FAQs Indirect Cost Rate

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Indirect Cost

Those expenses that incur for the joint benefit of more than one project and cannot be readily and specifically identified with a particular project without effort disproportionate to the results achieved. Indirect Cost can ONLY be applied to federally funded projects, however, may be restricted or disallowed on some federal grants.

Upon submittal of an Annual Financial Report (AFR) by a district or charter school, the district or charter school may request that the ADE calculate an Indirect Cost Rate (ICR) by placing a check mark in the check box provided, and then submitting the additional required information. The Audit Resolution Unit at ADE then calculates a restricted and a non-restricted rate and notifies the district or charter school of the approved restricted rate for use with State and Federal grants. Other entities (e.g. community-based organizations, community colleges and universities, state agencies, etc.) must provide to ADE Audit Resolution a copy of the letter of Indirect Cost from their cognizant agency showing their approved ICR in order for it to be entered into the Grants system.

Indirect Cost can be applied against all line items above the Indirect Cost line item on the budget page. It is not applied against Indirect Cost itself nor against capital outlay. E.g., if the total of all line items above the Indirect Cost line item equals $1,000 and the LEA’s Indirect Cost Rate (ICR) is 6.25%, the LEA can apply 6.25% against that $1,000 of anticipated expenditures. If final expenditures for line items located above Indirect Cost do not reach $1,000, the Indirect Cost line item must be reduced in direct proportion. Care must be taken not to exceed programmatic limits as well.

Indirect cost plus all other line items cannot exceed an allocation/award amount.

The maximum approvable restricted rate is 8.0%, however, rates are set yearly according to figures furnished by the LEA or by the LEA cognizant agency’s letter of Indirect Cost approval. Indirect Cost can ONLY be applied to federally funded projects, however, may be restricted or disallowed on some federal grants. Please refer to Indirect Cost term in the Grants Management Enterprise glossary to download and/or print a copy of the Maximum Allowable Indirect Cost Matrix by grant, in pdf format.

If a zero is indicated as the Indirect Cost Rate (ICR) either the entity did not request that the ADE calculate a yearly rate (on the most recent AFR), did not submit the required documentation, did not submit a copy of the letter of Indirect Cost from their cognizant agency, or was not approved for an ICR for that fiscal year. All entities are encouraged to apply for a yearly rate.

All approved budget line items except Indirect Cost.

Indirect Cost may be restricted or disallowed on some grants. In this example, the grant itself had an additional restriction. Please refer to Indirect Cost term in the Grants Management Enterprise glossary to download and/or print a copy of the Maximum Allowable Indirect Cost Matrix by grant, in pdf format.

Yes. Arizona State law states that County School Superintendents (CSS) will handle the fiscal activities of districts (Title 15.304) including federal grant funds, unless the district has been approved for fiscal independence (R7-2-902). There are no additional federal appropriations to cover the CSS responsibilities of handling districts’ federal projects. Effective 2008, districts are allowed to charge combined indirect cost rate.

E.g., if the district or district sponsored charter school gets approved for a 2% Indirect Cost Rate and their County School Superintendents Indirect Cost approved rate is 1.75%,the district can charge 3.75% combined indirect cost rate to cover the county’s indirect cost rate.