This Indirect Cost Rate Guide (Guide) has been prepared to assist non-profit organizations to understand the requirements for the determination of indirect cost rates for application on cost reimbursable grants and other agreements awarded by the United States Agency for International Development (USAID). 2 CFR 200, Subpart A, Section 200.56 defines Indirect (facilities & administrative (F&A)) costs for Major nonprofit organizations: Indirect (F&A) costs means those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. Any limitations placed upon the full recovery of indirect costs, i.e. one which results in an accurate measure of the benefits provided to each activity of the organization. To determine your indirect costs, apply the formula above using your indirect cost rate and your direct costs. This paragraph applies to the following types of documents and their supporting records: indirect cost rate computations or proposals, cost allocation plans, and any similar accounting computations of the rate at which a particular group of costs is chargeable (such as computer usage chargeback rates or composite fringe benefit rates). The proposed allocation base(s) is subject to negotiation and approval by USAID. This section provides two examples of calculating indirect costs. You should choose the base that would result in the fairest and most equitable allocation of indirect costs across your funding sources. The allocation base selected by the non-profit organization must be: Per 2 CFR 200, Subpart F, Appendix IV, Section C.2.b., organizations that do not have a NICRA with the Federal government are required to provide their initial indirect cost proposal immediately but no later than 3 months after the effective date of the Federal award which first incorporates indirect cost rates. Review the financial statements and audit report for any indication of activities which may have been omitted from the indirect cost proposal, i.e., the omission of restricted fund costs or the existence of an affiliated organization receiving supportive service from the parent organization. Indirect Cost Rate Proposal (ICR) Checklist for Subsequent NICRAs. This method should also be used where an organizations major functions benefit from its indirect costs to approximately the same degree, and may be used where the level of Federal awards to an organization is relatively small. Decide on what kind of electronic signature to generate. Breakdown of indirect salaries by position title, amount and indirect percentage. Description of changes in accounting or cost allocation methods made since that last submission. If the organization subsequently wins the award a NICRA will then be issued. The indirect costs allocated to each function are then distributed to individual Federal awards and other activities included in that function by means of an indirect cost rate(s). Examples include salaries and benefits for staff and consultants working on the project, project-related travel, and supplies and equipment used on the project. The decision to use either method will depend on the grantee's accounting system. Financial statements must be reconciled to the indirect cost rate calculations. Reconcile the indirect cost rate proposal to the audited financial statements. The rate is expressed as a percentage of indirect costs (numerator) and direct costs (denominator). First Time Provisional NICRA SubmissionPrepare the indirect cost rate proposal by using the Indirect Cost Rate (ICR) Proposal Checklist for First Time NICRAs included in Section 2.E. Provide the amount of executive compensation paid to the top 5 executives. General & Administrative (G&A) rate. See Appendix II of this guide titled, Frequently Asked Questions, for additional information on the 10% De minimis rate. Determine whether these unallowable or non-allocable items should be added to the distribution/allocation base. (A) An indirect cost pool of $200,000 (B) A salary and fringe total of $300,000. Examples of unallowable activities include: services to members, maintenance of membership rolls, public relations, lobbying, and fund raising. Review severance payments for reasonableness. See also 2 CFR 200, Subpart E, Section 200.442, Fundraising and investment management costs, and. Determine that the applicable cost principles stated in 2 CFR 200 were followed. Treatment of paid absences and signed statement of treatment of paid absences. If the rate agreement in effect at the beginning of the period does not cover the entire period of performance, then NEH will use the rate in effect for the last year of the negotiated rate agreement to determine indirect costs for the duration of the period of performance, Likewise, recipient organizations that issue subawards (referred to as pass-through entities) must accept subrecipients applicable federally negotiated indirect cost rates. A copy of the appeal must be concurrently furnished to the AO. A schedule that summarizes total cost by line item expenditure, which should include , but not be limited to: Total expenditures (reconcilable to the audit if using actual numbers), Indirect cost rate calculation and federal percentage. Common locations include: Type of programs that rates are applicable to, Indirect Cost Rate (Allocation) Base Defined. grant dollars available to recover indirect costs. Additional effort and cost required to achieve a greater degree of accuracy. A reconciliation schedule for each indirect cost pool and allocation base showing each reclassification and adjustment to the financial statements to arrive at the cost pools and allocation bases. This document provides introductory guidance to NEH applicant and recipient organizations on calculating indirect costs as part of an NEH grant or cooperative agreement application budget. Modified Total Direct Costs, excludes equipment, capital expenditures, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. An official website of the United States government. A copy of the organizations severance policy. Per 2 CFR Section 200.1 (definition of MTDC), standard exclusions include expenditures for: Capital equipment Capital expenditures Participant support costs Patient care charges Rental of space Scholarships and fellowships Some examples of indirect costs are office space rental, utilities, and clerical and managerial staff salaries. Refer to Section 2.E. Cognizant agency for indirect costs The cognizant agency for indirect costs is the federal agency that is responsible for establishing cost allocation plans or indirect cost proposals on behalf of all federal agencies (2 CFR 200.1). Certificate of Indirect Costs in accordance with 2 CFR 200, Subpart F, Appendix IV, Section D. Compile all remaining documentation identified in the indirect cost proposal checklist, such as: The following allocation bases are acceptable examples for use when indirect costs are allocated to benefiting cost objectives by means of an indirect cost rate. In fiscal year 2007, the majority of the Department of Defense's (DOD) basic research obligations were provided to higher education institutions. Maintenance of membership rolls, subscriptions, publications, and related functions. A grantee that expends less than $750,000 during the entity's fiscal year in federal awards is exempt from the single audit required by 2 CFR 200, Subpart F, Section 501(d). Indirect costs costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. Availability of data on square footage, number of transactions, employees, purchase orders, etc.e. If no approved rate exists, the pass-through entity may negotiate an indirect cost rate with the subrecipient or accept the de minimis rate (. The Total Project Cost is: $150,000 Total Direct Cost (TDC) base +22,500 15.0% indirect costs on TDC base $172,500 Total Project Cost (TDC + indirect cost) Example 2 (MTDC): A PI is submitting another proposal to the NSF for the same time period and the same direct-cost amount. Total Federal funds involved. Organizational structureb. Prior to the preparation of an indirect cost rate proposal and supporting documentation, the cost principles in 2 CFR 200, Subpart E should be reviewed to determine if the costs proposed are reasonable, allowable and allocable. Timekeeping is performed in accordance with company policies and procedures. Indirect rates are used for Incurred Costs Proposals. Choose the My Signature button. The measurement selected should be based on relative benefits received, and should be able to replicate the process. Explain significant variances for all cost elements. The proposal and related documentation must be retained for audit. CARS will allow your organization to document your already established federally approved indirect cost rate, or complete an indirect cost rate proposal (see State Negotiated Rate above). Establish a final ICR for a prior fiscal year. Written policies and procedures for screening unallowable costs. Depreciation schedule if depreciation is included as indirect costs. Example 2: Applying a 34% Indirect Cost Rate using direct salaries and wages, excluding fringe benefits, base. reasonable and consistently applied to direct costs, appropriate to the particular cost being distributed, and. Instruction teaching and training activities of an institution except for research training. Guidance for Negotiating an Indirect Cost Rate Agreement with NEH, Reviewing and Calculating Indirect Costs using a NICRA. Examples include costs for clerical and managerial staff, depreciation, office space rental, and utilities. Refer to Appendix V for a sample of a deviation letter from the NICRA. Subsequent NICRA Submissions to Establish Final and Provisional Indirect Cost Rates. Prior to the preparation of an indirect cost rate proposal and supporting documentation, the cost principles established by 2 CFR 200, Subpart E, Cost Principles, should be thoroughly reviewed. Include the level of transaction testing performed by the independent auditor on direct and indirect costs claimed. The rate in each case must be stated as a percentage which the amount of the particular indirect category (i.e., Facilities or Administration) is of the distribution base identified with that category.______ No. indirect cost rate agreement. Three common bases for direct costs are: An adjustment is also made for the difference between the rate approved for use in a year and the amount of indirect costs actually expended. Submission requirements are located on page 2 of the Uniform Budget Template as well as 2 CFR 200 Appendices IV, V & VII. Indirect Costs Ratio Indirect Cost Pool Direct Cost Base = Indirect Cost Rate Send the appeal to the Deputy Assistant Administrator, Bureau for Management, U.S. Agency for International Development, Management Bureau, 1300 Pennsylvania Ave, NW, Washington, D.C. 20523. Once established, a final indirect cost rate is used an interim rate applicable to a specified period time pending the establishment of a final rate for that period. 2 CFR Appendix II to Section 200 - Indirect (F&A) Costs Identification also Assign, and Rate . Reliability and accuracy of an organizations labor charging system is essential. 10% De minimisThe 10% De minimis rate may be elected by an organization that has never received a negotiated indirect cost rate. NEH must use the negotiated rates in effect at the time of the initial award throughout the life of the award, except as provided in, . Note - changes in allocation bases need to be approved on a prospective basis. To recover indirect costs related to an NEH award, your organization must either negotiate an indirect cost rate with its cognizant agency prior to a federal award or elect to use a de minimis rate of 10% of modified total direct costs (MTDC) (, A Negotiated Indirect Cost Rate Agreement (NICRA) is a formal written agreement between your organization and its. states a breakout of the indirect cost component into two broad categories, Facilities and Administration as defined in subparagraph A.3 of this appendix is required. In order to recover indirect costs related to federal awards, most organizations must negotiate an indirect cost rate with the federal agency that provides the preponderance of funding to that organization in the case of colleges and universities, this is usually the Department of Health and Human Services. The G&A expenses are those that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization. This guidance does not supersede information and requirements on the development, calculation, and application of indirect costs and indirect cost rates in, 2 CFR Part 200, Uniform Administrative Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, General Terms and Conditions for Awards to Organizations (For grants and cooperative agreements issued January 1, 2022, or later), general operating support costs to State Humanities Councils (SHC), Applicant organizations submit an NEH project budget using the, , unless otherwise instructed in the NOFO, When preparing your budget, you must treat costs that you classify as direct or indirect consistently. Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived.. The site is secure. If an extension is granted the non-Federal entity may not request a rate review until the extension period ends. Note that responsibility for each specific organization is based on the first letter of its name, i.e. The purpose of the CPS is to establish a clear understanding between the organization and the federal government as to what costs will be charged directly and what costs will be charged indirectly. When calculating indirect costs, select the appropriate cost base, as established in the NICRA, to determine the direct costs to be multiplied by the applicable negotiated indirect cost rate. State/Local Governments may support the indirect costs that they incurred by submitting an Indirect Cost Rate (ICR) proposal or a Cost Allocation Plan (CAP) to their Federal cognizant agency. In your application, you must include your project budget and the base, rate, and amount of indirect costs you will recover during period of performance. Provisional rate or billing rate is a temporary ICR applicable to a specified period which is used for funding, interim reimbursement, and reporting indirect costs on federal awards pending the establishment of a final rate for the period.