Date Published: July 2011
The seven percent limitation is based on the award amount established in the grantee agreement with the project sponsor. Nonetheless, HUD expects grantees to monitor administrative costs throughout the grant period to ensure that they do not exceed the statutory limit. As a method for maintaining costs within the administrative limit, grantees may establish procedures that limit draws for administrative costs to the limitation of seven percent of funds, subject to final reconciliation to the amount authorized by contract.
A recommended practice is for grantees to calculate, at the beginning of the grant period, the maximum administrative allocation (not more than seven percent of the project sponsor grant award/contract) and then reimburse sponsors for their incurred administrative costs at a rate proportionate to their spending of direct program funds. For example, if a sponsor spends ten percent of its awarded program funds during the first month, the grantee might reimburse the sponsor ten percent of its total allowance for administrative costs, provided that the sponsor documented actual administrative costs at least equal to that amount. If the sponsor billed for 13 percent of program activities in the second month, then the grantee could disburse 13 percent of the total allocated administrative funds that month, again assuming such costs were incurred, properly documented, and billed. Doing it in this manner prevents spending the administrative portion of the grant funds disproportionately to the program portion.
Alternatively, administrative cost disbursements to a project sponsor may exceed seven percent of the award at any particular point during the project period, provided that the total administrative costs at project expiration are below the limit allocated to this sponsor at the end of the grant period. Grantee expectations regarding documentation of costs and the terms of disbursement of administrative and eligible program costs to the sponsor should be clearly stated in the agreement between the grantee and sponsor