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New York State Accounting System User Procedures Manual

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Special Payments - Municipal Overhead Costs

     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.