how to calculate indirect cost rate for federal grants

UA 10.4.1D, Angelina Ball, Sr. Description of Cost Allocation Methodology. Gann Limit - Accounting (CA Dept of Education) Organized Research research and development activities of an institution that are separately budgeted and accounted for as scientific research and generally not scholarly inquiry of the type most often supported by NEH. 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. arrow-right To prevent substantial overpayment or underpayment of indirect cost during the fiscal year, a revised provisional rate may be requested by the organization. The Appendix II includes a list of some frequently asked questions by organizations on areas such as the OMB Super Circular (2 CFR 200); establishing indirect cost rates and a NICRA; the time period for establishing a NICRA; direct versus indirect costs; and award modification based on the NICRA. Therefore, care needs to be taken to ensure that amounts claimed do not exceed award limitations or indirect cost rate ceilings. UA 10.4.4A, Tanya Broadnax, Closeout Management Analyst. Where an organization's indirect costs benefit its major functions in varying degrees, indirect costs must be accumulated into separate indirect cost pools. These amounts should also tie to the general ledger labor accounts and the financial statements. As of November 1, 2016 the following changes have been made to the OCC Guide for Non-Profit Organizations. Provide a Certificate of Indirect Costs in accordance with 2 CFR 200, Subpart F, Appendix IV, Section D. Documentation and steps needed to finalize indirect cost rates: a. Audit adjustments need to be clearly delineated to be readily identifiable for verification by this office. one which results in an accurate measure of the benefits provided to each activity of the organization. In proposals and approved budgets, the total project cost is the sum of total direct costs and total F&A (indirect) costs. indirect cost rate agreement. The purpose of this spreadsheet is to identify effected awards, gauge materiality and identify any indirect cost limitations. Reimbursement of indirect costs are subject to the submission of an indirect cost rate proposal, availability of funds, statutory and administrative restrictions, and the approval of the USAID Grant Officer or authorized representative. Therefore, the organization must agree in writing not to recoup the reduction in the rates on other awards with the U.S. Government - the reduction must be taken from other non-governmental sources of revenues. To calculate costs when an award specifies indirect costs as a percentage of total direct costs, use the following example. Document meetings, telephone conversations, and e-mails. ERIC - ED511705 - University Research: Policies for the Reimbursement 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. (i.e., capital expenditures and major contracts and subgrants). Therefore, the organization should have internal controls in place regarding labor costs incurred that are evident, well defined, regularly maintained and updated as necessary, and verify effectiveness. 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. Examples include salaries and benefits for staff and consultants working on the project, project-related travel, and supplies and equipment used on the project. Indirect cost rates identified in the NICRA apply to all cost reimbursable awards that incorporate provisional indirect rates. 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. Title changed on 3.B from Time Distribution Report to Personnel Activity Report. 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. Review severance payments for reasonableness. The accounting system structure and capabilities should also be considered. 2 CFR 200, Subpart F, Appendix 4, Section C.2.f. Indirect costs. The Benefits of Obtaining a Federally Approved Indirect Cost Rate Determine whether these unallowable or non-allocable items should be added to the distribution/allocation base. Determine that the itemized costs in the indirect cost pool pertain to functions that are supportive of all direct activity. 2 CFR 200, Subpart E, Section 200.414 (c) (1) states that the negotiated rates must be accepted by all Federal awarding agencies. it is crucial to calculate the indirect costs both using the sponsor's indirect costs rate as well as our federally negotiated rate to ensure we are not charging excess indirect costs. Review changes in the indirect cost rate allocation bases for propriety, if applicable. If applicable, a reconciliation spreadsheet should be provided to support the organizations claimed labor cost. All direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). Failure to obtain such prior written approval may result in cost disallowance. 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.). Once a NICRA is issued, either by a Mission or M/OAA/CAS/OCC, this NICRA will apply to all Federal awards. Entitys written policy for allocating and identifying direct and indirect costs, i.e. A: PIs typically work with their collaborators to determine how each institution will provide resources towards the 50% cost-share commitment. An organization is required to provide written notification to the indirect cost negotiator prior to implementing any changes which could affect the applicability of the approved rates. 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. Provide the amount of executive compensation paid to the top 5 executives. If a sponsor's published policy mandates a lower F&A rate, an indirect cost exception (waiver) must be obtained. If your organization does not have a current negotiated (including provisional) rate or has an expired rate, your organization may choose to negotiate a rate with its cognizant agency. The result of this process is an indirect cost rate which is used to distribute indirect costs to individual Federal awards. Federal award recipients that recover administrative overhead costs through the use of an indirect cost rate (ICR) must submit an annual ICR proposal to: The organization must have an established accounting system prior to being awarded a grant or contract with a federal government agency. An indirect cost rate represents the ratio between the total indirect costs and benefiting direct costs, after excluding and or reclassifying unallowable costs, and extraordinary or distorting expenditures. A final rate is used to adjust indirect costs claimed based on a provisional rate. Note: Salaries and fringes included in this exhibit are for illustrative purposes only. The information herein is used by the organization for the development of the indirect cost rates as shown on the subsequent sections of the guide, Download Example - Statement of Total Cost Table [PDF 84 KB]. 2 CFR 200, Subpart F, Appendix IV, Section B.5 also provides for the use of Special Indirect Cost Rates. Note that a final indirect cost rate is established after an organization's actual costs are known, typically a fiscal year.

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