What are Indirect Costs?
Per 2 CFR §200.56, Indirect costs are:
- Incurred for a common or joint purpose, benefiting more than one cost objective
- Not readily assignable to the cost objectives specifically benefited, without effort disproportionate to the results achieved
What are Direct Costs?
Per 2 CFR §200.413, Direct costs are “those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect (Facilities and Administration F&A) costs.”
What are Disallowed Costs?
2 CFR §200.31 and OMB circular A-87 classifies certain items of cost as disallowed, which means that the federal funds cannot be used for these purposes.These costs are directly attributable to governance. However, for rate computational purposes, these disallowed costs should be included in the base for allocation, along with direct costs if they generated or benefited from allowable indirect cost. Examples include: bad debts, contingencies, entertainment, fines and penalties, governance, and contributions and donations to outside organizations.
What Costs should be Excluded when calculating Indirect Cost Rate?
34 CFR 76.567 describes expenditures that are “extraordinary or distorting and to be excluded” as:
-
- Capital outlay
- Debt service
- Judgments against the school district
- Certain transfers and internal-service fund expenditures
- General management costs determined under 34 CFR §76.565
- Fixed costs determined under 34 CFR §76.566
- Subgrants
- Contingencies
- Election expenses
What is the difference between Restricted Rate & Unrestricted Rate?
For grants made under federal programs with supplement and in no case supplant requirements, the restricted rate applies. The funds through these grants are intended to supplement, but in no way replace, local funds. Typically, restricted grants include only indirect costs consisting of general management costs and fixed charges. The unrestricted rates apply to grants not subject to the supplement but not supplant legislative restriction.
How does an LEA or entity negotiate an Indirect Cost Rate?
In order to negotiate an Indirect Cost Rate, log into the Grants Management Enterprise (GME) via ADEConnect (it is the Grants Management link under your parent organization). Once in GME and you have selected the organization, on the Entity Information page, select the Indirect Cost link and complete the required section (Data Sheet). For additional guidance on negotiating an Indirect Cost Rate, please refer to the
Indirect Cost PowerPoint.
What if an entity that is not an LEA and has a federally negotiated Indirect Cost Rate; what does the entity do?
A copy of the current Federally Negotiated Indirect Cost Rate Agreement must be submitted to Grants Management by emailing
[email protected].
What is the maximum Indirect Cost Rate an LEA or entity can receive?
- Unrestricted: 25%
- Restricted: 12%
Can an LEA or entity have Indirect Cost on a state grants?
No, Indirect Cost is only allowed on federal grants.
How does an LEA or entity classify the costs for negotiating an Indirect Cost Rate?
All costs are to be classified as Direct, Indirect, Other, Capital, Debt, or Food. Please see District or Charter Guide to use as guidance on how costs may be classified.
How does an LEA or entity recover the Indirect Cost?
To calculate your Indirect Cost Recovery, take the total direct expenditures minus excluded costs and multiply by the Indirect Cost Rate.
