Direct Costs are those for activities or services that benefit specific projects (e.g., salaries for teachers, aids, paraprofessionals and materials required for a particular project). Because these activities are easily traced to projects, their costs are usually charged to projects on an item-by-item basis.
Administrative Costs/Indirect Costs are general or centralized expenses of overall administration of an organization that receives grant funds and does not include particular program costs. Those are for activities or services that benefit more than one project. Their precise benefits to a specific project are often difficult or impossible to trace.
Indirect Cost Rates are handled at a federal level with the US Department of Education (DOE). Additional information can be found on the DOE's Guidance for Establishing an Indirect Cost Rate.
Sub-grantees must choose option A, B or option C, based on their applicable allowance for indirect costs, and provide proper justification for expenses in the grant application.
Option A - Federally Approved Indirect Cost Rate: If your organization has an approved indirect cost rate agreement in place, you must use that rate for this grant. If your site is associated with a district, there is likely an indirect cost rate already established. Please consult your district's fiscal administrator for more information, and select Option A in your application.
Option B - If the organization has not had an Indirect Cost rate agreement: The Subgrantee may charge the 10% provisional rate for up to 90 days and must submit an indirect cost proposal to the Arizona Department of Education within 90 days after the grant award is issued and, if it does so, may continue charging the 10 percent provisional rate until the cognizant agency has provided the Sub-grantee with a negotiated indirect cost rate; and if after the 90-day period, the Sub-grantee has not submitted an indirect cost proposal to the Arizona Department of Education, the Sub-grantee may not charge its grant for indirect costs until it has negotiated an indirect cost rate agreement with the Arizona Department of Education. If your program plans to apply for an indirect cost rate, select Option B and refer to the Grants Management Indirect Cost Rate Quick Reference Guide for further instructions.
Option C - Direct Charge: With proper justification, Subgrantee may include an allocation for administrative costs up to 5% of the total funds requested. Administrative costs may include: cost of auditing, accounting, financial, payroll, salaries and benefits of the program director and other administrative staff not attributable to the time spent in support of a specific program. Select Option C if your program does not currently have an indirect cost rate and does not plan to apply for one.