Introduction to Indirect Costs Claiming Your “Fair Share” Presented by: Alan Tiano, GPC, CGMS Broward County Grants Administrator Please set your phones to meeting mode. I understand it’s hard to disconnect for a couple of hours and would appreciate your efforts to stay focused on the class. I also acknowledge that during business hours, people may need your input and I support you taking a moment to respond to any emergencies that may arise in your office.  You all face many challenges as you manage your programs and budgets. Funds are always tight and advanced planning is a necessity. For federal and some state grants, regulations are changing.

Define Direct vs Indirect Modified Total Direct Costs Class Objectives Define Direct vs Indirect Modified Total Direct Costs Objectives of Indirect Cost Regulations Submitting an Indirect Cost Proposal Requirements for pass-through entities (Sub Awards) Unrecovered Indirect Costs • Identify the opportunities and options available to collect these costs (There is more than one way to collect. Let us discuss the options!) Learn how to accurately compute IDC (Now that I have the components, how do I come up with the magic number?) Make the distinction between Direct and IDC. (Be careful not to confuse these two!) • Know the regulations that govern the collection of IDC (There are opportunities and pitfalls in the new regulations) • Define Modified Total Direct Costs (What is THIS?)

Administrative Costs (Direct) vs Indirect Costs Direct costs are those costs that can be identified specifically with a particular final cost objective, or that can be directly assigned to such activities relatively easily with a high degree of accuracy What are indirect costs? (It’s easier if we identify direct costs first.)

Application to Federal awards: Direct Costs can be Identified with the Federal award, rather than the nature of the goods and services involved, is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards

Common or Joint Objectives Necessary to run the organization §200.414 Indirect (F&A) costs. Organizational Costs Common or Joint Objectives Necessary to run the organization Can’t identify with a project or program NOT READILY IDENTIFIABLE WITH THE PROGRAM/PROJECT organizational costs that are incurred for common or joint objectives necessary to operate the organization. They are not readily identifiable with a particular project or program. WHAT DO YOU THINK ARE SOME EXAMPLES OF THESE KINDS OF EXPENSES?

Indirect Costs pay for facilities and services that make it possible for you to do your work Executive Offices Attorney’s Office Budget Office Facilities Maintenance Finance and Accounting Records Dept IT Services Purchasing Division Human Resources Security Auditor’s Office How many clients would you be able to serve if we didn't have these services?

In 2014 Congress released new regulations for federal grants. PART 200—UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS (UGG) It streamlines and consolidates government requirements for receiving and using federal awards so as to reduce administrative burden and improve outcomes. Included in this law are new rules and guidelines for indirect costs. PART 200—UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS It was published in the Federal Register (79 Fed. Reg. 75871) on December 19, 2014, and became effective for new and continuation awards issued on or after December 26, 2014

Objectives of Indirect Cost Regulations Feds bear “fair share” of costs Provide guidelines for organizations concerning reimbursement requirements Provide uniform standards of allowability and allocation Simplify intergovernmental relations The feds have realized that the grantees are helping to achieve mission and goals and should contribute to the expenses of delivering the services. Shouldn’t the Federal Government pay it share of our indirect costs in order for us to deliver the services it needs to fulfill it’s mission?

Submitting an Indirect Cost Proposal The governmental unit desiring to claim indirect costs under Federal awards must prepare an indirect cost rate proposal and related documentation to support those costs. A governmental agency that receives more than $35 million in direct Federal funding must submit its indirect cost rate proposal to its cognizant agency for indirect costs.

What is a Cognizant Agency? To simplify relations between Federal grantees and awarding agencies, OMB established the cognizant agency concept, under which a single agency represents all others in dealing with grantees in common areas. The cognizant Federal agency is generally the agency that provides the largest amount of direct Federal funds to the organization. Discuss the difference between Cognizant Agency for indirect costs or Cognitive Agency for audits.

2017 Indirect Cost Rate Agreement Indirect costs are normally charged to Federal awards by the use of an indirect cost rate Include signed agreement with contracts If you are requesting indirect costs from the funding agency you must now attach the signed version of your Federally Approved Indirect Cost Rate Agreement The negotiated rates must be accepted by all Federal awarding agencies. Discuss Approved Rate Agreement What is our rate?

Submitting a Grant application with indirect costs NOFO must disclose Funding Restrictions – Notices if there are any limits on indirect costs (or facilities and administrative costs). Submit copy of signed IDC Rate Agreement Required. Notices must include information on funding restrictions in order to allow an applicant to develop an application and budget consistent with program requirements.

How Do You Compute Indirect Costs for a project/program? Amount of Grant X Federally approved Indirect Cost Rate = Indirect Costs WRONG!

How Do You Compute Indirect Costs for a project/program? Modified Total Direct Costs (MTDC) X Federally approved Indirect Cost Rate = Indirect Costs Indirect Costs are not calculated on the total program budget. They must be calculated by using the Modified Total Direct Cost X Indirect Rate

§200.68 Modified Total Direct Cost (MTDC) MTDC includes all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each sub award

Exclusions MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000.

What’s Included in MTDC ? Included in MTDC Calculation Excluded from MTDC Calculation Salaries and Wages Equipment Fringe Benefits Capital Expenditures Materials and Supplies Tuition Remission Services Rental Costs The portion of each subaward up to $25,000 The portion of each subaward in excess of $25,000 Travel Scholarships and Fellowships   Participant Support Costs

§200.331(4) Requirements for pass-through entities (Subrecipients) An approved federally recognized indirect cost rate negotiated between the subrecipients and the Federal Government or, if no such rate exists, either a rate negotiated between the pass- through entity and the subrecipient (in compliance with this part), or a de minimis indirect cost rate We must honor the indirect cost rates from each subawardee, if requested.

De minimis Indirect Cost Rate 10%

Either their approved rate or de minimis rate MUST be honored* *Only if they ask The Feds don’t pay recipients IDC unless they include it in their budgets (ask) The Awardee does not have to include IDC in subaward budgets.

Can you collect Indirect Costs on Matching/Cost Share Funds? The definitive answer? It depends

Unrecovered Indirect Costs Unrecovered indirect costs, including indirect costs on cost sharing or matching, may be included as part of cost sharing or matching with the prior approval of the Federal awarding agency.

QUESTIONS?