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Indirect Costs and the Impact of the Uniform Guidance

This session discusses the options and responsibilities of federal agencies and recipients regarding indirect costs in grants, as outlined in the Uniform Guidance (2 CFR 200). It covers the definitions of direct and indirect costs, how indirect costs are determined on a grant, and the most common ways indirect costs are calculated on NIFA awards. It also explores the options for obtaining indirect cost reimbursement, including the 10% de minimis rate.

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Indirect Costs and the Impact of the Uniform Guidance

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  1. Indirect Costs and the Impact of the Uniform Guidance (2 CFR 200):Options and Responsibilities of Federal Agencies and Recipients Edward NwabaAwards Management Division, Directorand Jack Goldberg, Branch ChiefPolicy and Oversight Division Session 45 April 26, 2017

  2. Topics Indirect Costs in Grants: • Definitions – Direct vs. Indirect costs • Discuss what determines the indirect costs on a grant • Most common ways indirect costs are calculated on NIFA awards Indirect Costs and the Uniform Guidance: • Indirect Cost Options and Responsibilities of Federal Agencies and Recipients under 2 CFR 200

  3. Indirect Costs in Grants

  4. What are Direct Costs? • Direct Costs – Expenditures that are easily quantifiable to a specific project: • Direct salaries and wages (PI’s, Post Docs, Grad. Students, etc.) • Materials and Supplies • Travel • Consultants • Subcontracts • Equipment

  5. What are Indirect Costs? • Indirect Costs – Expenditures that are not easily identified with a specific project: • Rent • Utilities • Executive Salaries • Admin. Personnel (accounting, payroll, purchasing, etc.)

  6. What determines total IDC on a Grant? • Total Indirect Costs allowed on a grant is determined by the program authority (AFRI, Community Foods, CYFAR, etc.) • The IDC info can be found in the Request for Applications (RFA of said program) / Notice of Funding Opportunity (NOFO) DHS

  7. Most Common Ways Indirect Costs are Calculated on NIFA Awards (Three Categories) 1) No Indirect Costs Allowed 2) A capped rate 3) The Approved Negotiated IDC/F&A Rate

  8. Most Common Ways Indirect Costs are Calculated on NIFA Awards (Three Categories) – contd. 1) No Indirect Costs Allowed *(Examples of these programs include Capacity/Formula Grants, CYFAR, and Fellowship Awards)

  9. Most Common Ways Indirect Costs are Calculated on NIFA Awards (Three Categories) – contd. 2) A capped rate a. The Lesser of Either 30% of the Total Award Amount or the Approved Negotiated Rate *(This ceiling was enacted in 2012 and applies to majority of NIFA awards) b. The Lesser of Either 22% of the Total Award Amount or the Approved Negotiated Rate *(This ceiling applies to awards from FY 2011 back to FY 2007 and all awards issued under the 2008 Farm Bill)

  10. Most Common Ways Indirect Costs are Calculated on NIFA Awards (Three Categories) – contd. 3) The Approved Negotiated IDC/F&A Rate • An approved negotiated rate is an indirect cost rate that a grantee has negotiated with a cognizant federal agency that applies to all of their federal awards. • Many federal agencies negotiate rates. • For IHE’s, F&A rates default to HHS and DOD-ONR • For nonprofits and for-profits rates default to major funder and are performed by many agencies • NIFA began negotiating IDC rates in FY 2012 • For-profits and non-profits

  11. Indirect Costs and the Uniform Guidance: Indirect Cost Options and Responsibilities Under the Uniform Guidance (2 CFR 200) Federal Agencies and Recipients

  12. Before Uniform Guidance Types of OMB Circulars Uniform Guidance

  13. Options for Obtaining Indirect Cost Reimbursement • Option 1: Elect a 10% de minimis indirect cost rate. • Option 2: Negotiate an indirect cost rate.

  14. Options for Obtaining Indirect Cost Reimbursement: Option 1 – 10% De Minimis Rate • This is a new option for obtaining indirect cost recovery beginning December 26, 2014. • Eligibility: Recipients of Federal awards that have never before received a Negotiated Indirect Cost Rate Agreement (NICRA). • 2 CFR 200.414(f) “any non-Federal entity that has never received a negotiated indirect cost rate … may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely…”

  15. Options for Obtaining Indirect Cost Reimbursement: Option 1 – 10% De Minimis Rate (cont.) • Applicability: The 10% de minimis is applied to Modified Total Direct Costs (MTDC). • 2 CFR 200.414(f) “…may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) ...” • MTDC means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). • Requirement: Must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate. • 2 CFR 200.414(f) “…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.”

  16. Options for Obtaining Indirect Cost Reimbursement: Option 1 – 10% De Minimis Rate (cont.) • How to elect a 10% de minimis rate? • Grantee must submit an email request to the mailbox at electronic@nifa.usda.gov. The mailbox is managed by the OIT- Information, Policy, Planning, and Training Division. • The OIT office forwards the request to the Oversight Branch (OB).

  17. Options for Obtaining Indirect Cost Reimbursement: Option 1 – 10% De Minimis Rate (cont.) • OB reviews organizations’ elections and issues a 10% de minimis indirect cost rate to each eligible organization. • OB developed a template to document organizations’ election of the 10% de minimis rate. • OCFO has adopted our template into official department regulation for use by all USDA agencies.

  18. Options for Obtaining Indirect Cost Reimbursement: Option 1 – 10% De Minimis Rate (cont.) • In FY 2016, OB issued 83 de minimis rates.

  19. Options for Obtaining Indirect Cost Reimbursement: Option 2 – A Negotiated Indirect Cost Rate • To recover indirect costs in excess of the 10% de minimis rate, organizations may request a negotiated rate. • 2 CFR 200.414 (f) - a non-Federal entity may choose to negotiate for a rate … “which the non-Federal entity may apply to do at any time”

  20. Options for Obtaining Indirect Cost Reimbursement: Option 2 – A Negotiated Indirect Cost Rate (cont.) • The cognizant agency is responsible to negotiate a rate. • 2 CFR 200 Appendix IV, (C) (2) (a) “… the Federal agency with the largest dollar value of Federal awards with an organization will be designated as the cognizant agency for indirect costs for the negotiation and approval of the indirect cost rates.” • NIFA is not the cognizant agency • NIFA is the cognizant agency

  21. Options for Obtaining Indirect Cost Reimbursement: Option 2 – A Negotiated Indirect Cost Rate (cont.) NIFA is not the cognizant agency • Organizations that already possess a Negotiated Indirect Cost Rate Agreement (NICRA) from their cognizant federal agency may budget for full indirect cost recovery using the rates approved in the NICRA, subject to programmatic or statutory limitations. Organizations should submit a copy of the NICRA directly to their grants specialist in support of budgeted indirect costs. • Exception: • Programmatic or statutory limitations - 2 CFR 200.414(c) (1) “a Federal awarding agency may use a rate different from the negotiated rate … when required by Federal statute or regulation, or when approved by a Federal awarding agency head or delegate …” • NIFA’s SBIR Program (IR&D and commercialization costs are unallowable) • In FY 2016, OB reviewed 14 NICRAs issued by other agencies for IR&D and commercialization costs. OB adjusted 9 NICRAs (impact = $357,507).

  22. Options for Obtaining Indirect Cost Reimbursement: Option 2 – A Negotiated Indirect Cost Rate (cont.) NIFA is not the cognizant agency (cont.) • If a grantee is unable to obtain a Negotiated Indirect Cost Rate Agreement (NICRA) from its cognizant federal agency, that grantee will be directed to elevate the matter up the hierarchy of the cognizant agency until a NICRA is obtained; or select the 10% de minimis rate option (i.e., if they have never had a NICRA).

  23. Options for Obtaining Indirect Cost Reimbursement: Option 2 – A Negotiated Indirect Cost Rate (cont.) NIFA is the cognizant agency • When a grantee elects to negotiate, NIFA must first determine if it is the cognizant Federal agency responsible to establish indirect cost rates. Grantees are asked to prepare and submit a schedule of Federal funding received (grants and contracts). • The list should identify: (a) Federal agency; (b) type of award (grant or contract); (c) whether the organization is the recipient or a subrecipient; (d) award amount; (e) effective period; (f) whether the award is current or pending; and (g) whether the award is fixed-price or cost reimbursable. • If NIFA is a grantee’s largest source of Federal funding, NIFA will issue a NICRA as the grantee’s cognizant agency.

  24. ABC CompanySchedule of Federal Awards

  25. ABC CompanySchedule of Federal Awards

  26. Options for Obtaining Indirect Cost Reimbursement: Option 2 – A Negotiated Indirect Cost Rate (cont.) • NIFA is the cognizant agency (cont.) • If NIFA is the cognizant federal agency, NIFA is responsible to establish negotiated indirect cost rates. • 2 CFR 200 Appendix IV(c)(2) “…the Federal agency with the largest dollar value of Federal awards with an organization will be designated as the cognizant agency for indirect costs for the negotiation and approval of the indirect cost rates…”

  27. Options for Obtaining Indirect Cost Reimbursement: Option 2 – A Negotiated Indirect Cost Rate (cont.) • If NIFA is cognizant, our office will notify the organization to submit a complete Indirect Cost Proposal (ICP) package to RecipientsICPs@nifa.usda.gov. • All guidance for preparing a complete ICP package is identified on our indirect cost webpage located at: http://nifa.usda.gov/indirect-costs.  • A description of the IDC process • Accounting system requirements • IDC requirements for Non-profit & For-profit grantees • Webinars • FAQs

  28. Options for Obtaining Indirect Cost Reimbursement: Option 2 – A Negotiated Indirect Cost Rate (cont.) The process for establishing a NICRA can take up to six months (180 days) from the time OB receives the Indirect Cost Proposal (ICP). OB started early outreach to improve the turn around time. OB monitors award expiration dates and advises grantees to request no-cost extensions, when necessary (e.g., SBIR Phase I awards have short durations) In FY 2016, OB negotiated 23 indirect rates (impact = $611,584).

  29. Indirect Costs and theUniform Guidance:Options and Responsibilities of Recipients and Subrecipients

  30. Options for Obtaining Indirect Cost Reimbursement:Recipients and Subrecipients • Option 1: Elect a 10% de minimis indirect cost rate. • Option 2: Provide a federally negotiated rate (i.e., NICRA) • Option 3: Establish a non-federal rate.

  31. Options for Obtaining Indirect Cost Reimbursement: Recipients and SubrecipientsOption 1 – 10% De Minimis Rate • The recipient can approve subrecipients’ use of the 10% de minimis rate. • 2 CFR 200.331(a)(4) “All pass-through entities must … approve federally recognized indirect cost rates negotiated between the subrecipient 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…” • OB developed a subrecipient de minimis template.

  32. Options for Obtaining Indirect Cost Reimbursement: Recipients and SubrecipientsOption 2 – A Federally Negotiated Rate • The recipient must accept subrecipients’ federally negotiated indirect cost rates. • 2 CFR 200.331(a)(4) “All pass-through entities must … approve federally recognized indirect cost rates negotiated between the subrecipient 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…”

  33. Options for Obtaining Indirect Cost Reimbursement: Recipients and SubrecipientsOption 3 – Establish a Negotiated Rate • The recipient can negotiate a non-federal indirect cost rate with its subrecipients, if they request to, in accordance with the requirements of the Uniform Guidance (2 CFR 200). • 2 CFR 200.331(a)(4) “All pass-through entities must … approve federally recognized indirect cost rates negotiated between the subrecipient 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…”

  34. Options for Obtaining Indirect Cost Reimbursement: Recipients and SubrecipientsOption 3 – Establish a Negotiated Rate (cont.) In compliance with this part… UG(2 CFR 200) requirements: A review of Subrecipients’ indirect cost calculations for allowability, allocability, and reasonableness in accordance with UG (2 CFR 200). 2 CFR Appendix IV (B)(2)(b) “Both the direct costs and the indirect costs must exclude capital expenditures and unallowable costs…”

  35. Options for Obtaining Indirect Cost Reimbursement: Recipients and SubrecipientsOption 3 – Establish a Negotiated Rate (cont.) • The review performed by the recipient should result in a document similar to a NICRA (i.e., rates, effective period, type of rate, applicable base, etc.) • 2 CFR 200 Appendix IV (C)(2)(g) “The results of each negotiation must be formalized in a written agreement…” • 2 CFR 200 Appendix IV (B)(2)(c) There must be a “distribution base” • 2 CFR 200 Appendix IV (B)(1)(e) There must be a “base period” • 2 CFR 200 Appendix IV (C)(1)(b-e) Identify the type of rate

  36. Hot Topics • Can a foreign subrecipient obtain a 10% de minimis rate? • 2 CFR 200.101 (3) (c) “Federal agencies may apply … to for-profit entities, foreign public entities, or foreign organizations, except where the Federal awarding agency determines that the application these subparts would be inconsistent with the international obligations of the United States or the statute or regulations of a foreign government. • Does UG (2 CFR 200) apply to incremental funding after December 26, 2014? • OMB F.A.Q “Once the Uniform Guidance goes into effect for non-Federal entities, it will apply to Federal awards or funding increments after that date, in cases where the Federal agency considers funding increments to be an opportunity to modify the terms and conditions of the Federal award.”

  37. Resources Resources: • NEW! Indirect Cost Caps – Frequently Asked Questions at: https://nifa.usda.gov/resource/indirect-cost-caps-%E2%80%93-frequently-asked-questions • Indirect Costs – Frequently Asked Questions at: https://nifa.usda.gov/resource/indirect-costs-frequently-asked-questions • IDC webpage, https://nifa.usda.gov/indirect-costs • OMB’s FAQ’s – https://cfo.gov/wp-content/uploads/2015/09/9.9.15-Frequently-Asked-Questions.pdf.

  38. Questions?

  39. The Uniform Guidance (Q&A) What date did the Uniform Guidance go into effect? • December 26, 2012 • December 26, 2013 • December 26, 2014 • December 26, 2015

  40. The Uniform Guidance (Indirect Cost Q&A) Under the Uniform Guidance, what does the acronym “NICRA” stand for? • New Interagency Cooperative Rate Agreement (NICRA) • No Indirect Cost Recovery Act (NICRA) • Negotiated Indirect Cost Rate Agreement (NICRA) • None of the above

  41. The Uniform Guidance (Indirect Cost Q&A) What options do grantees have under the Uniform Guidance to collect indirect costs? • Obtain a NICRA from the cognizant agency • Use a 10% De Minimis rate • Waive indirect costs and request only direct costs • All of the Above • None of the above

  42. The Uniform Guidance (Indirect Cost Q&A) The Uniform Guidance allows grantees to forgo the NICRA process and opt for a 10% de minimis indirect cost rate. What one fact must be true of a grantee to be eligible for the 10% de minimis rate? • The grantee must have never received a grant before • The grantee must have never been audited before • The grantee must have never received a NICRA before • The grantee must have never missed filing a FINAL SF- 425 before • None of the above

  43. The Uniform Guidance (Indirect Cost Q&A) The 10% De Minimis Rate must be applied to what types of costs? • Direct salaries and wages • Direct salaries and wages plus fringe benefits • Equipment, subcontracts > $25,000 and participant support costs • Modified Total Direct Costs (MTDC)

  44. The Uniform Guidance (Indirect Cost Q&A) If a grantee opts for the 10% De Minimis Rate, for how long must they use the de minimis rate? • One year • Forever, it was a one-time election • Until they receive a new award • Until they request a NICRA from the cognizant agency • None of the above

  45. The Uniform Guidance (Indirect Cost Q&A) Under the Uniform Guidance, is a recipient required to accept a subrecipient’s NICRA issued by a Federal Agency? • Yes • No

  46. The Uniform Guidance (Indirect Cost Q&A) Under the Uniform Guidance, if a subrecipient requests indirect costs, but does not have a NICRA from a Federal agency, what must the recipient do? • Direct the subrecipient to obtain a NICRA from the cognizant agency and withhold funds in the interim • Deny indirect costs and require the subrecipient to rebudget to direct costs • Negotiate a rate with the subrecipient or approve the 10% de minimis rate • Either a or b

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