YouthBuild match and construction cost guidance

CLASSIFICATION
  EMPLOYMENT AND TRAINING ADMINISTRATION                  Allowable Costs
              ADVISORY SYSTEM                             CORRESPONDENCE SYMBOL
         U.S. DEPARTMENT OF LABOR                         OFAM/TMG
            Washington, D.C. 20210                        DATE
                                                          July 16, 2018


ADVISORY:          TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 5-10,
                   Change 1

TO:                STATE WORKFORCE AGENCIES
                   STATE WORKFORCE LIAISONS
                   STATE WORKFORCE ADMINISTRATORS
                   STATE AND LOCAL WORKFORCE DEVELOPMENT BOARDS
                   ALL YOUTHBUILD GRANTEES

FROM:              ROSEMARY LAHASKY /s/
                   Deputy Assistant Secretary

SUBJECT:           Updated Guidance on Match and Allowable Construction and Other
                   Capital Asset Costs for the YouthBuild Program

1. Purpose. To provide further clarification on match requirements and allowable
   construction costs under the YouthBuild Program.

2. References.
     Workforce Innovation and Opportunity Act (WIOA), Pub. L. 113-128
       (https://www.gpo.gov/fdsys/pkg/PLAW-113publ128/pdf/PLAW-113publ128.pdf);
     WIOA regulations at 20 CFR 688.530 and 20 CFR 688.550
       (https://www.gpo.gov/fdsys/pkg/FR-2016-08-19/pdf/2016-15975.pdf); and
     2 CFR 200 and 2 CFR 2900, Uniform Administrative Requirements Cost Principles,
       and Audit Requirements for Federal Awards (https://www.gpo.gov/fdsys/granule/CFR-
       2014-title2-vol1/CFR-2014-title2-vol1-part200/content-detail.html and
       https://www.gpo.gov/fdsys/granule/CFR-2016-title2-vol1/CFR-2016-title2-vol1-
       part2900)

3. Background. An objective of the YouthBuild program is to expand the supply of
   permanent affordable housing for homeless individuals and low-income families while
   providing youth with training in the construction and rehabilitation of residential,
   community, or public facilities. Although construction costs are not normally permitted
   in Employment and Training Administration (ETA)-funded grants, and are specifically
   prohibited in the WIOA regulations at 20 CFR 683.235, the nature of the YouthBuild
   programs requires that certain construction costs essential to the mission of the program
   be allowable. Therefore, this TEGL provides the conditions under which these types of
   costs will be allowable.

  Furthermore, YouthBuild grants are required to provide cash or in-kind resources equivalent
  to 25 percent of the grant award amount as matching funds. Funds are considered matching
RESCISSIONS                                               EXPIRATION DATE
None                                                      Continuing

  funds only if the non-grant matching funds are used to pay for activities allowable under the
  grant. YouthBuild grantees have asked questions on what constitutes an allowable match,
  and the allowable construction costs that can be charged to the grant and counted as
  allowable match. This guidance provides clarification on these questions. Note that the
  allowable construction costs under the grant are those costs that also can qualify as
  allowable match costs, though the same cost cannot be attributed to both the grant funding
  and match.

4. Allowable Construction Costs for YouthBuild Activities. Construction costs are
   generally not allowable costs to ETA-funded grants because these types of costs are
   defined as capital expenditures, as they contribute to the increased value or useful life of
   a capital asset. However, because the YouthBuild program is designed to provide
   training to eligible participants in the construction or rehabilitation of affordable housing
   for homeless individuals and low-income families, the costs of construction-related
   materials and supplies are necessary to fulfill the goals of approved YouthBuild projects.
   The necessity of these costs to the program makes them allowable. Therefore, the
   purchase of construction supplies and materials used as part of the direct training for
   YouthBuild participants that are directly related to the construction or rehabilitation of
   residential, community, or other public facilities are allowable costs.

  Examples of allowable construction costs are the tools used to construct or rehabilitate
  residential, community, or other public facilities, such as hammers, safety gear, and
  protective clothing; the machinery used to construct or rehabilitate property, loaders, lift
  trucks, tractors, and mixers; and the materials needed to construct or rehabilitate property
  such as lumber, dry wall, and like items.

  Some of the costs associated with securing the location, land, and property are allowable
  costs to the grant while others are not. The purchase cost of buildings used solely for training
  purposes is allowable. For buildings used for training and other purposes, the allowable
  amount is determined based on the proportionate share of the purchase cost related to direct
  training. However, acquisition, inspection, title, and broker fees are not allowable costs.
  Architectural fees, or a proportionate share thereof, are allowable when such fees can be
  related to items such as architectural plans or blueprints on which participants will be trained.
  When making the distinction between allowable and unallowable costs, grantees need to
  consider whether the activity and associated costs are directly related to participant training.
  If the incurred costs are not directly related to participant training, then they are not allowable
  costs to the grant.

  As prescribed in Department of Labor exceptions at 2 CFR 2900.8, match is reported in the
  grant recipient’s accounting system when expended. This includes in-kind contributions that
  must be spent or used for training of a participant or for a YouthBuild activity before it can
  be accounted for as match. For example, property enhancements such as landscaping are
  not allowable costs to the grant unless performed by participants as part of a training
  activity. Similarly, the costs associated with plumbing and electrical work are unallowable
  unless participant training is taking place on those specific activities. Another example
  would be termite inspection services. Although termite inspection services may be a

  non-construction cost that is incurred when constructing or rehabilitating a house for sale, it
  is not directly related to participant training and is an unallowable cost of the YouthBuild
  grant program.

  The attachment to this TEGL identifies a list of selected cost items that are allowable,
  unallowable, or allowable with conditions as they relate to the YouthBuild program
  construction activities. Please note that the conditions under which some costs are allowable
  may include getting Grant Officer approval prior to incurring the costs.

5. Allowable Matching Funds under the YouthBuild Program. Under 2 CFR 200.306,
   matching requirements may be met by costs incurred by the direct grant recipient,
   subrecipient, or cost-type contractor that could have been paid with grant funds, but were
   instead paid with non-grant resources. Federal funds may not be used to meet a match
   requirement unless specifically authorized by the statute. A number of questions have
   been raised as to whether or not certain costs not chargeable to the grant, but incurred as
   a result of activities used for training participants, could be used to fulfill the 25 percent
   match requirement.

  Costs that are not allowable charges to the grant cannot be used to fulfill a match
  requirement. Like Federal costs, match must meet all seven factors for allowable grant costs
  under 2 CFR 200.403(a-g). For example, grant funds cannot be used to purchase land. As
  described in Section 4 above, a portion of grant funds may be used to purchase a building to
  be renovated through training, but only the portion of the building directly related to training.
  Therefore, under the requirement that only allowable costs may be used as matching funds,
  the cost of the land on which the home resides cannot be used to qualify towards meeting the
  match requirement. Other related costs that may be essential to the acquisition of a property
  used for training purposes but that are not chargeable to the grant, and therefore cannot be
  used as match, are appraisal fees, inspection fees, and other acquisition fees.

  Examples of allowable match for the YouthBuild program are the cost of construction
  supplies and materials used in the approved training activities. The costs of such materials
  for approved YouthBuild projects are allowable and therefore, may fulfill the match
  requirement if paid with non-Federal funds.

  Other examples of allowable match for the YouthBuild program are salaries of construction
  site managers paid with non-grant funds; construction tools, materials, equipment, and
  supplies purchased with non-grant funds used by participants for training activities;
  supportive services paid with non-grant funds to enable participation in the program; and
  other allowable activities that contribute to the direct training of eligible participants
  enrolled in the YouthBuild program. As discussed above, to be allowable as part of match, a
  cost must be an allowable charge for Federal grant funds. If the cost is not allowable with
  grant funds, it is also not acceptable in fulfilling the 25 percent match requirement.
  Matching funds must be expended during the grant period of performance and must be
  reported quarterly, when the costs are incurred, on the ETA 9130 financial form.

6. Match - Use of ETA Funds and Other Federal Funds. For ETA programs, 2 CFR
   200.306(b) states that for all Federal awards, all matching funds must be accepted as part

  of the award recipient’s matching funds when the funds meet all of the criteria listed at 2
  CFR 200.306(b)(1-7). The criterion at (b)(5) states that matching funds cannot be funds
  paid by the Federal government under another Federal award, except for where the
  Federal statute authorizing the program “specifically provides” that the program’s funds
  can be applied to matching requirements of other Federal programs. WIOA,
  YouthBuild’s authorizing statute, does not provide for YouthBuild funds to be applied to
  matching requirements of other Federal programs. For these programs which are not
  administered through ETA, it is the responsibility of the grant recipient to consult with
  that Federal agency and obtain the necessary documentation to support the recipient’s use
  of funds towards meeting a match requirement for the YouthBuild program. ETA is
  unable to provide guidance or technical assistance on other Federal agencies’ programs or
  the use of their funds.

  YouthBuild grantees may also have Corporation for National and Community Service (CNCS)
  AmeriCorps grants. AmeriCorps grants have a match requirement. Even though CNCS’
  authorizing statute states that CNCS programs may provide for their match “through . . . other
  Federal sources,” ETA’s YouthBuild grantees cannot use ETA grant funds as match for the
  CNCS matching requirements. This is because 2 CFR 200.306(b)(5) only allows for Federal
  funds to be used as match where the “Federal statute authorizing a program specifically
  provides that Federal funds made available for such program can be applied to matching or
  cost sharing requirements of other Federal programs.” Because YouthBuild’s Federal statute
  does not make such a provision for YouthBuild funds, the exception to the rule against using
  Federal program funds as match for another Federal program provided in 2 CFR 200.306(b)(5)
  does not apply. Please refer to the YouthBuild program’s statute, regulations, and grant
  agreement for further information.

7. Action Requested. All ETA YouthBuild grantees should distribute this information to
   all appropriate staff.

8. Inquiries. Questions regarding this guidance should be directed to the appropriate ETA
   regional office.

9. Attachments. YouthBuild Selected Cost Items

Attachment (official PDF: https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2018/TEGL_5-10_Change_1_Attachment_Acc.pdf)

Attachment
                             YouthBuild Selected Cost Items
NOTE: The selected cost items listed below are related to the construction component of the
YouthBuild program and not necessarily reflective of costs incurred to operate the grant.
These costs are strictly for the purpose of implementing an authorized YouthBuild program.


                                                                        A: Allowable
                                                                                             Citation
 Item                                                                   U: Unallowable
                                                                        AC: Allowable with
                                                                        Conditions*
                                                                                             20 CFR
 Real Property
 Acquisition of authorized buildings                                           AC            688.550(b)
 Acquisition of land                                                           U             688.550(e)(1)
 Construction of authorized buildings                                          A             688.550(a)(2)
 Construction/rehabilitation of community/other public facilities (up
 to 15% of total grant award)                                                  A             688.550(a)(3)

 Rehabilitation of existing authorized structures                              A             688.550(a)(1)
 Relocation of buildings                                                       AC            688.550(c)(4)
 Pre-Purchase Phase
 Acquisition fees                                                               U            688.550
 Brokerage fees                                                                 U            688.550(e)(2)
 Home appraisal                                                                 U            688.550
 Home inspection                                                                U            688.550
 Termite inspection                                                             U            688.550
 Title fee                                                                      U            688.550
 Pre-Construction/Construction/Rehab Phase
 Architectural fees                                                            AC            688.550(d)
 Building permits                                                              U             688.550
 Construction company services (provide the heavy equipment
 (crawler loaders, bobcats, dozers, mixers, operators, etc.)                   A             688.550(c)(3)

 Equipment rental costs                                                        AC            688.550
 Property insurance (not homeowners Insurance)                                 AC            688.550
 Supervisors and training (up to 15% of the total grant award)                 A             688.520(b)
 Work on grantee-owned facility/property                                       U             688.550
 Construction/Rehab Training Phase (TEGL 05-10)
 Appliances                                                                    U             688.550
 Brick/cement                                                                  A             688.550(c)(1)
 Clearance and demolition                                                      A             688.550(c)(5)
 Doors                                                                         A             688.550(c)(1)
 Door locks                                                                    AC            688.550(c)(1)
 Drywall                                                                       A             688.550(c)(1)

 Electrical supplies (fuse box, wiring, outlets/covers, etc.)       A         688.550(c)(1)
 Flooring materials                                                 AC        688.550(c)(1)
 Furnace                                                            A         688.550(c)(1)
 Stationary (not portable) AC unit                                  A         688.550(c)(1)
 Heat pump                                                          AC        688.550(c)(1)
 Hot water tanks                                                    A         688.550(c)(1)
 Insulation materials                                               A         688.550(c)(1)
 Kitchen and bath cabinets                                          AC        688.550(c)(1)
 Landscaping                                                        AC        688.550(c)(1)
 Lighting fixtures                                                  AC        688.550(c)(1)
 Lumber                                                             A         688.550(c)(1)
 Nails                                                              A         688.550(c)(1)
 Paint                                                              AC        688.550(c)(1)
 Plumbing supplies (tubs, sinks, commodes, faucets, etc.)           AC        688.550(c)(1)
 Plumbing pipes                                                     A         688.550(c)(1)
 Safety gear                                                        A         688.550(c)(1)
 Roofing materials                                                  A         688.550(c)(1)
 Tools (hammers, screw drivers, etc.)                               A         688.550(c)(1)
 Windows                                                            A         688.550(c)(1)
 Property Disposition Phase
 House advertising costs                                            AC        688.550
 Legal fees associated with acquisition and disposition             U         688.550
 Real estate fees                                                   U         688.550


* Costs marked as “A” are allowable, provided they are part of the YouthBuild training
activities, while costs marked as “AC” may be allowable with Grant Officer approval, and
those marked as “U” are always unallowable.