The Federal Office of Management
and Budget's Circular A-87 revised as of May 10, 2004, established standards
for reimbursing state and local governments for overhead
costs incurred in administering Federally funded programs.
The principle set forth in the circular is that the Federal
government should reimburse state and local governments
for the total costs of administering Federal programs, except
where restricted or prohibited by law,
In the case of local governments,
the circular applies only to overhead cost reimbursements
to the locality by the Federal government, It does not
apply to State-financed programs and does not obligate
the State to change any of its policies regarding reimbursements
to localities for State-aided programs, For example, such
local administrative costs as legal services, personnel,
budgeting, accounting, chief executives office, etc, are
not automatically eligible for State aid,
Local administrative costs may
be eligible for State aid reimbursement subject to the
following conditions which have been agreed to by OSC
and the State Division of the Budget. The conditions are:
1. Payment for these costs cannot be made unless
they were contemplated in the program costs set forth
in the State's Executive Budget and approved by the
State Legislature,
2. The extent to which the State may want to participate
in a particular-program will depend upon the availability
of funds in the light of other priorities. Therefore,
the addition of central staff overhead may result in
a decision to lower the percentage contribution by the
State.
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