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DATE: | August 2, 2002 |
MEMO CODE: | FMNP Policy Memorandum #2002-1 |
SUBJECT: | Women, Infants and Children (WIC) and WIC Farmers' Market Nutrition Program (FMNP) Cost Allocation |
TO: | Regional Directors Supplemental Food Programs All Regions |
This memorandum provides guidance concerning allowable FMNP costs that may be covered with federal WIC funds. It is intended to promote accuracy and uniformity in the application of allowable cost principles to decisions about FMNP-related costs, as state agencies seek to maximize federal funding. This memorandum is effective immediately.
The FMNP was conceived as an adjunct to WIC that would provide program participants with the additional benefit of fresh fruits and vegetables. Responsibility for administering the FMNP usually rests with either the WIC state agency (health department) or the state Department of Agriculture, with responsibilities being shared by both state agencies. While the FMNP is a separate federal program, its close link to WIC has resulted in questions as to whether certain FMNP activities can be considered allowable costs for WIC.
FMNP regulations (section 248.9(b)) clarify that nutrition education for the FMNP is an allowable WIC cost. FMNP Policy Memorandum 93-2 approves the use of WIC nutrition services and administration (NSA) funds to cover travel-related costs for WIC staff to attend FMNP conferences and training. Questions have arisen as to whether activities such as the development and implementation of FMNP modules or subsystems for WIC Management Information Systems (MIS) can be considered as allowable costs for WIC. While the benefit of such items is unquestioned, their allowability as costs for WIC is much less clear. This policy memorandum sets forth guidelines by which these and other determinations can be made.
Basic Guideline
Section 246.14(a) of the WIC program regulations and Attachment A, section C, of OMB Circular A-87, Cost Principles for state, local and Indian Tribal Governments, indicate that a cost must be reasonable and necessary for the fulfillment of program objectives to be deemed allowable. This basic definition of an allowable cost should govern all decisions regarding whether an FMNP cost may be properly charged to WIC funds. If the cost fulfills a WIC program objective or mandate, and a WIC state agency could be expected to incur such cost in the absence of the FMNP, then the cost is potentially allowable. Although other factors also affect the allowability of a cost item, application of this basic criterion is the first step in answering questions about allowable costs for WIC.
Other Considerations
Even when a cost is potentially allowable, a state agency may not automatically charge it entirely to WIC. Attachment A, section C of OMB Circular A-87 indicates that costs should be charged or assigned to grants in accordance with relative benefits received. In shared cost situations, each program should bear its fair share of the cost in question. Circular A-87, Attachment A, also states that any cost allocable to a particular federal award may not be charged to other awards in order to overcome funding deficiencies or for other reasons.
When different state agencies administer WIC and FMNP, they should execute a written agreement delineating the responsibilities of each agency, describing any compensation for services and identifying the responsible agency representative. The signed agreement, a copy of which should be included in the WIC and FMNP state plans, should specify how costs allowable under both WIC and FMNP (such as providing nutrition education for the FMNP) would be charged. It should also identify FMNP functions that state or local WIC program staff will perform on a cost-reimbursement basis (such as conducting FMNP reviews of authorized sites). The FMNP state agency must also maintain a record identifying the source and use of funds expended for FMNP activities.
Similarly, a WIC state agency that administers both WIC and FMNP should discuss in the WIC and FMNP state plans how it proposes to charge allowable FMNP-related costs to the two programs.
Examples of FMNP-related NSA costs that are allowable costs for WIC follow:
Costs that are not necessary to fulfill WIC program objectives, and costs that WIC state agencies would not reasonably incur in administering the WIC program, are not allowable costs for WIC. A state agency may not use federal WIC funds to cover a cost incurred solely to fulfill a FMNP requirement. Examples of allowable FMNP costs, no part of which may be charged to WIC, include:
As this list suggests, state agencies should not assume that a FMNP cost is allowable for WIC. States should assume that FMNP will pay its own costs, unless it is established that the cost is allowable to WIC and that all or a portion of it can be charged to WIC. Each program's share of the cost should be based on the relative benefit derived as determined by the state agency.
As a general rule, the WIC Cost Allocation Guide requires staff working on multiple programs to document the distribution of their time and effort between programs via the continuous time reporting method described in section 3010 of that document. The use of alternative methods requires the approval of the state or local agency's cognizant agency. Section 3000.C. of the Guide also provides a less rigorous standard for capturing the distribution of staff time and effort between cost objectives within WIC (such as nutrition education and client services). For that purpose, alternative methods of capturing staff time and effort require the prior approval of the awarding agency, rather than that of the cognizant agency. The awarding agency for a state or local agency is the applicable FNS regional office or the state agency, respectively.
FNS will allow the following exceptions to these general rules for capturing the time and effort of local agency staff who perform WIC and FMNP functions only. Application of these exceptions should reduce the paperwork and administrative burden for local WIC agencies that provide FMNP services.
Exception 1: WIC and FMNP Coupon Issuance
A local agency that operates both WIC and the FMNP may use the modified continuous time reporting method, described in section 3020 of the WIC Cost Allocation Guide, for documenting the time and effort of local agency staff engaged in issuing coupons (or other food instruments) for use in both programs and educating participants on their use. No prior approval is required to do this. Rather than attempting to identify and record the portion of this task that benefits each program, local agency staff would record the entire block of time spent on coupon issuance under a generic title such as "coupon issuance." When preparing its reports to the state agency, the local agency would then allocate the cost of all compensation for issuance time and effort on a reasonable basis, such as the ratio of total FMNP coupons issued to total coupons issued under both programs.
Exception 2: Other Shared Staff Functions
To allocate other shared staff compensation costs between WIC and FMNP, state agencies may approve the use of methods that apply the rules for distributing costs between cost objectives within WIC. For example, a state agency could approve a method other than either "regular" or modified continuous time reporting for documenting the distribution of staff time and effort spent on joint WIC and FMNP participant surveys. Such alternative methods may include, but need not be limited to, those expressly described in the WIC Cost Allocation Guide. Any method approved must, however, generate reasonable results.
The basis for these exceptions is House Report 102-540 that accompanied the original FMNP legislation and spoke to local administrative requirements. The report states that Congress intended that USDA "permit state WIC programs to select a method of administrative cost accounting that will maximize administrative efficiency and reduce unnecessary paperwork and administrative burden for local WIC agencies responsible for distributing farmers' market coupons to program recipients."
Please note that this memorandum does not preclude WIC state and local agencies from receiving reimbursement for a FMNP cost identified as an allowable cost for WIC. State cost allocation agreements or plans may continue to allocate to FMNP all allowable costs that benefit the FMNP.
The lists of allowable and unallowable WIC costs contained in this memorandum are not exhaustive; however, they do include items or activities about which state agencies have raised allowable cost questions to FNS. The guidelines in this memorandum provide a framework for allocating FMNP costs in accordance with established cost allocation principles, and are a starting point for answering questions that arise in the future.
FNS acknowledges the difficulty of some cost allocation decisions that states (and ITOs in particular) face relative to the FMNP. The agency will address other FMNP cost issues in separate memoranda as needed.
The following is a summary of the guidelines discussed in this policy memorandum:
PATRICIA N. DANIELS Director Supplemental Food Programs Division |
LAEL LUBING Director Grants Management Division |
The contents of this guidance document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.