Frequently Asked Questions

A fallen jar with coins spilling out of it.

How do you select who you are going to review?

FSO determines who will be reviewed based on the fiscal year's risk assessment. The risk assessment takes into consideration factors including the size of the award(s), a grantee's single audit results, historical fiscal compliance, latest fiscal reviews findings, and amount of DSHS funding. In addition, it is our goal to review every DSHS grantee at least once during a four to five year cycle.

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What are 'direct' costs vs. 'indirect' costs?

Direct costs are costs that can be specifically or readily identified with a specific cost objective or program. For example, a tobacco prevention grant's direct activity would be the dissemination of tobacco-danger information to youth, organizing high school students to speak at elementary and middle schools, etc.

Indirect costs are costs necessary for the effective and efficient operation of a grant but cannot be readily identified to a specific cost objective or program without effort disproportionate to results achieved. Examples of indirect activities are employees performing general office duties, and shared costs such as the copier rental cost, utilities, etc.

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Where can I find more information about the Property Inventory Report GC-11 form?

The DSHS Contractor's Property Inventory Report ( GC-11) can be found in the Texas Department of State Health Services contractor forms page . This spreadsheet contains a separate tab with general information and instructions. Grantees must submit a GC-11 form by October 15th to FSOequip@dshs.texas.gov every year. Grantees may also submit any questions about the process to this mailbox.

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How do we (grantees) dispose of items on our Property Inventory Report?

Contact your Assigned Contract Manager (ACM) via email with all the details. The ACM will evaluate the request in accordance with the American Hospital Association manual to assess the useful life of the item and the nature of the disposition. In instances that the asset is sold, and a salvage value is obtained, this value must be reported as program income to the grant, or if the grant no longer exists, repaid to DSHS. The item can also simply be returned to DSHS. If the item has been stolen, the grantee must produce a police report as support. In any instance, the item must be reported on the Property Inventory Report for one additional year with the disposition date in the appropriate column. Once approved, the ACM will contact the grantee with a form to complete.

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What is Cost Allocation?

Cost Allocation assigns costs that benefit more than one program to funding sources by relative benefit. This means that if one program uses more of a shared resource, a higher percentage of the cost should be assigned to that program. For example, if one program uses four offices in a building used by multiple programs while another uses two offices, all equal size, the first program will pay a higher percentage of common areas such as the lobby and break room.

The method used should be reasonable for the type of cost. For example, building space is commonly allocated by square footage but this would not be a reasonable method for salaries. Cost allocation presents challenges in a clinic setting. One methodology that can be used for clinics when multiple grants are benefitting from the clinic's activities is patient census. This method uses the ratio of patients receiving services under a particular program to the total patients receiving services under all programs.

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What are some unacceptable methods of allocating shared costs?

Budgeted amounts – Basing charged expenditures and payroll based on what is budgeted for the grants (also known as "percentage of funding") is not acceptable. Budgets are targets, but do not reflect what actually occurs.

Even Splits – An even split requires a sufficient and reasonable written explanation. If these two grants each had the same number of fulltime employees and their usage of supplies were similar, then an even split may be considered an acceptable methodology for allocating the cost of supplies. For example, if a grantee has 2 grants with DSHS and purchases supplies that benefit both programs, it is not acceptable to split the costs 50/50 for no other reason than there are two grants. Similarly, if an employee works on 3 grants, a 1/3 split of hours worked would not be acceptable.

No established methodology – Charges based on available funds, or the amount of money available in the fiscal year.

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What Criteria is Used in Evaluating Compliance?

  • Contract Provisions: DSHS contracts may include specific unallowable costs for the particular program(s). If a cost is specifically listed as unallowable in the contract, this takes precedence over other criteria.
  • 2 CFR 200: To deliver on the promise of a 21st-Century government that is more efficient, effective and transparent, the Office of Management and Budget (OMB) has streamlined the Federal government's guidance on Administrative Requirements, Cost Principles, and Audit Requirements for Federal awards. UGMS was developed under the authority of Chapter 783 of the Texas Government Code, to promote the efficient use of public funds in local government and in programs requiring cooperation among local, state, and federal agencies. Health and Human Services (HHS) has codified the OMB language, with minor modifications, for federal grants awarded in 45 CFR Part 75.
  • Uniform Grant Management Standards: The Uniform Grant Management Standards were established to promote the efficient use of public funds by providing awarding agencies and grantees a standardized set of financial management procedures and definitions, by requiring consistency among grantor agencies in their dealings with grantees, and by ensuring accountability for the expenditure of public funds. State agencies are required to adhere to these standards when administering grants and other financial assistance agreements with cities, counties and other political subdivisions of the state. The grants beginning on Jan 1st, 2022, and onwards will follow the Texas Grant Management Standards, which are replacing UGMS.
  • Other applicable criteria include, but not limited to, Generally Accepted Accounting Principles (GAAP) and specific Federal program requirements.

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Program Income?

What is Program Income?

Program income is gross income-earned by a recipient, a consortium participant, or a contractor under a grant-that was directly generated by the grant-supported activity or earned as a result of the award.

For what purposes can program income be used?

“Program income must be used for the purposes and under the conditions of the Federal award.” 45 CFR § 75.307

What are some examples of program income?

  • Conference or workshop participant registration fees
  • Income from sales of educational materials
  • Sale of equipment that was purchased with grant funds
  • Fees, payments, or reimbursement for the provision of a specific service, such as patient care reimbursements received under Medicare, Medicaid, or Children’s Health Insurance Program.

What are the allowable uses of Program Income?

  • Direct costs, such as: personnel, fringe benefits, staff travel, contractual services
  • Allowable administrative costs include usual and recognized overhead (including indirect rates for all organizations)
  • Per the grant contract, program specific outreach is allowable

Is there a limit on program income generated?

No, non-federal entities are encouraged to earn income to defray program costs where appropriate ( 45 CFR § 75.307 Program income).

What is 340B?

340B is a federal drug pricing program where the manufacturer provides a discounted price to covered entities. Its goal was to provide covered entities with additional savings that will fund additional services that will benefit patients.

Is all 340B generated revenue considered program income?

Yes, all 340B generated revenue is considered program income. When an entity is 340B eligible and purchases pharmaceuticals via 340B pricing under multiple awards, the recipient must use a reasonable allocation method for the attribution of costs and program income and be able to document the methodology used.

What is the addition or “additive” alternative for the use of program income?

Under the additive alternative, program income is added to the Federal award and must be used for the purposes and under the conditions of the Federal award. Please note that this does not result in a separate or additional notice of the grant award. See 45 CFR § 75.307(e)(2).

What are Program Income Requirements?

  • Program income must comply with grant conditions, State and Federal regulations ( Centers for Disease Control, 2020).
  • Program income must be spent during the contract term it is earned and not allowed to be carried over to next term, except with approved spending plan ( 45 CFR 75).
  • All program income must be disbursed before requesting additional grant payments ( TxGMS and 45 CFR §75.307).
  • Program income must be used for the purposes of the Federal award. ( 45 CFR §75.307)

How should I document Program Income?

  • Program income should have a separate cost center established in the grantee’s General Ledger.
  • Program income should be able to be identified by the grant in which it was generated
  • appropriate allocation methodology and allocation work must be shown when there are multiple funding streams.
  • Retain invoices and payments for billing
  • Readily available for third party reviewers

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Last updated January 25, 2022