1. Maximizing the De Minimis Rate
NACCA - Leading Excellence in Research Costing Practices
General Conference: 10/3 – 10/5, 2017

2. Presenters Carrie Hurney (Moderator) Andres Chan Mike Legrand
Senior Director
Huron Consulting Group
Andres Chan
Director, Financial Analysis
University of Southern California
Mike Legrand
Director, Costing Policy and Analysis
University of California Davis

3. Agenda De Minimis Defined Considerations for De Minimis Rate
Negotiating Rates with Subs
Sample Calculation
Panelist Discussion
FAQ Updates
Agency Guidance
Questions/Comments

4. De Minimis (According to Webster)
“too trivial or minor to merit consideration…”
“lacking significance or importance…” 
synonyms:
chicken, negligible, footling, inconsequential, inconsiderable, insignificant, measly, minute, niggling, no-account, nominal, paltry, peanut, petty, picayune, piddling, piffling, pimping, slight, trifling, Mickey Mouse

5. Uniform Guidance Says…
§  (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. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate…

6. Applying the De Minimis Rate Important Considerations
Meant for entities who have never negotiated an indirect cost rate
If sub already charging all costs directly, cannot apply 10% on top of it
Supporting documentation not required

7. Negotiating Rates with Subs Important Considerations
The prime recipient is responsible for setting rates with subrecipients
Follows same procedures as a prime would in negotiating rates with their cognizant agency
Rate must be supported and subject to audit
Must negotiate the time period (annually? Project period?)

8. Negotiating Rates with Subs Approach
Follow simplified rate calculation process
Data Needs
Financial report
Expense detail
Groupings between direct and indirect costs
Exclusions, Unallowable costs identified

9. Less: Exclusions & Unallowables
Non-Profit Example
Cost Category
Total Costs All Funds
Less: Exclusions & Unallowables
Indirect Costs
Total Direct Costs
Federal Program
Non-Federal Programs
Salaries
1,314,000
373,250
940,750
141,000
799,750
Fringe Benefits
352,000
99,988
252,012
37,772
214,240
Consultant Services
26,000
14,000
12,000
1,800
10,200
Staff Travel
94,000
20,000
74,000
11,100
62,900
Bad Debts
10,000
10,000 (1)
Office Rent
170,000
150,000
22,500
127,500
Consumable Supplies
161,000
11,000
68,000
57,800
Subcontracts
175,000
107,000 (2)
Lease, Purchase Equipment
82,000
22,100 (2)
59,900
Telephone
109,400
55,000
54,400
8,200
46,200
Entertainment
1,800 (1)
Printing & Reproduction
48,000
37,000
5,500
31,500
Insurance and Bonding
42,000
Fundraising
120,000
Postage and Delivery
34,000
5,100
28,900
4,300
24,600
Depreciation
28,800
8,800
3,000
17,000
Allowances
148,000
148,000 (2)
Emergency Assistance
54,000
54,000 (2)
Training Materials
12,300
69,700
Participant Support Costs
36,000
36,000 (2)
Total Costs
3,088,000
378,900
870,038
1,839,062
257,672
1,581,390
Indirect Rate            
( c )
47.31%
( d )

10. Questions for Panelists
Who is responsible for negotiating rates at your institution?
What is the volume of rates that you are negotiating each year?
What is your approach for reviewing and setting the rates?
Challenges?

11. FAQ Updates
Indirect Cost Rates and Entities Who Do Not Have Indirect Costs
“…Not all entities charge indirect cost rates. Will they now be forced to establish such rates?”
No. Non-Federal entities that are able to allocate and charge 100% of their costs directly may continue to do so. Claiming reimbursement for indirect costs is never mandatory; a non-Federal entity may conclude that the amount it would recover thereby would be immaterial and not worth the effort needed to obtain it.

12. FAQ Updates
Pass-through Entities and Indirect Cost Rate Negotiation
“…Is it acceptable to require a subrecipient to accept a rate lower than 10% MTDC via negotiation, or in lieu of their negotiated F&A rate? If a subrecipient requests to establish a rate via negotiation, does the pass-through entity have to establish the rate via negotiation?”
If the subrecipient already has a negotiated F&A rate with the Federal government, the negotiated rate must be used. It also is not permissible for pass-through entities to force or entice a proposed subrecipient without a negotiated rate to accept less than the de minimis rate…Pass-through entities may, but are not required, to negotiate a rate with a proposed subrecipient who asks to do so.

13. FAQ Updates
Pass-Through Entities That Have Previously Paid Indirect Costs *
“Can a pass-through entity that paid actual or negotiated indirect costs to a subrecipient prior to the Uniform Guidance now impose the 10 percent de minimis rate on that same subrecipient?”
No…If a pass-through entity paid negotiated or actual indirect costs to a specific subrecipient in the past, they should continue to negotiate and award indirect costs to that subrecipient in accordance with their prior practice… If the pass-through entity negotiated an approved indirect cost rate with its subrecipient in the past, a de minimis rate cannot be applied.

14. FAQ Updates .414-9 De Minimis Rate and Breaks in Federal Relationship
“Our organization previously had a negotiated indirect cost rate. However, all federal awards expired causing a break in our relationship with the federal government. During the break in relationship our negotiated indirectcost rate expired. Our organization has now received a new federal award. Are we eligible to receive the 10percent de minimis rate?”
No. Organizations that experience a break in federal relationship are not eligible to receive the 10 percent de minimis rate upon receipt of a new award…It is expected that organizations that have experience developing and negotiating rates have adequate resources to develop a new indirect rates.

15. FAQ Updates .414-10 De Minimis Rate and Period of Applicability
“If an organization elects the 10 percent de minimis rate at the beginning of an award, is the de minimis rate applicable to the period of performance of the award?”
The de minimis rate may not be applicable during the entire period of performance of an award. A non-Federal entity may use the 10 percent de minimis rate indefinitely until it elects to negotiate an indirect cost rate, which the non-Federal entity may apply to do at any time. Indirect cost rates are generally negotiated based on a nonfederal entity’s fiscal year (not the period of performance of an award)…

16. FAQ Updates
De Minimis Rate and non-Federal entity with Single Function
“Can a non-Federal entity conducting a single function, which is predominately funded by Federal awards elect to charge the 10% de minimis rate if they currently charge all costs as direct costs to Federal programs?”
No, the 10% de minimis rate must only be used to pay for overhead costs that are not directly charged to Federal awards. If all costs are charged directly to the Federal award (e.g., space costs, utility and administrative costs) then the recipient should not also charge the 10% de minimis rate. As described in 2 CFR section , costs must be consistently charged as either indirect or direct cost, but may not be doubled charged or inconsistently charged as both.

17. FAQ Updates
Providing Proof of Indirect Costs for De Minimis Rate *
“Does a non-Federal entity that uses the 10 percent de minimis indirect cost rate need to provide documentation to prove that its indirect costs are at least 10 percent of its organization’s modified total direct costs?”
No. A non-Federal entity that has never received a negotiated indirect cost rate and that uses the 10 percent de minimis rate does not need to provide proof of its indirect costs. The 10 percent de minimis rate was designed to reduce burden for small non-Federal entities... The non-Federal entity has to report in its SEFA whether it has elected to use the 10% de minimis rate for its Federal programs (see § (b)(6)).

18. FAQ Updates .414-13 Is the De Minimis rate the de facto rate?
“Many pass-through entities are willing to pay only the 10 percent of modified total direct costs (MTDC) to subrecipients. Is the 10 percent de minimis rate meant to be the de facto indirect cost rate?”
No. The 10 percent de minimis rate is not meant to be the de facto indirect cost rate...Pass-through entities must recognize:
1) An approved federally recognized indirect cost rate negotiated between the subrecipient and the federal government or,
2) If no such rate exists, either a rate negotiated between the pass-through entity and the subrecipient or the 10 percent de minimis rate.

19. Agency Guidance
U.S. Department of Health and Human Services:
National Science Foundation:
U. S. Department of Education:
U.S. Department of Labor:
U.S. Department of the Interior:
U.S. Department of Agriculture: National Institute of Food and Agriculture (NIFA):
USAID:

20. Contact Information
Carrie Hurney
Andres Chan
Mike Legrand

21. Questions/Comments?
Thank you!