HF529

Purpose

• The bill aims to limit how much indirect or overhead cost can be paid with certain legacy funds. It requires recipients to document increases in overhead costs that are directly caused by administering programs funded with these dollars and to keep overhead charges to the documented increase. It covers several specific funds and tightens rules around paying for administration with legacy funds.

Key Provisions

• Indirect cost exemptions and restrictions (Minnesota Statutes 2024 section 16A.127, subd. 8):
  • Exempts certain accounts from accruing statewide or agency indirect costs, including exemptions for funds held in trust or used as passthrough accounts, bond issue receipts, and general fund accounts.
  • Specific carve-outs: except for the legislative auditor’s costs to conduct financial audits of federal funds, this section does not apply to certain entities (e.g., Board of Trustees of the Minnesota State Colleges and Universities); receipts from such audits go to the general fund.
  • The commissioner cannot use this section to take money from the outdoor heritage fund, clean water fund, parks and trails fund, or arts and cultural heritage fund to pay for statewide or agency indirect costs.
• Parks and Trails Fund overhead (Minnesota Statutes 2024, section 85.53, added Subd. 8):
  • Recipients may not pay rent, lease payments, insurance, utilities, custodial services, building maintenance, or other overhead costs with Parks and Trails Fund money unless they document the amount that specific overhead costs increased directly due to administering a program, project, or activity funded by the Parks and Trails Fund.
  • The amount charged for overhead cannot exceed the documented increase.
• Outdoor Heritage Fund overhead (Minnesota Statutes 2024, section 97A.056, added Subd. 25):
  • Same requirements as above: overhead costs must be directly tied to administering a funded program, and charges cannot exceed the documented increase.
• Clean Water Fund overhead (Minnesota Statutes 2024, section 114D.50, added Subd. 8):
  • Same documentation and cap requirements for overhead costs paid with Clean Water Fund money.
• Arts and Cultural Heritage Fund overhead (Minnesota Statutes 2024, section 129D.17, added Subd. 7):
  • Same documentation and cap requirements for overhead costs paid with Arts and Cultural Heritage Fund money.

Significant Changes to Law

• Introduces explicit, fund-by-fund overhead documentation requirements and caps for four legacy funds.
• Prohibits using legacy funds to cover general or statewide agency indirect costs unless the specific overhead increase is documented and within the documented increase.
• Retains certain exemptions and clarifications around budget and audit-related receipts, but restricts cross-subsidizing indirect costs from legacy funds.

Practical Impact

• Agencies and organizations receiving funds from these legacy programs must track and document any increases in overhead costs that are directly caused by administering funded activities.
• Overhead charges to the Parks and Trails Fund, Outdoor Heritage Fund, Clean Water Fund, and Arts and Cultural Heritage Fund will be limited to these documented increases, potentially reducing the amount available for program activities if overhead would have previously been covered by the funds.
• Budgets and accounting practices may need adjustments to separately identify and verify overhead increases.

Terminology & Key Phrases (from the bill)

• indirect costs
• overhead costs
• program, project, or activity
• documentation of the amount that specific overhead costs increased
• not exceed the amount documented as the increase
• Parks and Trails Fund
• Outdoor Heritage Fund
• Clean Water Fund
• Arts and Cultural Heritage Fund
• substantiated increase
• statewide or agency indirect costs
• exempted accounts
• trust or passthrough account
• general fund
• legislative auditor
• bond issue receipts
• federal funds

Relevant Terms - indirect costs - overhead costs - program - project - activity - documentation - increase - Parks and Trails Fund - Outdoor Heritage Fund - Clean Water Fund - Arts and Cultural Heritage Fund - general fund - legislative auditor - bond proceeds - federal funds - trust accounts - passthrough accounts