• If a fellow/entrepreneur has already negotiated indirect costs with the USG. Because it is difficult for a federal agency to determine the indirect costs associated with delivering a program or project. DESCRIPTION – A provisional rate is a temporary rate set for a specified period of time to allow for the financing, assertion and reporting of indirect costs until a permanent rate is set for that period. DESCRIPTION – A fixed interest rate has the same characteristics as a predetermined interest rate; However, the difference between the costs used to set the fixed interest rate and the actual costs incurred during the financial year covered by the fixed rate shall be described as a carry-over. The deferral is used as an adjustment to the current interest rate to allow the recipient or contractor to recover as part of the recovery or repay an excess in a subsequent year. Once you have determined which agency your recognized agency will be, the second step is to calculate your indirect cost rate allocation. Annex IV, Section B, of 2 CFR 200 explains the allocation procedures that non-profit organizations should use to justify their allocation of indirect costs. Your cognitive agency will ultimately approve your indirect cost rate and other rates such as benefits and compute throughput rates. Once an organization has received knowledge for your organization, the allocation will not be changed unless there is a change in the dollar volume of federal premiums to your organization for at least three years. You do not have to negotiate a collective agreement with individual federal authorities, as all other federal authorities must have the opportunity to participate in the bargaining process. But once a rate is agreed, it is accepted by all federal agencies. DESCRIPTION – A predetermined rate is a permanent interest rate set for a given future period based on a review of the actual costs of a previous period. These rates are not subject to adjustment except in very unusual circumstances.
If your nonprofit receives a lot of federal grants, you may want to negotiate an indirect cost agreement. Here is a brief summary of what you can expect from this process. DESCRIPTION – A final rate is a permanent rate that is established after the actual cost of an organization for a current year is known. A final rate is used to adjust the indirect costs claimed on the basis of a provisional rate. • NICRA allows the grant or contracting officer to quickly calculate the appropriate allocation of indirect costs related to a project, resulting in the entire process. The first step is to determine which federal agency is most likely to be called your conscious agency. To do this, you look at which federal agency provides your organization with the greatest dollar value in federal grants. This agency will be the agency with which you will negotiate a standard rate for indirect costs. The complexity of the process depends on how many important features your nonprofit has. If the organization has only one primary function, it can use a simplified mapping method. If its indirect costs benefit its core functions to varying degrees, you can use a basic method with multiple assignments to allocate indirect costs. Another available method is the direct allocation method, which is used when not-for-profit organizations treat all costs as direct costs, with the exception of general administration and expenditures.
Your accountant will help you determine which of these three methods is best for your business. After submitting your indirect cost proposal to your cognitive agency, begin the negotiation process. The results of each negotiation are formalized in a written agreement between the cognitive agency and the non-profit organization. The indirect cost agency will provide copies of the agreement to all affected federal organizations. With so many JVA clients applying for grants within the U.S. Department of Health and Human Services (HHS), this article focuses on the process with this agency. Within HHS, Cost Allocation Services reviews and negotiates indirect cost rates, ancillary service rates, and special rates. While each federal agency may have its own requirements, you can see an example of a proposed indirect costs for nonprofits at HHS under rates.psc.gov/fms/dca/np_exall2.html. The third step is to use this allocation calculation to submit your initial indirect cost proposal to your cognitive agency. The indirect cost proposal is the documentation you prepare in support of your claim for reimbursement of indirect costs. This proposal forms the basis for the review and negotiation that leads to the determination of your organization`s indirect cost rate. In addition to your proposal, you submit audited financial statements, a certificate of lobbying fees and a grant notice.
Your CHIEF Executive Officer or Chief Financial Officer also signs an Indirect Cost (Q&A) certificate, which ensures that the indirect cost proposal is correct and that costs can be authorized and properly allocated among federal premiums. .