One of the most significant changes within the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards is the change in the requirements related to indirect costs in Section 2 CFR 200.414. Recipients of federal awards that currently have a negotiated indirect cost rate now have a requirement that this rate must be accepted by all federal awarding agencies unless otherwise required by federal statute or regulation, or when approved based on documented justification as defined in Section 200.414(c)(3). The various methods of rate determination are contained in Appendix III to Part 200.
Non-federal entities that currently have a federally negotiated indirect cost rate may apply for a one-time extension of that rate for a period of up to four years. The request will be reviewed by the cognizant agency for indirect costs. If the extension is granted, another rate review cannot be requested until the extension period ends. When the extension period ends, the entity must reapply to negotiate a rate. Non-federal entities that have never received a negotiated rate may elect to charge a de minimis rate of 10% of modified total direct costs. Modified total direct costs are defined in Section 200.68. The de minimus rate may be used indefinitely and must be applied consistently for all federal awards until such time that the entity chooses to negotiate a rate. The entity may apply to negotiate a rate at any time.
Rates that subrecipients have negotiated with federal agencies are also applicable to pass-through entities. If no such rate exists, the pass-through entity is required to negotiate a rate with the subrecipient, or use the de minimis rate.
For entities that have never had a negotiated rate, an analysis of the implications of applying the de minimis rate would be helpful in determining if rate negotiation would be more beneficial. The changes to the indirect cost rates for federal awards could also have a significant impact on an entity’s grant budgets. While the change in the indirect cost rate will not result in additional funding, it will change the allocation of funds and allow organizations to more fully recover their administrative costs. These administrative costs would otherwise need to be subsidized by additional means. The result is that these extra funds can be made available for other purposes.
You’ve heard our thoughts… We’d like to hear yours
The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].
Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.
This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.