Guidance on the Use of FHWA State Planning and Research Funds for Reimbursement of Education and Tuition Expenses

Date: 4/2/2015

On December 26, 2014, the Department of Transportation (DOT) issued 2 CFR [Code of Federal Regulations] 1201, adopting 2 CFR 200, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.” Federal Highway Administration (FHWA) provides guidance on reimbursement of tuition and education expenses consistent with these requirements in the form of the following Questions and Answers.

1. Can State departments of transportation (DOTs) pay for an employee’s tuition for specialized training needed to conduct a research study?
   
   

   Yes. Specialized training and education costs for employee development that are ordinary, reasonable, and necessary to conduct a State Planning and Research (SPR) funded research study are allowable costs and may be charged to SPR funds or eligible core formula funds under workforce development training (23 U.S.C. 504(e); 23 U.S.C. 505(a); 2 CFR 200.472).

2. Can State DOTs pay for an employee’s training to gain specialization in a given area?  For example, can State DOTs pay tuition for an employee to get a certificate or to take course work in traffic operations in order to be better qualified to conduct such studies in the future?
   
   

   Yes. Certifications and training specific to SPR tasks and that benefit the SPR program are allowed. Further, for the example where traffic operations may benefit both the Federal-aid program, including SPR activities, and other eligible Federal-aid activities and State activities that involve State traffic operations of its facilities, the government-wide cost principles require that costs be allocated in relative proportion to the benefits received (2 CFR 200.405(a)(2)). Where such costs cannot easily be identified with a specific cost objective with a high degree of accuracy (a grant program), or are not readily assignable to either the Federal-aid or SPR program objective, and do not benefit other Federal-aid cost objectives, the costs may be recovered indirectly through an approved indirect cost rate (2 CFR 200.405(a); 2 CFR 200.413–414; 2 CFR 200 Appendix VII).

3. Can State DOTs pay tuition for a State employee to get a specialized, undergraduate, or graduate degree?
   
   

   No. Such costs are not specialized training costs and fail to meet allowability criteria in government-wide cost principles (2 CFR 200.403), as those costs “are not necessary and reasonable for performance of SPR or Federal-aid cost objectives” and are not readily allocable to SPR or other Federal-aid cost objectives.

4. Can State DOTs pay tuition for a State employee pursuing a degree whose major project (e.g., thesis or dissertation) is a project conducted on an SPR-eligible State DOT research project (i.e., to benefit the State DOT Research Program)?
   
   

   No. Such costs are not specialized or continuing education costs and fail to meet allowability criteria in government-wide cost principles (2 CFR 200.403), as those costs are not necessary and reasonable for performance of SPR or Federal-aid cost objectives and are not readily allocable to SPR or other Federal-aid cost objectives.

5. Can universities pay their faculty, students, or employees’ tuition for specialized training needed to conduct a research study?
   
   

   Yes. Specialized training and education costs for employee development (faculty and staff) that are ordinary, reasonable, and necessary to conduct an SPR funded research study are allowed and may be charged to SPR funds or eligible core formula funds under workforce development training. See response to question 8 pertaining to student tuition costs (23 U.S.C. 504(e) and 2 CFR 200.472).

6. Can universities pay tuition for their faculty or staff to gain specialization in a given area, for instance, to get a certificate or to take course work in traffic operations in order to be better qualified to conduct such studies in the future?
   
   

   Yes. The education costs that are funded by the SPR program must benefit and be appropriately allocated to the SPR program. Because transportation specialization may benefit both the Federal-aid program, including SPR and other eligible Federal-aid activities, and State transportation responsibilities associated with operation and control of State highways, the government-wide cost principles require that tuition costs of employees (faculty and staff) be allocated in relative proportion to the benefits received (2 CFR 200.405(a)(2)). Where such costs cannot easily be identified with a specific cost objective with a high degree of accuracy, or are not readily assignable to either the Federal-aid or SPR program objective and do not benefit Federal-aid objectives, the costs can be recovered indirectly through an approved indirect cost rate (2 CFR 200.405(a); 2 CFR 200.413–414).

7. Can universities pay tuition for faculty or staff to obtain a specialized, undergraduate, or graduate degree?
   
   

   No. While training and education costs for employee development that benefit SPR activities are an allowable cost under 2 CFR 200.472, the totality of costs for faculty or staff to obtain a degree are not specialized education costs and fail to meet the allowability criteria in government-wide cost principles (2 CFR 200.403), as the totality of those costs are not necessary and reasonable for performance of SPR or Federal-aid cost objectives, and are not fully allocable to SPR or other Federal-aid cost objectives.

8. Can universities pay the tuition for their enrolled students who are conducting the research (either a single study or work on multiple studies) for the State DOT? The tuition would be part of the compensation to a student for his or her work in the conduct of a study or studies for the State DOT.
   
   

   Yes. Tuition, scholarships, and student aid are allowable costs, as addressed by the consolidated government-wide grant regulation in 2 CFR 200.466 (2 CFR 200.466 Scholarships and student aid costs).

9. Do the answers to questions 5–8 differ if the arrangement between the State DOT and the university is a contract, grant, cooperative agreement, or some other vehicle?
   
   

   No. The cost principles apply to grant awards, cooperative agreements, and contracting instruments (2 CFR 200.401). In any of these instances, the education costs funded by the SPR program must benefit and be appropriately allocated to the SPR program.

10. Can private contractors or subcontractors pay their employees’ tuition for specialized training needed to conduct the SPR research study?
    
    

    Yes. As previously noted, specialized training cost eligibility should follow the cost principles. Costs that benefit the SPR and Federal-aid program are allowable subject to the terms of the contract and cost allocation requirements if more than one cost objective is benefited. If the cost benefits both the SPR-funded activity and another activity unrelated to the SPR program, the cost of the training should be allocated to the respective cost activities based upon the relative benefits received as required by 2 CFR 200.405(a)(2).

11. Can private contractors or subcontractors pay tuition for employees to gain specialization in a given area, for example, to get a certificate or to take a course in traffic operations in order to be better qualified to conduct such studies in the future?
    
    

    Yes. The education costs that are funded by SPR must benefit and be appropriately allocated to the SPR program. For the cost to be treated as an allowable direct cost to the SPR or the Federal-aid program, the cost must benefit a Federal-aid activity. For costs that benefit one or more cost objectives, the costs either require allocation in proportion to the relative benefits received by the funding category benefited, or require recovery as an indirect cost through an approved indirect cost rate (2 CFR 200.405(a)(2)).

12. Can private contractors or subcontractors pay tuition with Federal-aid funds for their employees to obtain a specialized, undergraduate, or graduate degree?
    
    

    No. The totality of costs to obtain a degree is not allowable as direct costs but would be part of the contractor’s indirect costs and may be recovered under an approved indirect cost rate (2 CFR 200 Appendix VII, Section A).

13. Can private contractors or subcontractors pay tuition with Federal-aid funds for an employee pursuing a degree? The employee’s major project (e.g., thesis or dissertation) is the SPR project on which he or she conducts research (i.e., to benefit the State DOT Research Program)?
    
    

    Yes. The education costs that are funded by the SPR program must benefit and be appropriately allocated to the SPR program. Where the costs cannot be readily allocated as a direct cost, the cost would be included as part of the contractor’s indirect costs and may be recovered under an approved indirect cost rate. Where SPR funds are sought to be charged for contractor employee tuition reimbursement, additional coordination with FHWA is required to determine eligibility consistent with 2 CFR 200.403, 2 CFR 200, Appendix VII, Section A, and 48 CFR 31.205–44 [FARS] [Federal Acquisition Regulations].