Administrative Cost Limitations

These frequently asked questions focus on administrative cost limitations that directors and fiscal managers may ask.

  1. Q: Are indirect costs administrative or program costs?

    A: Indirect costs may be classified as administrative costs or program costs. Indirect costs are usually, but not always, administrative costs. However, indirect costs classified as program costs must be fully explained in the application.

  2. Q: Can a disallowance of Federal funds be taken against a grantee agency if it fails to meet the 15% administrative cost limitation, and if so, how is it computed?

    A: Yes, a disallowance can be taken against the grantee agency for the amount that administrative costs exceed the 15% limitation. In addition, a disallowance may be taken on administrative costs that are considered excessive even if the administrative costs limitation is not exceeded.

  3. Q: Can the grantee agency request a waiver if it cannot meet the 15% administrative cost limitation?

    A: Yes, the grantee agency may request a waiver of the 15% administrative cost limitation for a period not to exceed 12 months. The approval must be in writing and signed either by the Grants Officer, the ACF Regional Administrator or the ACF Assistant Secretary.

  4. Q: How do you allocate the costs of a staff member who serves as both the Head Start Director and Education Coordinator in a small program?

    A: This would be considered a dual benefit cost and should be appropriately allocated (usually a time study) between the administration and program.

  5. Q: How do you categorize and allocate facilities costs?

    A: This would depend on the use of the facility. If the facility contained space for both administrative functions and program component functions, then it would be classified as a dual benefit cost. The grantee agency must then allocate costs between administrative and program.

  6. Q: How do you determine if the grantee agency has met the 15% administrative cost limitation?

    A: The grantee agency's actual percentage can be obtained by dividing the total administrative costs incurred to date or at the end of the budget period by the total approved costs (Federal share plus non-Federal share) incurred to date or at the end of the budget period.

  7. Q: What are dual benefit costs and how do you allocate them?

    A: Dual benefit costs include such costs as salaries, fringe benefits and other costs (e.g. travel and training) that benefit both the administrative functions as well as program components. In such instances the grantee agency must identify and allocate appropriately the portion of costs that are applicable to the administrative functions separately from the program components.

  8. Q: What types of costs are considered administrative costs?

    A: Administrative costs are organization-wide management function costs and include such categories as planning, accounting, personnel, and related administrative costs as well as expenses related to administrative staff functions such as fringe benefits, travel and training.

  9. Q: What types of costs are considered program costs?

    A: Yes. Program costs are those costs directly related to the provision of program component services, training, staff and similar functions as well as expenses related to program staff functions such as fringe benefits, travel and training.

Administrative Cost Limitation. HHS/ACF/ACYF. 2000. English.

Last Reviewed: November 2008

Last Updated: August 3, 2015