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

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
8 Separate OMB Circulars
2 Administrative Requirements
--A-102, A110
3 Cost Principles
-- A-21, A87, A-122
2 Audit Requirements
-- A-133, A-50
1 Circular covering the CFDA catalog
-- A-89
Application & Standards
1 Regulation
--2 CFR 200
Applies to most entity types
(However, agencies must specifically adopt 2 CFR 200 to for-profit entities, foreign public entities and foreign organizations)

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 (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 (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 (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 request to the mailbox at 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.

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

21. 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 (f) - a non-Federal entity may choose to negotiate for a rate … “which the non-Federal entity may apply to do at any time”

22. 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

23. 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 (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).

24. 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).

25. 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.

26. ABC Company Schedule of Federal Awards
Grant/Agency
Award Period
Award Amount
USDA - OAO
1/1/2015 – 12/31/2015
$130,000
USDA- NIFA
$100,000
DOJ
$210,000
HHS
$290,000
HUD
$80,000

27. ABC Company Schedule of Federal Awards
Grant/Agency
Award Period
Award Amount
USDA - OAO
1/1/2015 – 12/31/2015
$175,000
USDA- NIFA
$199,999
DOJ
$195,000
HHS
$209,000
HUD
$150,000

28. 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…”

29. 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
All guidance for preparing a complete ICP package is identified on our indirect cost webpage located at: 
A description of the IDC process
Accounting system requirements
IDC requirements for Non-profit & For-profit grantees
Webinars
FAQs

30. 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).

31. Indirect Costs and the Uniform Guidance: Options and Responsibilities of Recipients and Subrecipients

32. 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.

33. Options for Obtaining Indirect Cost Reimbursement: Recipients and Subrecipients Option 1 – 10% De Minimis Rate
The recipient can approve subrecipients’ use of the 10% de minimis rate.
2 CFR (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.

36. Options for Obtaining Indirect Cost Reimbursement: Recipients and Subrecipients Option 2 – A Federally Negotiated Rate
The recipient must accept subrecipients’ federally negotiated indirect cost rates.
2 CFR (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…”

37. Options for Obtaining Indirect Cost Reimbursement: Recipients and Subrecipients Option 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 (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…”

38. Options for Obtaining Indirect Cost Reimbursement: Recipients and Subrecipients Option 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…”

39. Options for Obtaining Indirect Cost Reimbursement: Recipients and Subrecipients Option 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

40. Hot Topics Can a foreign subrecipient obtain a 10% de minimis rate?
2 CFR (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.”

41. Resources
Resources:
NEW! Indirect Cost Caps – Frequently Asked Questions at:
Indirect Costs – Frequently Asked Questions at:
IDC webpage,
OMB’s FAQ’s –

42. Questions?

43. 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

44. 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

45. 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

46. 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

47. 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)

48. 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

49. 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

50. 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

51. The Uniform Guidance (Indirect Cost Q&A)
Under the Uniform Guidance, is a recipient required to negotiate an indirect cost rate with its subrecipients?
Yes No

52. Thank you!

53. Contact Information
Jack Goldberg Edward Nwaba