The decision to use either method will depend on the grantee's accounting system. For local educational agencies (LEAs), issues with the limit can occur if revenues from taxes . These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and be incorporated into the official records of the non-Federal entity. Failure by the parties to agree on any final rate(s) under this provision is considered a dispute within the meaning of the Standard Provision, Disputes. If a dispute arises in a negotiation of an indirect cost rate between the cognizant agency for indirect costs and the nonprofit organization, the dispute must be resolved in accordance with the appeals procedures of the cognizant agency for indirect costs. Guidance for Negotiating an Indirect Cost Rate Agreement with NEH, Reviewing and Calculating Indirect Costs using a NICRA. If an organization believes the future rates will be materially different than the previous finalized rates, it should propose the more accurate provisional rates with adequate supporting documentation and rationale. consult with other divisions within M/OAA as needed before preparing a recommendation for the deciding official; and, Establish a provisional rate to charge estimated indirect costs to an award for future periods and. 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). 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). of this guide. Entitys written policy for allocating and identifying direct and indirect costs, i.e. Negotiated indirect cost rate approval does not need to be included in the application but will need to be provided if a grant is awarded. The AO must place a copy of the final decision in the award files. Budget Preparation: Indirect (F&A) Costs - University of Idaho To the extent that indirect costs are reasonable, allowable and allocable, they are a legitimate cost of doing business payable under a U.S. Government contract or grant. , are incurred for the benefit or joint objectives of a specific project and organizational activities. NEH must accept valid and applicable indirect cost rates (2 CFR 200.414 (c)(1)), or if no current or provisional negotiated rate exist, accept the de minimis rate, if requested in the application budget. Submit a draft NICRA to the organization for their review of the indirect cost rate methodologies, and obtain their concurrence. Contact person information (preferably the person who prepared the ICR): Entitys internet website address, if any. If you choose the de minimis, you must use the rate consistently for all federal awards until your organization chooses to negotiate its own indirect cost rate. Examples include. The first set of procedures is for an organization seeking its first NICRA and the second set is related to the issuance of subsequent NICRAs. A Negotiated Indirect Cost Rate Agreement (NICRA) is a formal written agreement between your organization and its cognizant federal agency describing how the organization will calculate indirect costs. Frequently Asked Questions (FAQs) | U.S. Department of Labor - DOL Indirect Costs Ratio Indirect Cost Pool Direct Cost Base = Indirect Cost Rate Per 2 CFR 200.414 (f), if you do not have a current or provisional negotiated rate (except for local governments claiming central service costs under 2 CFR 200, Appendix VII D.1.b), you may choose to use a de minimis rate of 10% of modified total direct costs (MTDC). Financial statements must be reconciled to the indirect cost rate calculations. Refer to the Notice of Funding Opportunity (NOFO) for statutory or administrative information regarding the allowability of indirect costs. The federal agency that provides the most funding is the cognizant agency responsible to establish indirect cost rates. Whether an organization has an automated or manual personnel activity reporting system there must be procedures, controls and an audit trail of documentation to support the labor costs. Direct costs must align with the cost principles, including allowability (2 CFR 200.403), reasonableness (2 CFR 200.404), and allocability (2 CFR 200.405). The rate is expressed as a percentage of indirect costs (numerator) and direct costs (denominator). Direct costs are salaries, services, and goods that are directly related to the project and are accounted for with a high degree of accuracy. The allocation base should best represent the causal relationship between costs being allocated and the final cost objectives (awards, fundraising, lobbying, etc.). 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). The 2 CFR 200.430(i), Standards for Documentation of Personnel Expenses, states that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. The campus's federally-negotiated indirect cost rate is 50%. See Appendix II of this guide titled, Frequently Asked Questions, for additional information on the 10% De minimis rate. The Benefits of Obtaining a Federally Approved Indirect Cost Rate The cost base describes the direct cost pool (types of costs and cost caps) to which the indirect cost rate is applied. 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. Statement of Treatment of Paid Absencesb. The appeal must be in writing and must be postmarked within thirty (30) calendar days of receipt of the AOs final decision. Reliability and accuracy of an organizations labor charging system is essential. Sponsored Project Award Allocations: Calculating Direct and Indirect Costs The Overhead, Special Cost, and Closeout Branch (M/OAA/CAS/OCC), within the Cost Audit Support Division, Office of Acquisition and Assistance, within the Bureau for Management is the central unit authorized to negotiate indirect cost rates with concerns awarded contracts, grants or cooperative agreements by USAID. They should also support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. These amounts should also tie to the general ledger labor accounts and the financial statements. Title & Location, Name & Responsibility, Email Address, Telephone number, Supervisory Contract Specialist:UA 10.3.OC, Ramon E. Santos, rsantos@usaid.gov 202-916-2557, Contract Specialist:UA 10.3.2F, Catrina Burgess, B,M,N,U, cburgess@usaid.gov 202-916-2563, Contract Specialist:UA 10.3.1C, Devon Rodriguez, G,L,P,Q,R, derodriguez@usaid.gov,202-916-2558, Contract Specialist:UA 10.3.2D, Guli Hall, A,E,F, guhall@usaid.gov, 202-916-2562, Contract Specialist:UA 10.3.2C, Heartwill Doughan, C,J,O, hdoughan@usaid.gov, 202-916-2561, Contract Specialist:UA 10.3.1D, Natasha Young, S,T,V,Y,Z, nayoung@usaid.gov, 202-916-2559, Contract Specialist:UA 10.3.1C, Rami Khyami, I, rkhyami@usaid.gov, 202-916-2557, Contract Specialist:UA 10.3.1F, LaToya Dorsey, D,G,H,K,W, ldorsey@usaid.gov, 2020-916-2560, Management Analyst:UA 10.4.4A, Tanya Broadnax, Closeout Management Analyst, tbroadnax@usaid.gov, 202-916-2597, Administrative Assistance:Offisite, Alexis Johnson, Closeout Contract Specialist, AlexJohnson@usaid.gov, 202-907-1175, Administrative Assistance:UA 10.4.1D, Angelina Ball, Sr. Facilities costs are the overall costs of operating and maintaining facilities owned or leased by the organization in which activities that may directly or indirectly support your project are taking place. In any instance where an indirect cost rate other than that specified in the NICRA is used in an award, the grantee is required to acknowledge the above stipulations by providing a written acknowledgement to USAID. Indirect cost proposals must follow the cost principles available at 2 CFR Part 200, Appendix VII. indirect cost rate agreement. If your organization wants to negotiate a NICRA and NEH is its cognizant agency, see Guidance for Negotiating an Indirect Cost Rate Agreement with NEH. For example, research rates are not applicable to the scholarly research that NEH funds, except in rare circumstances. You should prepare a project budget in coordination with your organizations Institutional Grant Administrator (IGA) and/or Office of Sponsored Projects. Include the level of transaction testing performed by the independent auditor on direct and indirect costs claimed. An example of how to calculate matching funds is as follows: (a) Take the amount of grant funds requested and divide it by .75. . The cognizant agency is typically the federalawarding agency that provides the largest amount of direct funding (as listed on the schedule of expenditures of Federal awards, see 200.510(b)) to a non-Federal entity unless OMB designates a specific cognizant agency for audit. ), please provide all applicable final indirect cost rate data as specified in the Federal Acquisition Regulation (FAR) 52.216-7 (d) (2) (iii) for that . Include the level of transaction testing performed by the independent auditor on direct and indirect costs claimed. The cognizant Mission initially negotiates, and subsequently updates, the NICRA on a company-wide basis; not per grant/award. eCFR :: 2 CFR 200.414 -- Indirect (F&A) costs. Also, 2 CFR 200, Subpart E, Section 430(i)(3) states that in accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA) (29 CFR part 516),charges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section,must also be supported by records indicating the total number of hours worked each day. If your organization has a NICRA, you may apply to your cognizant agency for a one-time extension of a current agreement for a period of up to four years, in accordance with, if you do not have a current or provisional negotiated rate (except for local governments claiming central service costs under. 2. If indirect costs are allowed under the terms of the award, the entity will then be ready to prepare an indirect cost rate proposal beginning with the following steps: a. Historic federal grants available for infrastructure and clean energy can bring significant financial and compliance risks for for-profit federal grant A final rate is not subject to adjustment. Follow up, after reviewing the indirect cost proposal, with questions, and/or concerns and may request additional documentation, and/or narrative responses, in support of the proposal (for more detailed steps see Section 2.G., Indirect Cost Proposal M/OAA/CAS/OCCs Review Procedures, of this guide.). Fixed rates may be negotiated where predetermined rates are not considered appropriate. Calculate the total indirect charges by multiplying your approved indirect cost rate by your direct costs. Indicate which, if any, of the following the organization used to establish executive compensation, and provide the following supporting documentation: Approval by the board or compensation committee. When preparing your budget, you must treat costs that you classify as direct or indirect consistently. Include the level of transaction testing performed by the independent auditor on direct and indirect costs claimed. 2 CFR 200, Subpart E, Section 200.414 (g) states that any non-Federal entity that has a federally negotiated indirect cost rate may apply for a one-time extension of a current negotiated indirect cost rate for a period of up to four years. Indirect Cost Calculation: A Base Amount is determined by adding together all direct costs (-) minus any items which are exempt from IDC costs. Any changes in accounting practice to include changes in the method of charging a particular type of cost as direct or indirect and changes in the indirect cost allocation base or allocation methodology requires the prior approval of the M/OAA/CAS/OCC. An indirect cost rate is simply a device for determining fairly and expeditiously the proportion of general (non-direct) expenses that each project will bear. Please refer to Section 1.F below titled Determination of Indirect Cost Rates and Cost Allocation for information on the base of application. Note that a final indirect cost rate is established after an organization's actual costs are known, typically a fiscal year. To calculate costs when an award specifies indirect costs as a percentage of total direct costs, use the following example. Decide on what kind of electronic signature to generate. PDF Indirect Costs - Guide Sheet - Office of Justice Programs MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. DOCX Module 4: How to Develop a Budget: Indirect Costs - US EPA Indirect Cost Rate Proposal (ICR) Checklist for Subsequent NICRAs. After receiving the indirect cost proposal M/OAA/CAS/OCC will perform the following steps: Note that NICRAs are not issued to sub-awardees since there is no legal relationship between USAID and the sub-awardee. Below are some samples of common allocation bases: This method is acceptable provided each joint cost is prorated using an acceptable base. Grantees that already have a NICRA are required to submit their audited financial statements and single audit in accordance with 2 CFR 200, Subpart F, Section 512(a)(1) and certified indirect cost rate proposal to USAID within the earlier of 30 days after receipt of the auditors report, or nine months after the close of each fiscal year. In summierung, 2 CFR 200, Subpart A, Abteilung 200.57 defines an indirect cost rate offer as the documentation prepared via a non-Federal business to substantiate its request for the establishment of an indirecly cost rate. PDF Attachment III to UIPL No. 22-21, Change 2 Instructions for Completing a. The base of application for this example is total costs excluding G&A expenses. Prior year audited financial statements including any affiliated organizations, and the single audit in accordance with 2 CFR 200, Subpart F, Section 200.512(a)(1). The Federal Grant Budget To facilitate equitable distribution of indirect expenses to the cost objectives served, your organization may need to establish a number of pools of indirect costs. The Total Direct Cost (TDC) base includes all direct costs without exclusions. grant dollars available to recover indirect costs. Labor is the most significant cost incurred by an organization. Once NEH issues an award, it is not obligated to make adjustments due to increases in your organizations indirect cost rate agreement. The rate is based on an estimate of the costs to be incurred during the period. Frank Fico, CPA on LinkedIn: Six Important Considerations for For Determine that costs that are statutorily unallowable, or for reasons of non-allocability, have been eliminated from the indirect cost pool. 2 CFR 200.332 Requirements for pass-through entities, Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions for Higher Education (IHEs), Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations, State and Jurisdictional Humanities Councils, General Guidance on Calculating Indirect Costs, Chronicling America: History American Newspapers. describing how the organization will calculate indirect costs. 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. Q: Does both my department and my division need to approve the cost-share for my proposal? Submit a draft NICRA to the organization for their review of the indirect cost rates methodology, and obtain their concurrence. Indirect cost Proposal Checklist for First Time NICRA of this guide for the required documentation. 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. If you have never received a negotiated indirect cost rate, you may elect to charge a de minimis rate of 10 percent of modified total direct costs. Reconcile the indirect cost rate proposal to the audited financial statements. direct salaries and wages including (or excluding) fringe benefits, direct salaries and wages including vacation, holiday, sick pay, and other paid absences, Provides the separate rates for allocating. The selection of an appropriate base for allocating indirect costs. The following resources are provided to aid grantees in the administration of Federal grants awarded by the Department of Education. The checklist below addresses the documentation to provide and steps needed when seeking a revised provisional rate and/or final rates. General Guidance on Calculating Indirect Costs | The National Endowment The Appendix IV includes a sample of a deviation letter to be issue when an indirect cost rate other than that specified in the NICRA is used in an award. Indirect Costs Allocation for Federal Grant Awards - LSL CPAs These records must support the distribution of the employees salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.