Costs of Mandatory Education and Training Programs for Teenage Parents on Welfare: Lessons from the Teenage Parent Demonstration. Elements of Total Resource Cost

07/12/1993

Total resource costs are composed of site costs -- the cost of services delivered by the Camden, Newark, and Chicago programs -- and central management costs -- the cost of overseeing and supporting the programs from the Trenton and Springfield offices of the New Jersey Department of Human Services and the Illinois Department of Public Aid, respectively.  The primary focus of the cost analysis is on site costs, which include both "program-paid costs" for services delivered directly by program staff or purchased by the program, and "in-kind costs" for services provided to demonstration participants at no cost to the program by staff of other agencies, either at the program site or at other community locations.  Our estimates of central management costs are reported separately, because the relative size of such costs is likely to vary with the scale of program operations and we have very limited basis for estimating that variation.  Program-paid site costs, in-kind site costs, and central management costs all include the cost of labor and associated fringe benefits, non-labor costs, and overhead.

Program-Paid Site Costs

A large proportion (although varying from site to site) of the resources used in delivering demonstration services can be valued based on actual expenditures paid by the program and charged to the demonstration projects for staff and personal services, non-labor direct costs, support service payments, capital costs, and overhead.  Data on the cost of these items were obtained from State expenditure accounting records, including special reports on expenditures charged against the demonstration project budget and general expenditure records that are used for certain types of costs incurred on behalf of all AFDC recipients.  The specific categories for which costs were reported, and the types of charges reported in each category, are listed in Table III.1.  In most instances, the State expenditure reports provided a clear and full accounting of the cost of program resources.  However, several exceptions should be noted in which some adjustments or special treatment were required.

TABLE III.1
CATEGORIES OF REPORTED SITE COSTS AND ITEMS INCLUDED,
BY DEMONSTRATION SITE

Camden and Newark Chicago
Salary Costs
Salaries and fringe benefits for site managers, case managers, child care counselors, data entry and clerical staff Salaries and fringe benefits for site manager, supervisors, case managers, education and employment specialists, data entry and clerical staff
Indirect Costs
Standard agency overhead rate to cover facilities;  annual amortization of office renovation (Newark only) Not reported;  costs charged directly
Rent, Utilities, Maintenance
Not reported; covered by indirect rate Office rent, office maintenance, repair and maintenance of office facilities
Centrally Contracted Services
No reported costs Contracted staff for data entry and data administration;  catering of awards ceremonies;  consultant services to run life management workshop (additional workshop resources included in implicit costs)
Staff Travel/Conferences
Mileage for local travel (e.g. home visits);  travel costs for professional conferences and project meetings Mileage for local travel (e.g. home visits);  travel costs for professional conferences and project meetings
Computer Equipment and Servicesa
Hardware and software development for installation of client tracking systems (contractor) Hardware and software development for installation of client tracking systems (contractor)
Other Equipment and Furnishingsa
Purchase, rental, and maintenance of non-computer equipment (photocopy, office furniture, file cabinets, etc.) Office alarm system, rental and maintenance of office equipment, audio-visual equipment
Staff Development and Training
Payments for consultant services to train case managers None reported;  most training included in central management costs
Miscellaneous Supplies
General office supplies General supplies, shipping, printing
Site Service Contracts
Contracts with local agencies to conduct selected workshops (additional workshop resources included in implicit costs) Included in centrally contracted services
Educational Services and Expenses
Course registration fees;  costs of special group outings Summer camp fees;  classroom materials
Support Services (Child Care and Training-Related Expenses)
Payments to child care providers for individual children, contracted slots, and on-site care (Newark only);  payments to participants for bus fare Payments to child care providers;  payments to participants for bus-fare;  bus tokens distributed to participants
Other Client Expenses
Purchase of books, uniforms, tools for education and training courses No costs reported in this category;  included in support services
Vehicle Leasing/Insurance
Lease and insurance on van used to transport participants to education and training, and for outings (Camden only) No costs reported

SOURCE:  New Jersey Department of Human Services Teen Progress Quarterly Financial Reports and Illinois Department of Public Aid Obligation Transaction Reports for Project Advance.

aExpenditures for the purchase or lease of capital equipment in these categories were amortized before inclusion in the cost estimates.

 


Some adjustment of New Jersey reports of expenditures for site service contracts was required to arrive at a full estimate of the resources provided to run program workshops in Camden and Newark.  Rather than using actual reported payments, we relied on the terms of contract agreements to estimate the market value of services delivered in fiscal year 1989, for two reasons.  First, because of delays in billing, payments to other agencies were often made many months after services were rendered, and at such irregular intervals that payments in a 12-month period could not be relied on as an estimate of annual costs.  Second, a few agencies that negotiated contracts to provide services later failed to bill the demonstration project for some or all of the periods of service.  Thus, estimates of contract services costs are based on the reported values placed on services by demonstration planners and managers, but not strictly on payments made during fiscal year 1989.(3)

Special treatment was also given to program-paid expenditures for the purchase or lease of capital items, such as computer equipment, software packages and software development, office furniture and other major office equipment, and major office renovations.  All computer equipment and other capital items which were purchased were assumed to have a useful life of five years.  Thus, one-fifth of total expenditures for such items was attributed to fiscal year 1989.  In the event that State reports did not clearly distinguish between purchase and lease payments for non-computer office equipment, total expenditures for these items were allocated evenly across the four years of the demonstration period, with one-fourth of the expenditures included in reported costs for fiscal year 1989.  The cost of items allocated in these ways is included in the indirect cost category (for Newark only), the computer equipment and services category, and other equipment and furnishings.

Both states reported costs for support service payments -- for child care, transportation and other training-related expenses (TREs) -- but in ways which create slightly different category definitions.  In New Jersey, costs were reported in three separate categories -- payments to child care providers, payments for transportation, and payments for other client expenses (TREs).  The State demonstration expenditure reports in Illinois, which served as the basis for support service cost estimates in this draft, do not distinguish payments for child care from payments for transportation or other TREs.  Thus, these support services are reported as a single category of cost.(4)

In-kind Site Costs

Since program-paid costs reported by the two state agencies did not fully reflect all sources of demonstration services, it was also necessary to estimate the implicit value of some in-kind services provided by other agencies at no reported cost.  In-kind cost estimates were required for some workshops led or sponsored by other organizations, on-site remedial education instructors from other agencies, job training funded by JTPA or other publicly-funded agencies, GED classes and other education programs provided by local community organizations or educational institutions (other than secondary schools), and other services provided by community agencies.  The services for which in-kind costs were estimated and the basis for these estimates are summarized in Table III.2.

TABLE III.2
BASIS FOR ESTIMATES OF IN-KIND SITE COSTS FOR FY 1989

Camden Newark Chicago
Program Workshops
ACE Motivational Workshop:  25% of FTE salary of counselor provided by JTPA on site.

Child Support Workshop:  8 hours of CSE supervisor FTE salary per year for workshop sessions.

Family Planning Workshop:  Sum of four (non-contiguous) quarterly payments to Planned Parenthood.

Nutrition Workshop:  Estimated cost of 6% of extension service instructor's FTE salary.

Parenting Skills Workshop:  Budgeted annual cost of contract with University of Medicine and Dentistry of NJ.

Pre-Natal Workshop:  120 hours per year of an educational/staff development nurse (estimated $21.68 per hour).

Home/Family Life Management Workshop:  6 days (or 2.3% of FTE) of a University of Illinois Extension Service counselor.  Estimated based on NJ extension service salaries.

Abstinence Workshop:  12 hours of Planned Parenthood Counselor.  Cost estimated based on reported average counselor salaries from NJ.

Motivational Workshop:  Estimated 15 hours of outside counselor, based on counselor salary rates used for Planned Parenthood.

Education Services
GED/ABE Classes On-Site:  Cost of JTPA contract cost with Department of Personnel ($120,000) divided by expected number of participants (50) and expected duration (6 months) = $400 per participant/month.(a)  Multiplied by participation durations in FY89 from site MIS.

GED Classes at Community College:  $250 per person-month of attendance, times average duration from site MIS for persons ever enrolled.(b)

ESL Classes:  Cost of instructor at local Hispanic Center for 24-week course ($5,400), spread across reported class size = $154 per enrollee.  Applied to reported number of demonstration referrals.

ABE/Work Experience Program (Urban Youth Corps):  Cost of JTPA contract per person ($4,000) spread over expected duration (6 months) = $667/month.  Actual durations from site MIS applied to monthly rate.

GED/ABE Classes On-Site:  Budgeted annual cost of contract with Newark Board of Education ($18,000).

ESL Classes:  Cost/participant estimated at Camden Hispanic Center, multiplied by Newark number of participants who entered ESL, from site MIS.(c)

 

GED/ABE Classes On-Site and Off-Site:  $250 per attendance-month, based on reports from primary provider (community college).  Rate applied to number of entrants to classes during FY89 and estimated average duration from site MIS.
Post-Secondary Education:  Cost/participant-month of $475, derived from cost per credit-hour reported by Chicago Community College.  Applied to number of FY89 participants and average duration from site MIS. Post-Secondary Education:  Cost/participant-month of $475, derived from cost per credit-hour reported by Chicago Community College.  Applied to number of FY89 participants and average duration from site MIS. Post-Secondary Education:  Cost/participant-month of $475, derived from cost per credit-hour reported by Chicago Community College.  Applied to number of FY89 participants and average duration from site MIS.
Job Training Services
Job Training Courses:  Average reported JTPA cost/enrollee across all sites ($4,200, including JTPA administration overhead).  Applied to number of participants starting training in FY89, from site MIS.

Summer Youth Employment Program:  JTPA-reported cost of $640 per participant (including stipend and training and administration costs).  Applied to number (25) of demonstration participants in FY89, estimated by site manager.

Job Training Courses:  Average reported JTPA cost/enrollee across all sites ($4,200, including JTPA administration overhead).  Applied to number of participants starting training in FY89, from site MIS.

Summer Youth Employment Program:  JTPA-reported cost of $640 per participant (including stipend and training and administration costs).  Applied to number (50) of demonstration participants in FY89, estimated by site manager.

Job Training Courses:  Average reported JTPA cost/enrollee across all sites ($4,200, including JTPA administration overhead).  Applied to number of participants starting training in FY89, from site MIS.

Summer Youth Employment Program:  JTPA-reported cost of $640 per participant (including stipend and training and administration costs).  Applied to number (78) of demonstration participants in FY89, estimated by site manager.

Other Services
Job/Training Placement:  25% of FTE salary of JTPA counselor on site.

High-Priority Child Support Case Tracking:  25% of clerical FTE salary for special case tracking.

Hispanic Child Care:  Cost of child care staff at Hispanic Center for 6 months, divided by class size, times number of demonstration referrals = $180 per participant.

Child Support Sessions:  1% of FTE salary for Office of Child Support counselor (1.5 hours per month), to supplement Life Skills Workshop. Job Club Counselor:  20 days of a Job Service counselor (working with demonstration staff).  Estimated at rate of NJ JTPA employment counselor.

Child Support Enforcement:  Counselor from Office of Child Support on-site 2 days per week to conduct "enhanced" child support interviews.  Estimated as 10% of $25,000 FTE.

Staff Training:  Estimated 58 hours of consultants for various case manager training sessions.  Estimated at known rate of major consultant ($80 per class hour).

SOURCE:  Interviews with site managers and staff of provider agencies. 

NOTE:  All in-kind cost estimates based on salaries also include overhead rates of relevant agencies. 

a  Classes were poorly attended and did not enroll the expected number of participants; the unit cost estimated in the contract was applied to each participant, rather than the actual contract cost. 

b  Monthly costs of community college GED classes in Camden were based on unit costs reported by Chicago Community College System, since no data could be obtained from Camden County College.

c  Cost per participant in ESL in Newark was estimated based on costs from Camden because no cost information was available on the ESL provider in Newark. 

 


 

In calculating the value of in-kind services, we strove to estimate the full cost of all resources used in providing the services, including indirect and overhead costs, even if not all costs were passed along to consumers of the services.  For example, tuition charges at community colleges do not fully cover the costs of college staff and facilities, because much of the cost is borne by state education subsidies.  Instead of using tuition fees as an estimate of the resource cost for program participants' classes at community colleges, we obtained a more complete estimate of the full cost of college programs. 

In-kind cost estimates were derived from information obtained from service providers, who reported costs in two ways.  Most providers were able to supply information on the total value of all resources used in delivering services to demonstration participants.  In these instances, providers either reported their actual total cost of providing services or, more commonly, provided information on staff salaries, the frequency and duration of service delivery and preparation, and organizational overhead rates, from which we could estimate the total cost of the services.(5)  Since, for example, workshop leaders or GED teachers were provided by other organizations for a specified period of time regardless of the number of demonstration participants who attended the sessions or classes, we did not compute unit costs for the value of these services.

Other providers reported unit cost estimates for their services.  To compute the aggregate costs of these services, unit cost estimates were multiplied by the relevant number of units in the study period, based on data from the sites' participant tracking systems.  However, the definitions of the units for which costs were reported and, thus, the way the data had to be used, varied by service provider and type.  For example, JTPA agencies reported the average cost per person served in job training.  To compute total job training costs, we multiplied JTPA per-person cost estimates by the number of demonstration participants determined to have participated in training during fiscal year 1989.  In contrast, community colleges reported the cost per credit hour in college level classes and the cost per person-month in non-matriculation (GED and ABE) classes.  To calculate total in-kind costs for these services, cost per credit hour was converted to a cost per person-month of attendance.  The average cost per person per month was then multiplied by the number of months spent by demonstration participants in the relevant educational programs or courses during fiscal year 1989.  Since contacting every service provider to obtain unit cost estimates was impractical, unit cost information was obtained from selected providers.  These unit cost rates were then applied to estimate total costs for other providers of comparable services.  Representative unit cost rates were used to compute the aggregate implicit costs of job training, some education services, and a few infrequently conducted workshops (Table III.2). 

To calculate the in-kind costs to the programs of job training at all three sites, we used a unit cost rate equal to the approximate average of JTPA costs per trainee across all three sites.  This rate was applied to all job training, regardless of the provider or whether or not the training was actually funded by JTPA.  Demonstration participants received training from about 25 providers in Camden, 17 in Newark, and over 100 in Chicago.  Most training was funded by JTPA, however, so the JTPA cost per trainee provides a reasonable basis for the cost estimate.  Camden, Newark, and Chicago JTPA agencies reported per-trainee costs of $3,695(6), $4,299, and $4,500 respectively, with the average JTPA cost for the three agencies (unadjusted for number served) of $4,158.  A rounded unit cost rate of $4,200 was adopted for the three sites.(7)

For education, the costs of in-kind services were estimated in a variety of ways depending on the kinds of information available from each provider.  Cost estimates for GED/ABE courses and post-secondary courses at community colleges were based on the cost per person-month of attendance for each of the two types of programs reported by the Chicago Community College system -- $250 per person-month of GED/ABE attendance, and $475 for post-secondary courses.(8)  ESL classes were reported only in Camden and Newark, and for very few participants; person-month costs in both sites were based on a report from the Camden Hispanic Women's Resource Center, where ESL classes were offered, on the costs of instructor time and the size of classes.  The cost of classes in four-year college programs was assumed to be the same as at two-year community college programs.  This assumption may understate some education costs, but since a very small number of participants attended four-year colleges, it does not introduce any substantial distortion of cost estimates.

Representative rates were also used to estimate costs for providers of very small-scale services -- primarily occasional workshops.  For every such service, we obtained estimates from site managers of the time that staff from other agencies spent delivering the service.  For each service, we applied a salary rate obtained either from the particular provider agency or from a comparable agency in that site or one of the other sites.  For example, approximate extension service counselor salaries in Camden were obtained and applied to estimate the costs of nutrition workshops in Newark and the home/life management skills Workshop in Chicago.  Other such examples are noted in Table III.2.

Central Management Costs

The full costs of any program include the cost of central management control and oversight, and these must be given some recognition in our accounting of demonstration costs.  Our analysis therefore includes approximate estimates of the cost of central management provided by the New Jersey Department of Human Services (NJDHS) and the Illinois Department of Public Aid (IDPA) to the sites in Camden, Newark, and Chicago.  However, we report central management costs separately from site costs, for several reasons.  In Illinois there is no clear accounting of central office costs actually incurred for the demonstration; as a result, we must infer estimates from information in demonstration grant application budgets.  In New Jersey, central staff costs are reported, but they coincide so closely to grant application estimates that they do not appear to reflect close documentation of the actual time spent on demonstration management.  Obtaining a reasonably accurate breakdown of the time allocation of central office staff in either state was impractical.  Finally, the magnitude of such costs relative to site program costs is likely to depend on the scale of program operations, and might be quite different at the scale of a one- or two-site demonstration than at the scale of an ongoing, statewide program.  We therefore present estimates of central management costs separately to provide some indication of how central management increases overall program costs, but with less supporting data than is the case for site costs.

Data on central management costs were available in different forms in each state.  In New Jersey, the time of central management staff was explicitly budgeted in grant proposals and then charged to State demonstration accounts, and the associated costs were included in demonstration expenditure reports and grant financial reports.  Total New Jersey central office staff salaries, fringe benefits, and indirect costs were 30 percent of total reported site labor costs in Camden and Newark (salaries and fringe benefits).  In Illinois, central management costs were not explicitly included in grant proposal budgets, and the time of central management staff was not accounted for in State expenditure reports.  However, IDPA normally applies a 26.3 percent indirect cost rate to labor costs when planning and budgeting for its programs.  A portion of this indirect cost -- that which covered site office overhead in Chicago -- was included in the state accounting reports for the demonstration program.  However, the portion that supported office staff and facilities in Springfield was not reported since these services were provided to the demonstration program at no cost.  This portion of indirect cost for central office functions amounts to 24 percent of reported site salaries and fringe benefits.  Although the accounting definitions underlying these data are unclear, these two central office overhead rates -- 30 percent for New Jersey and 24 percent for Illinois -- provide an approximate range for the relationship of central management costs to demonstration site costs.

Presumably, the ratio of central management to site costs would be somewhat lower in a larger, ongoing, multi-site program than in a small demonstration project, due to economies of scale in central monitoring efforts.  The origins of the two central management cost rates derived above support this interpretation and provide some basis for selecting a central management overhead rate that might apply in ongoing programs.  The higher rate in New Jersey reflects an accounting of central office costs during the demonstration.  The lower Illinois rate reflects broader agency experience not only with demonstration programs but other ongoing programs, as well as the larger scale of operation there.  For this reason, we have applied the rate derived for Illinois -- 24 percent -- to reported salaries and fringe benefits in all three sites as a consistent way of estimating the central office costs that would be associated with program sites like those in the Teenage Parent Demonstration if they were part of a larger, ongoing program.