer toner, pencils, rent, utilities, etc. These types of costs are typically included in an Indirect Rate.
- Services or items of cost that involve labor are either Subrecipients or Vendors and do not belong in this category.
Supporting Documentation Required
Supporting documentation must be provided for any line item total that is $5,000 or more.
- For example, a single line item with 6 widgets at $1,000 each, which equals $6,000, would require a receipt(s), even if $3,000 was covered by Match Funds and $3,000 by CEC Funds.
Acceptable supporting documentation includes an invoice, a bill, or a receipt for expenses that have been paid or expenses that have been incurred (meaning the expense is legally binding even if not actually paid yet). A purchase order, without either an invoice, bill, or receipt, is not sufficient.
Adding New M&M Items to the Budget
If a recipient wants to charge an expense to the Materials and Miscellaneous Category, that expense must be necessary to accomplish the Scope of Work. All items included on the budget are deemed approved because they have been determined to be necessary.
Additions less than $5,000
A Recipient may charge an expense to this category under $5,000 that was not included on the budget, as long as it is necessary to accomplish the scope of work and meets other Agreement requirements. No supporting documentation will be required with the invoice, and no approval by way of the Form to AddEquipment/Materials and Miscellaneous will be required.
Although the Energy Commission’s goal is to reduce administrative burdens, Recipients are to avoid practices to “game the system” by adding items to invoices in small increments to avoid the $5,000 approval threshold. Also, Recipients must remain mindful of un-budgeted spending so that expenses do not exceed the category budget.
Additions more than $5,000
If a Recipient wants to charge an expense to this category of $5,000 or more per line item, and the expense was not included on the budget, the new expense must be approved by way of a Form to Add Equipment/Materials and Miscellaneous in order to be reimbursed. A completed form may be submitted prior to invoicing or along with an invoice seeking reimbursement for the expense. Supporting documentation must also be provided.
The California Energy Commission distinguishes entities as recipients, subrecipients, and vendors.
A recipient is defined as the entity that executed the grant agreement with the CEC.
A subrecipient is defined as an entity that receives grant funds directly from the Recipient and is entrusted by the Recipient to make decisions about how to conduct some of the grant’s activities. A Subrecipient’s role involves discretion over grant activities and is not merely just selling goods or services.
Characteristics which support the classification of the entity as a subrecipient include when the entity:
- Has its performance measured in relation to whether objectives of a CEC program were met;
- Has responsibility for programmatic decision-making;
- Is responsible for adherence to applicable CEC program requirements specified in the CEC award agreement;
- In accordance with its agreement, uses the CEC funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the recipient or sub-recipient; or,
- Provides match share funding contributions to the CEC-funded project.
A sub-subrecipient has the same meaning as a subrecipient except that it receives grant funds from a subrecipient. There can also be further levels below of sub-subrecipients.
A vendor is defined as a person or entity that sells goods or services to the Recipient, Subrecipient, or any layer of Sub-Subrecipient, in exchange for some of the grant funds, and does not make decisions about how to perform the grant’s activities. The Vendor’s role is ministerial and does not involve discretion over grant activities. A vendor is an entity selected through a competitive process or is otherwise providing a product or service at a fair and reasonable price. Characteristics indicative of a procurement relationship between the recipient or subrecipient and a vendor are when the vendor:
- Provides the goods and services within normal business operations;
- Provides similar goods or services to many different purchasers;
- Normally operates in a competitive environment;
- Provides goods or services that are ancillary to the operation of the CEC program; and
- may not be subject to compliance with all of the requirements of the CEC program as a result of the agreement, though similar requirements may apply for other reasons.
Use of judgment in making determination
In determining whether an agreement between a recipient or subrecipient and another entity casts the latter as a subrecipient or a vendor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases, and the Recipient must use judgment in classifying each agreement as a subaward or a procurement contract.
A recipient or subrecipient entity must make case-by-case determinations whether each agreement it makes for the disbursement of CEC program funds casts the party receiving the funds in the role of a subrecipient or a vendor. The CEC may supply and require recipients to comply with additional guidance to support these determinations. If there is a disagreement on whether an entity should be classified as a subrecipient or vendor, CEC retains ultimate discretion.
Going forward, Recipients should include all equipment that is to be used on the project within the Recipient’s equipment budget category, instead of including equipment as a line item on a Subrecipient/Vendor budget. Equipment will not count towards the $100,000 “Major Sub” threshold.
For any subrecipient receiving $100,000 or more in Energy Commission funds (Major Sub):
- Subrecipient must provide a budget, just as a Recipient.
- Recipient must submit agreement with Subrecipient for review prior to invoicing for Subrecipient’s work.
- For each Subrecipient, a CAM will:
- Review scope to ensure fit with project
- Review budget for alignment with project
- Ensure the CEC’s “flow-down” provisions are in the subrecipient agreement
- Subrecipient invoices are subject to training invoice requirements.
- A Subrecipient’s invoice must:
- be broken down by category, just as a Recipient
- include the Subrecipient’s actual source documentation – not a document to be created by Recipient.
- be sufficient to allow us to verify that we are paying actuals.
- If the Auditor chooses to audit a Subrecipient, the Subrecipient must have be able to provide the same supporting documentation a Recipient is required to provide. This is in the flow-down provisions of agreement terms and conditions.
For any Subrecipient receiving less than $100,000 in Energy Commission funds (Minor Sub):
- No detailed budget required – Recipient need only submit Subrecipient’s invoice.
- no contract review required
- no training invoice required
- is subject to flow-down provisions
- No detailed budget required – Recipient need only submit Vendor’s invoice.
- No contract review required
- No training invoice required
- Invoice must certify that Vendor was competitively bid or is a responsible supplier that provides a fair and reasonable price.
- When a Recipient classifies an entity as a Vendor, the recipient must retain documentation establishing how the price was determined to be fair and reasonable.
- If a CAM has concerns about an entity being improperly classified as a Vendor, the CAM will elevate the issue to his or her supervisor.
- Vendors may be exempt from some flow-down provisions. Check the applicable terms and conditions.
Additional Information related to Subrecipients:
- Recipients are responsible for managing their Subrecipients and Vendors. If a Subrecipient or Vendor does not complete its duties under the Agreement, the Recipient is liable for the non-performance. Similarly, if an audit finds that a Subrecipient has not adhered to the requirements to invoicing for actual costs or maintaining acceptable supporting documentation, the Recipient is liable for questioned costs.
- Major Subrecipients should attend Administrative Kick-off meetings and so they can better understand their responsibilities.
Indirect costs are those costs incurred for common or joint purposes of a public or private entity, benefitting more than one project or activity, and not easily assignable to the projects and activities. For example, it is difficult to assign the cost of a building’s operations to each activity performed by a company.
Indirect, Overhead, General and Administration (G&A), Facilities and Administrative (F&A) are all terms for indirect costs. Typical examples of Indirect Costs may include depreciation on buildings and equipment, the costs associated with operating and maintaining facilities and equipment, and general administration and expenses, such as salaries and expenses of executive officers, personnel administration and accounting. This category typically covers other general business expenses such as printer paper, printer toner, pencils, rent, and utilities.
Grant applicants may select one of three options for indirect costs. The selection must be made prior to submitting the first invoice and must be maintained over the life of the grant.
OPTION 1 – Defense Contract Audit Agency (DCAA) or other Federally Approved Indirect Rate
An entity that has a federally approved indirect rate from DCAA or another Federal agency may use the approved indirect rate for Energy Commission grants. A copy of the approval letter must be provided. CAMS will review the letter to determine which fiscal year it applies to and what basis is used to calculate the rate to ensure the approved rate is for a recent fiscal year and the calculation of indirect for the grant matches the approved method. CAMS may contact CEC’s audit office if they have questions regarding the letter.
The benefits of using this option:
- Aside from the letter, no backup documentation is required.
- Indirect Costs will not be subject to an Energy Commission audit.
This rate will typically shift annually, and this shift is generally acceptable.
- When the rate goes down, the Indirect budget category does not need to be adjusted.
- When the rate goes up, if the rate increase would require a budget reallocation to increase the total dollar value of the Indirect budget category, approval per the Grant Agreement Change Approval Chart will be required.
OPTION 2 - CEC De Minimis Rate
The CEC has established a De Minimis Rate of 10% of Modified Total Direct Cost (MTDC). This is the same de minimis rate used by the Federal government. MTDC is defined as: all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, rental costs, tuition remission, scholarships and fellowships, and the portion of each subaward in excess of $25,000.
The benefits of using this option:
- No backup documentation is required
- Indirect Costs will not be subject to an Energy Commission audit.
- When eventually applied to solicitations where indirect cost rates are part of scoring criteria, this option will guarantee the applicant full points to incentivize its use.
This rate may be an excellent choice for small start-up companies that do not have an established cost allocation plan, or for entities that would like a simple option that removes documentation requirements and risk of audit findings in this category.
This rate will not change during the life of the grant. If the Energy Commission increases the De Minimis Rate, only new grants will use the new rate.
Although a rate increase is not allowed during the life of the grant, the budget category amount may be increased through a budget reallocation – if necessary – if other category amounts are changed and those changes increase the total amount that will be charged in the Indirect budget category.
OPTION 3 – Recipient’s Cost Allocation Plan
Under this option, Recipients set their indirect rate pursuant to a cost allocation plan. To create a plan, a Recipient identifies all costs they consider to be overhead or indirect. This indirect cost pool is then allocated to the various projects or activities conducted by the Recipient using a methodology that fairly distributes the indirect costs.
Documentation Must be Provided Upon Request
While a Cost Allocation Plan is not required to be submitted with an application or an invoice, an entity who selects this option must be able to provide a copy of their cost allocation plan, and that plan must follow OMB Guidelines. Here are examples of Cost Allocation Plans. No plan will be the same, but these are provided as reference for examples of what has worked, and where problems were found.
However, if Energy Commission staff have received the plan and an Indirect Rate based on the plan has been included in the Agreement, this does not mean that the plan has been “approved” by the Energy Commission as sufficient for purposes of an audit.
The Indirect Rate Listed in the Budget Will Not Be Increased
The indirect rate set in the agreement budget will not be allowed to change during the life of the grant. Although a rate increase is not allowed during the life of the grant, the budget category’s total dollar value may be increased through a budget reallocation if necessary due to changes made to other budget categories that are used to calculate the indirect costs.
Suggestions for Budget Development when using this Option
- A Recipient is required to charge only “actual” costs under the grant agreement. However, a Recipient is allowed to set an indirect rate at a rate that is higher than the expected actual rate as projected over the life of the grant. This “padding” would allow a Recipient to continue to charge its actual expenses to the grant even if the indirect costs rise unexpectedly.
- Is equipment included in the base rate? If equipment costs are very high, then the amount claimed as indirect will change dramatically between invoices that include equipment and those that don’t, even if the other expenditures do not change much. This is why most companies do not include equipment purchases in their indirect basis. If equipment purchases are included in the indirect basis, the CAM may arrange a meeting between the Recipient’s CFO/Accounting Manager, the CAM and CEC’s auditor to discuss.
The Indirect Rate will be Subject to Audit
The Auditor has provided this list of common mistakes related to indirect costs often found during audits that Recipients are advised to avoid:
- The Recipient’s indirect cost allocation plan is not documented. The company cannot show what costs are included in the indirect cost pool or how they are allocated.
- The Recipient has claimed the rate listed on the budget instead of actual rates. The indirect rate estimated in the budget is not a “negotiated rate.” Recipients must be able to show documentation of actual expenses. This is also a common mistake for other Agreement rates, like direct labor.
- The Recipient has not recalculated indirect costs each year. Similar to Fringe Benefits, Indirect costs should be recalculated each year and the updated rate should be compared to the claimed rate. Recipients can then either remit or credit the over-claimed amount or submit a reimbursement request for under-claimed amounts. Additional claims are subject to the budget category limit.
- The Recipient used a different method to claim indirect expenditures for the grant than is shown in the cost allocation plan. For example, for the grant, the recipient claims a percentage of all direct costs including subcontractors and equipment, but the company’s indirect cost allocation plan shows that indirect costs are claimed as a percentage of labor only.
- The Recipient’s indirect cost pool includes unallowable costs such as lobbying or fundraising.
- The Recipient has improperly included typical indirect expenses under other budget categories.
- The Recipient has improperly included in the indirect cost pool costs that can be assigned to a specific project or activity. Only those costs that cannot be tied to a specific project or small group of projects should be included in the indirect cost pool.
- The Recipient has more than one grant, and the base/methodology is not the same for both grants.
The Energy Commission’s auditor may review a recipient’s plan early in the grant. The goal of this review is to reduce future audit findings in this area. However, this review does not protect a Recipient from future audit findings.
Profit remains limited to Subrecipients and Vendors and capped at 10%. Recipients may not charge profit to the grant.
"Match" is funding, in addition to the Energy Commission award amount, that is being provided by the Recipient to support the project.
"In-kind match" is match provided by a third party, and is not coming from the recipient's own pocket. Examples: Subrecipient donating costs, Subrecipient donating site.
Match Fund Requirements and Limitations
Match has all the same requirements as all of the other expenditures that are reimbursed using CEC Funds. For example, if a Recipient is providing labor as Match, it still has to be supported by time-sheets, etc.
If you are donating space or land or equipment, the value claimed as Match has to be based on FMV.
Foregone costs (i.e., costs that were not actually incurred by the recipient or subrecipient) are not allowed to be used as Match Share expenses on grant agreements.
The savings from discounts on goods or services purchased for a grant agreement project are not allowed to be counted as Match Share expenses. The reason that discounts cannot be counted, which a recipient or subrecipient negotiates with a vendor, is because the recipient or subrecipient did not incur the cost of the savings that resulted from the discount.
A Subrecipient can have Profit paid for with Match Share funds as long as they can prove that someone else is paying them the Match Share, such as the Recipient. The Match Share cannot be from Foregone costs (i.e., the subrecipient cannot pay themselves their own Profit).
Using Match to Cover Costs that Exceed the Budget for CEC Funds
If a recipient wants to bill for actual expenses that exceed the funding available from CEC Funds, they can claim the excess as Match Funds.
Important exception for Indirect Rates: If the recipient or sub is using the de minimis rate, they cannot use the difference between actuals and the de minimis rate as match. Once they choose to use actuals, whether as match or grant funded, it all becomes subject to audit.
Most often, consultants are best placed in the Subcontractor Budget Category.
However, some Recipients place consultants in the Direct Labor Budget Category. If not handled correctly, this can lead to accounting problems that result in audit findings and questioned costs that must be repaid.
Recipients do not typically pay the Fringe Benefits and Indirect Costs for a consultant, but those rates are often calculated based on the Direct Labor Budget Category. If a Recipient does not back out the direct labor associated with consultants when calculating those rates, it is likely that the Recipient will be claiming excess Fringe and Indirect that will have to be paid back.
Also, anyone listed in Direct Labor must be able to provide acceptable timesheets as backup documentation to prove the time they spent on the project. Invoices listing someone's hours worked on the project are not sufficient. See the "Requirements for Acceptable Timesheets" within the Direct Labor Budget Category Guidance for more information.
Finally, verifying a consultant’s hourly wages utilizes the consultant invoices, progress reports, and the actual contract. In contrast, to verify an employee’s hourly rates, paystubs and W-2s are used.