This information is intended to facilitate the completion and submission of your indirect cost rate proposal or Cost Allocation Plan. We have designed a series of checklists, forms, samples, and templates to assist you in meeting the ICP or CAP documentation requirements.
Additional support is provided with links to cost principle guidance and frequently asked questions.
Please be sure to include the completeness checklist and required certifications with your ICP or CAP.
This template contains information on:
1. How do I determine which federal agency to turn to for my organization when discussing indirect cost rates?
The cognizant agency for negotiating indirect cost rates shall be the federal agency that provides the majority of the federal funding (per OMB guidance).
Interior Business Center's Indirect Cost Services is the federal cognizant agency designated by OMB to negotiate indirect cost rates for:
Indirect Cost Services also negotiates indirect cost rates, under interagency agreements, on behalf of the following federal agencies that provide the majority of the organization's federal funding:
Department of Agriculture, APHIS
Department of Agriculture, Rural Housing Service
Department of State
Environmental Protection Agency
Institute of Museum and Library Sciences
National Endowment for the Arts
National Endowment for the Humanities
National Science Foundation
2. What is the difference between an indirect cost rate and a cost allocation plan?
An indirect cost rate is a device for determining, in a reasonable manner, the proportion of indirect costs each program should bear. It is the ratio (expressed as a percentage) of the indirect costs to a direct cost base. Indirect costs are grouped into a common pool and then distributed to individual federal awards by the use of the indirect cost rate. Once negotiated by Indirect Cost Services, an indirect cost rate will be accepted and used by all federal agencies unless prohibited by statute - so that an organization can use the negotiated rate for new programs/grants from all federal agencies.
In contrast, a cost allocation plan is a document that explains an organization's methodology in identifying, accumulating, and allocating allowable costs to its all departments and agencies. Some federal agencies still require an approved indirect cost rate even though a CAP has already been approved.
3. Is there a standard format that we should follow to compile the indirect cost proposal (ICP) or cost allocation plan?
Indirect Cost Services has created sample proposal formats, checklists, and templates to assist you in completing the ICP and CAP proposals. Please select the appropriate sample proposal for your type of organization (i.e., nonprofit organization). Although it is not required that you follow our ICP or CAP format, doing so will expedite the review process because our format will contain the information needed to process either the ICP or CAP proposals.
4. What is the $25,000 Subgrant/Subcontract rule applicable to nonprofit organizations?
A nonprofit organization is subject to the $25,000 subaward rule if its distribution base is MTDC or modified total direct costs (2 CFR 230 (Circular A-122), Appendix A, Section D.3.f). The rules state that MTDC includes "Subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract (regardless of the period covered by the subgrant or subcontract)".
Please note that this rule only applies to subawards given out by the nonprofit organization.
5. What is the difference between a Subgrant and a Subcontract?
These definitions were taken from EPA's Uniform Administrative requirements for Grants and Agreements with Institutions of Higher Education, Hospitals and Other Nonprofit Organizations, located at 40 CFR 30.2.
Award: "Financial assistance that provides support or stimulation to accomplish a public purpose. Awards include grants and other agreements in the form of money or property in lieu of money, by the federal Government to an eligible recipient. The term does not include: technical assistance, which provides services instead of money; other assistance in the form of loans, loan guarantees, interest subsidies, or insurance; direct payments of any kind to individuals; and, contracts which are required to be entered into and administered under procurement laws and regulations."
Subaward: "An award of financial assistance in the form of money, or property in lieu of money, made under an award by a recipient to an eligible subrecipient or by a subrecipient to a lower tier subrecipient. The term includes financial assistance when provided by any legal agreement, even if the agreement is called a contract, but does not include procurement of goods and services nor does it include any form of assistance which is excluded from the definition of "award" in §215.2(e)."
Subrecipient: "The legal entity to which a subaward is made and which is accountable to the recipient for the use of the funds provided. The term may include foreign or international organizations (such as agencies of the United Nations) at the discretion of the federal awarding agency."
6. Can nonprofits use fixed carry forward rates?
For nonprofit entities, "A fixed rate shall not be negotiated if all or a substantial portion of the organization's awards are expected to expire before the carry-forward adjustment can be made; the mix of federal and non-federal work at the organization is too erratic to permit an equitable carry-forward adjustment; or the organization's operations fluctuate significantly from year to year." (2 CFR 230, Appendix A, Section E.2.e). As such, Provisional/final type of rate is more appropriate for nonprofit entities.