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Overview
The Uniform Guidance allows any non-Federal entity (NFE) that has never received a negotiated indirect cost rate to charge a de minimis rate of 10% of modified total direct costs (MTDC), which the NFE may be use indefinitely as a Federally-negotiated rate. This option for NFE recovery of proper indirect costs incurred during work under Federal awards removes administrative barriers smaller organizations previously faced receiving and implementing Federal financial assistance. With the introduction of the de minimis rate, these organizations can now charge allowable costs which indirectly support the direct work on the Federally-funded project(s) that were previously unavailable to them because of the large administrative burden associated with the negotiation process.
10% De Minimis Indirect Cost Rate
Guidance
2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
§200.412 Classification of costs.
There is no universal rule for classifying certain costs as either direct or indirect (F&A) under every accounting system. A cost may be direct with respect to some specific service or function, but indirect with respect to the Federal award or other final cost objective. Therefore, it is essential that each item of cost incurred for the same purpose be treated consistently in like circumstances either as a direct or an indirect (F&A) cost in order to avoid possible double-charging of Federal awards. Guidelines for determining direct and indirect (F&A) costs charged to Federal awards are provided in this subpart.
[78 FR 78608, Dec. 26, 2013]
2 CFR 200.414 Indirect (F&A) costs.
(e) Requirements for development and submission of indirect (F&A) costs rate proposals and cost allocation plans are contained Appendices III-VII and Appendix IX as follows:
(1) Appendix III to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs);
(2) Appendix IV to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations;
(3) Appendix V to Part 200—State/Local Government and Indian Tribe-Wide Central Service Cost Allocation Plans;
(4) Appendix VI to Part 200—Public Assistance Cost Allocation Plans ;
(5) Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost Proposals; and
(6) Appendix IX to Part 200—Hospital Cost Principles.
(f) In addition to the procedures outlined in the appendices in paragraph (e) of this section, any non-Federal entity that has never received a negotiated indirect cost rate, except for those non-Federal entities described in Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost Proposals, paragraph D.1.b, may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely. As described in §200.403 Factors affecting allowability of costs, costs must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time.
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Appendix VII to 2 CFR Part 200 (D)(1)(b) Submission and Documentation of Proposals
A governmental department or agency unit that receives more than $35 million in direct Federal funding must submit its indirect cost rate proposal to its cognizant agency for indirect costs. Other governmental department or agency must develop an indirect cost proposal in accordance with the requirements of this Part and maintain the proposal and related supporting documentation for audit. These governmental departments or agencies are not required to submit their proposals unless they are specifically requested to do so by the cognizant agency for indirect costs. Where a non-Federal entity only receives funds as a subrecipient, the pass-through entity will be responsible for negotiating and/or monitoring the subrecipient's indirect costs.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75889, Dec. 19, 2014]
10% De Minimis Indirect Cost Rate
Frequently Asked Questions
Are State fish and wildlife agencies eligible to charge the 10% de minimis rate for indirect?
Yes. As long as the State fish and wildlife agency has never had an indirect cost rate approved by its cognizant Federal agency and it meets the requirements established under Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost Proposals.
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Non-Federal entities that have previously had an approved indirect cost rate are not eligible to use the 10% de minimis rate. Additionally, 2 CFR 200 Appendix VII (D) outlines two basic groups of entities that are not allowed to charge the 10% de minimis rate for indirect:
(1) A governmental department or agency unit that annually receives more than $35 million in direct Federal funding must submit its indirect cost rate proposal to its cognizant agency for indirect costs; or
(2) Those governmental departments or agency units that are not required to submit their indirect cost rate proposals to their cognizant agency for indirect costs. Such entities must still develop an indirect cost proposal in accordance with the requirements under 2 CFR 200 and maintain the proposal and related supporting documentation for audit. Examples of such departments or agencies are those whose cognizant federal agency is Health and Human Services (HHS). In some situations, HHS may allow a governmental department or agency to develop their indirect cost rate proposal, but not require them to submit it for approval. The reason for this is that HHS does not have the resources or capacity to review and approve all the indirect cost rate proposals from all of its different grantees. In these cases, the governmental department or agency must still develop and document their indirect cost rate and be able to provide it to auditors if needed.
Do FEMA funds count towards the $35 million annual Federal funding criteria for using the 10% de minimis rate?
Yes. FEMA funds are considered Federal funds.
How do I determine if my State fish and wildlife agency has ever had an approved indirect cost rate?
Typically the budget office would have record of the State fish and wildlife agencies approved indirect cost rate. If not, the State fish and wildlife agency could consult with the WSFR Regional Office. Additionally, the Interior Business Center would also be able to inform the State fish and wildlife agency if they have ever had an approved indirect cost rate.
What type of indirect base can you apply the 10% de minimis towards?
2 CFR 200.414(f) states that an eligible non-Federal entity who elects to charge the 10% de minimis may only apply the rate to Modified Total Direct Costs (MTDC). The MTDC as a base removes "distorting items" (i.e. capital expenditures, contracts, and subgrants). Non-Federal entities are allowed to charge the 10% de minimis to the first $25,000 of its subgrants and contracts.
10% De Minimis Indirect Cost Rate
Learning Aids
10% De Minimis Indirect Cost Rate
Related Pages
10% De Minimis Indirect Cost Rate
Resources
10% De Minimis Indirect Cost Rate
References
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