DCD-2-CFR Guide

A Guide for

Indirect Cost Rate Determination

Based on the Cost Principles and Procedures Required by

2 CFR Part 200, Subpart E & Appendix IV for Non-profit Organizations

and by the Federal Acquisition Regulation - Parts 31.2 and 42.7

for Commercial Organizations

U.S. Department of Labor

Cost & Price Determination Division

Office of Strategy & Administration/OSPE/OASAM

For additional Information: Contact Us

July 2024

A GUIDE FOR INDIRECT COST DETERMINATION

TABLE OF CONTENTS

Section I: General Information

Page

Definition of Indirect Cost Rates

I-1

Type of Indirect Rates

I-1

Determination of Indirect Cost Rates and Cost Allocation

I-3

Submissions of Indirect Cost Proposals

I-4

Approval of Indirect Cost Proposals

I-4

Negotiated Indirect Cost Agreements

I-4

Disputes

I-5

Reimbursement of Indirect Costs

I-5

Retention of Records

I-5

SECTION II: Guidelines for Preparing Indirect Cost Rate Proposals

Preliminary Steps

II-1

Indirect Cost Allocation Bases

II-3

Indirect Cost Proposal Checklist

II-4

Indirect Cost Proposal - Review Procedures

II-6

Administration Limits and Indirect Cost Claims

II-7

SECTION III:

Examples of Exhibits to Support Indirect Cost Proposals

(Applicable excel exhibits are available through above link. Additional

information on exhibits is provided as part of this section – see pages below.)

Exhibit A

Personnel Cost Worksheet

Exhibit B

Allocation of Personnel Worksheet

Exhibit B-1

Time Distribution Report

Exhibit C

Statement of Employee Benefits

Exhibit D

Statement of Total Costs - using direct allocation method

Suggested Allocation Bases

III-2

Exhibit D-1

Supplemental Schedule Required for Organizations using the MTDC base

excluding subawards/subcontracts in excess of $25k

Notes to Exhibits D and D-1

III-3

Exhibit D-2

Supplemental Statement of Total Costs - Required for Nonprofit Organizations

receiving more than $10 million or more in direct federal awards

Exhibit E

Federal Listing of Grants and Contracts to verify Federal Cognizant Agency

Exhibit F

Cost Policy Statement

III-4

Exhibit G

Certificate of Indirect (F&A) Costs for Nonprofit Organizations

III-9

Exhibit G-1

Certificate of Indirect (F&A) Costs for Commercial Organizations

III-10

SECTION IV:

Common Indirect Cost Problems

IV-1

SECTION V:

Typical Questions and Answers (Q&As)

V-1

APPENDIX:

Example of Negotiated Indirect Cost Agreement

Appendix I

PREFACE

This Guide has been prepared by the Cost & Price Determination Division (CPDD), to assist non-

profit and commercial organizations (non-Federal entities) in understanding the requirements for

the determination of indirect costs on cost reimbursable grants, contracts, and other

agreements awarded by the U.S. Department of Labor (DOL).

An indirect cost rate is established based on a Federally approved indirect cost rate proposal

and supporting documentation submitted by organizations. Indirect costs allocable to DOL

programs should be reimbursed if an organization has a Federally approved rate.

Reimbursement, however, is subject to any administrative limitations established in the grants

and/or contracts.

The formats provided in this guide are the preferred formats of CPDD, but are not strictly

required, as some other formats may be acceptable. The actual content of the exhibits and

samples may vary between organizations.

An indirect cost rate is simply a device for determining fairly and conveniently within the

boundaries of sound administrative principles, what proportion of indirect cost each program

should bear. Note that indirect costs are incurred for common or joint objectives and cannot be

readily identified with a particular grant, contract, or other activity of the organization. An indirect

cost rate is the ratio between the total indirect expenses and some direct cost base. The indirect

cost allocation methods used by each organization depend on its own structure, program

functions, and accounting system.

The applicable cost principles and contents of this indirect cost guide should be reviewed

prior to the preparation of an indirect cost proposal and supporting documentation.

2 CFR Part 200, Subpart E & Appendix IV, establish the Federal requirements for the

determination of allowable and unallowable direct and indirect costs for nonprofit organizations.

The Federal Acquisition Regulations (FAR), Part 31.2, “Contracts with Commercial

Organizations”, establishes the Federal requirements for the determination of allowable and

unallowable direct and indirect costs. FAR Part 42.7 “Indirect Cost rates” provides guidance on

cognizance for indirect rate determination among other relevant topics. Commercial entities must

follow these regulations.

Access to the above regulations is available our CPDD's website.

The Office of Inspector General randomly audits indirect cost rate proposals. The results of their

audits have indicated a need for better controls and procedures on charging indirect costs to

Federal awards. Section IV of this Guide provides examples of problems disclosed during such

audits which are presented here to help avoid future problems.

All inquiries for additional information should be directed to CPDD. Visit our Contact Us website

for details or send an email to OSPE-CPDD@dol.gov.

VICTOR M. LOPEZ

Chief

Cost & Price Determination Division

I-1

Section I

General Information

This section includes the following information:

Definition of Indirect Costs

Types of Indirect Rates

Determination of Indirect Cost Rates and Cost Allocation

Submissions of Indirect Cost Proposals

Approval of Indirect Cost Proposals

Negotiated Indirect Cost Rate Agreement (NICRA)

Disputes

Reimbursement of Indirect Costs

Retention of Records

Definition of Indirect Costs

According to 2 CFR Part 200.1, indirect costs or otherwise indirect F&A costs are define as:

§200.56 Indirect (facilities & administrative (F&A)) costs.

Indirect (F&A) costs mean those costs incurred for a common or joint purpose

benefitting more than one cost objective, and not readily assignable to the cost objectives

specifically benefitted, without effort disproportionate to the results achieved. To facilitate

equitable distribution of indirect expenses to the cost objectives served, it may be

necessary to establish a number of pools of indirect (F&A) costs. Indirect (F&A) cost

pools should be distributed to benefitted cost objectives on bases that will produce an

equitable result in consideration of relative benefits derived.

Definition and types of Indirect Rates

An indirect cost rate is simply a device for determining fairly and conveniently within the

boundaries of sound administrative principles, what proportion of indirect cost each program

should bear. An indirect cost rate is the ratio between the total indirect expenses and some direct

cost base.

The CPDD typically negotiates provisional and final indirect cost rates. There are also

predetermined and fixed rates which may be suitable for certain negotiation scenarios and

organizations. All of these types of rates are described in §2 CFR, Appendix IV, C.1. See also

below:

Provisional rate or billing rate means a temporary indirect cost rate applicable to a

specified period which is used for funding, interim reimbursement, and reporting

indirect costs on awards pending the establishment of a final rate for the period.

Final rate means an indirect cost rate applicable to a specified past period which is

based on the actual costs of the period. A final rate is not subject to adjustment.

Note that a final indirect cost rate is established after an organization's actual costs

are known, typically a fiscal year. Once established, a final indirect cost rate is used

to adjust the indirect costs claimed.

The use of provisional and final rates will likely result in final audited

expenditures being higher or lower than those reported for awards, which are

I-2

terminated during the organization's fiscal year. A final rate may be issued as

a provisional rate in the ensuing year, adjusted for anticipated changes in

funding levels or costs.

Predetermined Rate: Means an indirect cost rate, applicable to a specified current or

future period, usually the organization's fiscal year. The rate is based on an estimate

of the costs to be incurred during the period. A predetermined rate is not subject to

adjustment. A predetermined rate may be used on awards where there is reasonable

assurance that the rate is not likely to exceed a rate based on the organization's

actual costs,

Fixed Rates with carry-forward: Means an indirect cost rate which has the same

characteristics as a predetermined rate, except that the difference between the

estimated costs and the actual costs of the period covered by the rate is carried

forward as an adjustment to the rate computation of a subsequent period.

Provisional and final rates are preferred by most nonprofit organizations for the following

reasons:

Actual indirect costs are allocated to program objectives in the year incurred, creating

accurate cost information,

There are no prior year indirect costs carried into a future year to burden new

or continuing funding,

All indirect costs are properly funded in the fiscal year incurred, creating no

profit or loss for the organization,

The organization's accounting system must determine actual costs each

year, a capability that ultimately must exist to synchronize accounting,

budgeting, and cost allocation; and

The actual cost of services or programs is determined annually and is

therefore available for purposes of internal management and informed

budgeting.

10% De minimis rate – 2 CFR 200.414(f) provides for this type of rate, see description

below. It is noted that this office does not approve this type of rate. It is up to the grant

officer approval.

In addition to the procedures outlined in the appendices in paragraph (e) of this

section, any non-Federal entity that does not have a current negotiated (including

provisional) rate, except for those non-Federal entities described in appendix VII

to this part, paragraph D.1.b, may elect to charge a de minimis rate of 10% of

modified total direct costs (MTDC) which may be used indefinitely. No

documentation is required to justify the 10% de minimis indirect cost rate. As

described in § 200.403, costs must be consistently charged as either indirect or

direct costs, but may not be double charged or inconsistently charged as both. 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,

which the non-Federal entity may apply to do at any time.

According to §200.1, MTDC is defined as:

MTDC means all direct salaries and wages, applicable fringe benefits, materials

and supplies, services, travel, and subawards and subcontracts up to the first

$25,000 of each subaward or subcontract (regardless of the period of

performance of the subawards and subcontracts under the award). MTDC

excludes equipment, capital expenditures, charges for patient care, rental costs,

tuition remission, scholarships and fellowships, participant support costs and the

I-3

portion of each subaward and subcontract in excess of $25,000. Other items may

only be excluded when necessary to avoid a serious inequity in the distribution of

indirect costs, and with the approval of the cognizant agency for indirect costs.

Possible 4-year extension of previously negotiated rates - 2 CFR 200.414(g), states the

following:

(g) Any non-Federal entity that has a current federally-negotiated indirect cost

rate may apply for a one-time extension of the rates in that agreement for a

period of up to four years. This extension will be subject to the review and

approval of the cognizant agency for indirect costs. If an extension is granted the

non-Federal entity may not request a rate review until the extension period ends.

At the end of the 4-year extension, the non-Federal entity must re-apply to

negotiate a rate. Subsequent one-time extensions (up to four years) are

permitted if a renegotiation is completed between each extension request.

CPDD’s policy – We will consider non-Federal entities requests for these extensions on a

case-by-case basis.

Determination of Indirect Cost Rates and Cost Allocation

Non – Profits - The three basic methods for calculating indirect cost rates are explained in 2

CFR, Appendix IV, B2 through B4. These methods are:

•

Simplified,

•

Multiple Rate, and

•

Direct Allocation methods.

2 CFR, Appendix IV, B.5., also provides for the use of Special Indirect Cost Rates. A single

indirect cost rate for all activities of the organization may not be appropriate when work under the

Federal program is conducted in an offsite location and the level of administrative support is

different than other programs.

For an organization that receives more than $10 million in Federal funding of direct costs in a

fiscal year, a breakout of the indirect costs into two components; Facilities and Administration,

as defined below, is required. The rate shall be stated as a percentage which the amount of

Facilities and Administration is, of the applicable distribution base used for each component.

Each indirect cost rate negotiation agreement shall identify the development of each indirect cost

pool component as well as the overall indirect cost rate. See definitions below and example

available in Exhibit E-2 of Section III of this guide.

"Facilities" is defined as depreciation and use allowances on buildings, equipment and

capital improvements; interest on debt associated with certain buildings, equipment and

capital improvements; and operations and maintenance expenses.

"Administration" is defined as general administration and general expenses such as the

director's office, accounting, personnel, library expenses and all other types of

expenditures not listed specifically under one of the subcategories of "Facilities",

(including cross allocations from other pools, where applicable).

Commercial Organizations – The above requirement is not applicable to commercial

organizations.

I-4

Submissions of Indirect Cost Proposals

Prior to the preparation of an indirect cost rate proposal and supporting documentation, the

following cost principles should be reviewed to determine if the costs proposed are

reasonable, allowable, and allocable to the Federal government:

Non-profit Organizations 2 CFR Part 200, Subpart E & Appendix IV

Commercial Organizations Federal Acquisition Regulation (Part 31.2 & 42.7)

An incurred cost, or final indirect cost rate proposal, together with the supporting documentation

listed in Section II.C., must be developed and submitted on an annual basis to the CPDD no later

than six months after the close of the organization's fiscal year, unless an exception is approved

by the CPDD. For organizations with no prior approved indirect cost rate, a budget (or

provisional) proposal must be submitted no later than three months after the effective date of the

DOL award.

Indirect cost rate proposals need to be submitted via email to the assigned cost negotiator (see

our Contact Us website) or to the following email address: OSPE-CPDD@dol.gov.

Refer to Section II-4 for checklist of required documentation, and Section III for Examples of

Exhibits to support the indirect cost proposal.

Approval of Indirect Cost Proposals

Unless different arrangements are agreed to by the agencies concerned, the Federal agency with

the largest dollar value of awards with an organization will be designated as the cognizant agency

for the negotiation and approval of the indirect cost rates.

The CPDD will negotiate and approve indirect cost rates when the DOL is the cognizant Federal

agency. Indirect costs can only be charged to a grant or contract based on a Negotiated Indirect

Cost Rate Agreement (NICRA) approved by the CPDD. However, the approval of indirect costs

by the CPDD is not intended to identify the circumstances or dictate the extent of Federal

participation in the financing of particular grants or contracts.

Negotiated Indirect Cost Rate Agreement (NICRA)

The approval will be formalized by a rate agreement signed by the Chief, CPDD (or its designee)

and an authorized representative of the organization. Each agreement will include:

The approved rate(s) and information directly related to the use of the rates, e.g.,

type of rate, effective period, and distribution base,

The treatment of fringe benefits as either direct and/or indirect costs

General terms and conditions; and

Special remarks.

An example of an indirect cost agreement is provided in Appendix I of this Guide.

I-5

Disputes

When the CPDD and the non-Federal entity cannot reach an agreement on an acceptable

indirect cost rate, the CPDD will make a unilateral determination of the rate(s) and will notify the

organization. The CPDD or the grant/contract officer will advise the organization of its right to

appeal the determination and will provide information about the appeal procedures to follow upon

request.

Reimbursement of Indirect Costs

Reimbursement of indirect cost is subject to the submission of an indirect cost rate proposal (see

part D of this Section), availability of funds, statutory and administrative restrictions, and the

approval of the DOL Grant/Contract Officer or authorized representative.

Certain DOL grants and contracts include ceilings for reimbursement of indirect costs and/or

administrative costs. When the amount otherwise allocable as indirect costs exceeds the amount

allowable under the terms and conditions of the grant/contract agreement, the excess amount

may be used to satisfy cost-sharing or matching requirements. However, the differences may not

be shifted to another Federal grant or contract unless specifically authorized by legislation.

Retention of Records

If the indirect cost rate proposal, cost allocation plan, or other computation is to be submitted to

the Federal Government (or to the grantee) to form the basis for negotiation of a rate(s), there is

the 3-year retention requirement from the date of such submission.

If the indirect cost rate proposal, cost allocation plan, or other computation is not required to be

submitted to the Federal Government for negotiation purposes, then the 3-year retention period

for its supporting records starts from the end of the fiscal year (or other accounting period)

covered by the indirect cost rate proposal, cost allocation plan, or other computation.

For regulatory basis on “retention of records” for non-profits, see 2 CFR 200.334 (f)(1)(2).

For regulatory basis on “retention of records” for commercial organizations, see the Federal

Acquisition Regulation Part 4 – Administrative Matters, Subpart 4.703 Policy.

If any litigation, claim or audit is started before the expiration of the 3-year period, the records

shall be retained until all litigations, claims or audit findings involving the records have been

resolved.

II-1

SECTION II

Guidelines for Preparing Indirect Cost Rate Proposals

Note: Non Federal entities (Grantees/Contractors) must have an established accounting system prior to

being awarded a grant or contract from DOL or any other agency in the Federal government. The

accounting system must provide adequate internal controls to safeguard assets, insure fund

accountability by cost category, assure accounting data accuracy and reliability, promote operating

efficiency, and comply with Government requirements and accounting procedures.

For reference purposes, see the Standards for Financial Management in 2 CFR.302 for nonprofit

organizations. Also, see evaluation of accounting systems referenced in FAR Part 9.106 and the

Standard Form 1408 applicable to contractors.

This section includes the following information:

Preliminary Steps

Indirect Cost Allocation Bases

Indirect Cost Rate Proposal Checklist

Indirect Cost Proposal – Review Procedures

Administration Limits and Indirect Cost Claims

Preliminary Steps

Prior to the preparation of an indirect cost rate proposal and supporting documentation, the applicable

cost principles should be thoroughly reviewed.

Nonprofit organizations must follow 2 CFR Part 200, Subpart E & Appendix IV.

Commercial organizations must follow the Federal Acquisition Regulation Parts 31.2 and 42.7.

If indirect costs are allowed in the grant or contract award, the entity will then be ready to prepare an

indirect cost rate proposal based on the following steps:

i. Organization Review



If one does not already exist, prepare a formal organizational chart(s), or a rough draft

version, and provide any information or material explaining the various services and/or

functions for each unit.



Determine which units are indirect (administrative) functions of the organization.



Determine the services that are allowable and allocable to Federal grants and contracts per

the applicable cost principles.

ii. Review Federal and Non-Federal Funding



Review the Federal and non-Federal outlays to determine programs being funded; verify with

the appropriate staff.



Prepare a list of all funded programs in detail as to the amount or percent of reimbursement of

direct and indirect cost and any restrictions or references to statutes or regulations.



Determine at what organizational level the various funded programs apply. Illustrate the list of

funded programs on a copy of the organization chart.

II-2



Contact the Federal agency which provides the most funds regarding the procedures for the

submission, review and approval of indirect cost rates.

iii. Review the Accounting Structure



Obtain a chart of accounts, or some other list of accounts for your organization, in which the

actual dollars expended can be related to various programs and/or organization structure.



Reconcile the accounting structure to the organization chart.



If necessary, determine changes to implement an indirect cost rate system of billing.

iv. Prepare a Cost Policy Statement



Develop a written policy that outlines the costs considered as direct, the costs considered to

be indirect, and the rationale to support those costs. A sample cost policy statement is

available in Section III.

v. Prepare an Indirect Cost Rate Proposal



Determine which method is best for the organization, i.e., direct cost allocation or simplified,

and whether special indirect cost rates are required, i.e. on-site, off-site, fringe benefit rate for

full-time vs. part-time. In selecting the appropriate method, the organization should consider

the following:

Organizational structure

Level of Federal funding

Reports generated from their accounting system

Availability of data on square footage, number of transactions, employees, purchase

orders, etc.

Additional effort and cost required to achieve a greater degree of accuracy.



Prepare the indirect cost rate proposal following the examples shown in Section III.



Prepare a Certificate of Indirect Costs and have signed by the Executive Director, or other

designated official with organization’s signature authority (see Section III for a sample).



Compile all remaining documentation required by the cognizant Federal agency. Non-federal

entities that need submit proposals to CPDD should follow the checklist on page II-4.



Reconcile the indirect cost rate proposal to the audited (if applicable) financial statements.

vi. Obtain Cognizant Agency Approval



Submit proposal to cognizant agency;



Cognizant agency may follow up after review with questions, and/or concerns – and may

request additional documentation, and/or narrative responses, in support of the proposal.



Document meeting and/or telephone conversations, e-mails and faxes.



Make any agreed upon changes, and submit any revised, and/or supporting documentation

requested by cognizant agency.



Receive Negotiated Indirect Cost Rate Agreement.

vii. Implementation



Prepare claims using the lower of either the approved rate, or the ceiling rate for your grant or

contract.



Use final, predetermined, or fixed with carry forward rate(s) included in indirect cost rate

agreement for close-out purposes.



Maintain documentation for audit purposes – see page I-4 for Retention of Records.

II-3

Indirect Cost Rate Allocation Bases

The following allocation bases are acceptable examples for use when indirect costs are allocated to

benefiting cost objectives by means of an indirect cost rate. Typical allocation bases are below to

calculate an indirect cost rate. See also see Exhibit E for Suggested Allocation Bases on non-labor costs.

i. Direct salaries and wages including (or excluding) all fringe benefits.

ii. Direct salaries and wages including vacation, holiday, sick pay, and other paid absences

but excluding all other fringe benefits.

iii. According to 2 CFR §200.1, Modified Total Direct Costs (MTDC), is defined as:

All direct salaries and wages, applicable fringe benefits, materials and supplies, services,

travel, and subawards and subcontracts up to the first $25,000 of each subaward or

subcontract (regardless of the period of performance of the subawards and subcontracts

under the award).

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.

iv. For commercial entities, total costs less G&A expenses.

The selection of an appropriate allocation method should be based upon the commonality of costs to all

cost objectives. In general, a correlation exists between the incurrence of administrative effort with the

expenditures for direct labor. In most cases, a direct labor base will produce an equitable distribution of

indirect costs. However, where the ratio of direct labor to total direct costs varies significantly from

program to program, an "adjusted" total direct cost base should be used in allocating costs to benefiting

programs.

The proposed allocation base(s) is subject to negotiation and approval by CPDD. Any modifications to

the “approved” base require prior written approval. Failure to obtain such written approval may result in

cost disallowances.

Indirect Cost Rate Proposal Checklist – non-profit and commercial organizations

See next page.

II-4

Indirect Cost Proposal Checklist

Non-Profits and Commercial Organizations

1. Administrative documents:

1a. ____Organizational chart

2a ____Nonprofits - Narrative explaining compliance with 2 CFR §200.430(a)(1)(2) & (3) and the standards for

documentation of personnel expenses.

Commercial - Narrative explaining the standards for documentation of personnel expenses in compliance with

FAR 9.106-4 and SF-1408.

For both entities, an example of an employee timesheet for a pay period, providing for distribution of hours to

direct/indirect functions.

1c. ____Signed Cost Policy Statement providing, in part, narrative explaining allocation of direct and indirect costs.

NEW - Idle facilities/Idle capacity and space utilization - Narrative explaining compliance with 2 CFR § 200.446 for non-

profits or 31.205-17 for commercial entities as part of Cost Policy Statement. For background and additional

guidance, see further below. The narrative should also include operating procedures for evaluation and assessment

of reasonable space utilization considering staff working:

• in-office 100% of the time,

• working in-office and teleworking (“hybrid”) from a remote location one or more days per week, and

• remotely 100% of the time.

2. An indirect cost rate proposal(s) providing the following:

____2a. Personnel Costs Worksheet, including fringe benefits breakdown.

____2b. Allocation of Personnel Worksheet, providing indirect/direct time charges, indicating full or

partial year employment for applicable staff, and telework status (see 1.c. above).

____2c. Fringe Benefits Worksheet,

____2d. Statement of Total Costs, supporting the indirect and direct costs incurred by expense category,

identified by Federal agency, specific government grant, contract, and other non-government activities.

____2e. Statement of Indirect Costs, including indirect cost pool(s), allocation base(s), and indirect cost rate(s)

proposed.

3. ____Audited financial statements, if available, to support actual costs. For non-profits with direct Federal

funding over $750,000, annually, must provide audited financial statements. Under $750,000 for nonprofits,

please provide IRS Form 990 as support. For commercial entities, compilation/review financial statements

are also acceptable. Note: The Statement of Total Costs (2d. above) based on actual costs must reconcile to

Financial Statements. If not, please provide a reconciliation statement.

4. ____Certification that the indirect cost rate proposal was prepared in a manner consistent with the

applicable cost principles set forth in 2 CFR Part 200, Subpart E & Appendix IV for non-profits, or FAR Part

52.242-4 for commercial organizations. The certificate must be signed on behalf of the organization by an

individual at a level no lower than vice-president or chief financial officer for the organization.

5. ____A listing of grants and contracts by Federal agency, subagency, program office funding source,

award amount, period of performance, and the indirect cost (overhead) limitations (if any) applicable to

each, such as, ceiling rates or amounts restricted by administrative or statutory regulations, applicable to

the period(s) of the proposal(s). This listing must be supported with copies of the approved federal grants

or contracts notification awards (1

page).

Note: For organizations receiving funding from DOL-ETA, please ensure that the proposed individual

compensation (salary and bonus) complies with limitations established. Contact CPDD for more details.

Note

•

Please submit separate electronic files as part of proposal corresponding with checklist items to your assigned cost

negotiator or to this office at OSPE-[email protected].

•

Ensure that no personal identifiable information (PII; Ex. social security numbers) is submitted with the proposal.

•

For item # 2, please submit one Excel workbook or similar format.

•

Examples of exhibits supporting the proposal are available in Section III of this guide.

II-5

Checklist Cont. - 1.c.

Idle Facility/Idle Capacity, reasonable use of space considering current

teleworking trends, and actions to support annual indirect cost proposals.

Background0F

The use of real property was greatly impacted by the pandemic that started on March 13, 2020. Many entities

responded by adopting a maximum telework posture, allowing many employees to work offsite remotely. As a

result, many employees shifted to remote work and telework, including employees who had not historically done

so. The pandemic has lowered the utilization of office space and may have added to the amount of unneeded

space that existed before the pandemic.

Noting that the pandemic is over, organizations may have continued to embrace telework and remote work for

employees. Due to these work arrangements, possible idle facilities/capacity or vacant space may be

experienced. This moment presents a unique opportunity to reconsider various aspects of the organization’s

space and how best to align with future needs. Retaining excess and underutilized space is not

reasonable/necessary. Underutilized office space has financial costs. Any reduction in office space could reduce

these costs benefitting the non-Federal entity and Federal government.

Applicable regulations:

• For nonprofit organizations, state/local agencies, and educational institutions: 2 CFR 200.446 Idle

facilities and idle capacity; 2 CFR 200.465 Rental costs of real property and equipment.

• For commercial entities: FAR 31.205-17 Idle facilities and idle capacity costs; FAR 31.205-36 Rental

costs.

Action:

1. Indirect cost proposals submitted for review and approval to the Cost & Price Determination Division

(CPDD) at the U.S. Department of Labor must provide narrative explaining compliance with the above

regulations on an annual basis.

2. The narrative should include operating procedures for evaluation and assessment of reasonable space

utilization considering indirect staff that may be working:

• in-office, 100% of the time,

• in-office and teleworking (“hybrid”) from a remote location one or more days per week, and

• remotely 100% of the time.

3. The indirect cost proposal’s Allocation of Personnel Worksheet should identify indirect staff in line with

the above categories.

4. Describe efforts to achieve/maintain office space optimization such as office “hoteling”, shifting to co-

working office space, challenges encountered, planned efforts to reduce costs such as subleasing space,

etc. Ensure that there is a standard operating procedure on monitoring and assessment of space

utilization.

5. Provide details of whether the facility is owned or leased. If renting/leasing a facility, provide term

agreement dates.

6. Identify idle space not used over one year explaining the need, if any, to continue keeping that space.

Support this inquiry with floorplan documentation.

Reference: GAO report: Federal Real Property - Agencies Need New Benchmarks to Measure and Shed Underutilized Space – October 2023

II-6

Indirect Cost Proposal-CPDD’s Review Procedures

Some issues that may be raised by a CPDD negotiator during, or after, the review of an indirect cost rate

proposal, usually result from the following procedures. Knowing these procedures while preparing an indirect

cost proposal, organizations may enable us to avoid such issues from occurring.

•

Determine that the applicable cost principles (stated in the Circulars or the FAR) were

followed.

•

Review the organization chart for a visual picture of the flow of responsibility,

identification of areas of common costs, and the location of those areas in which

federally-funded activity exists

•

Perform a mathematical verification of the proposal.

•

Determine that the proposal reconciles with the supporting audit, official budget or

financial statements.

•

Review the financial statements and audit report for any indication of activities which may

have been omitted from the indirect cost proposal, i.e., the omission of restricted fund

costs or the existence of an affiliated organization receiving supportive service from the

parent organization.

•

Determine that the itemized costs in the indirect cost pool pertain to functions that are

supportive of all direct activity.

•

Determine that costs that are statutorily unallowable, or for reasons of non-allocability,

have been eliminated from the indirect cost pool. Determine whether these unallowable

or non-allocable items should be added to the distribution/allocation base.

•

Determine that "pass-through" funds have been excluded from the base.

•

Review and analyze direct costs for the determination of:

Consistency in charging specific items of cost.

The selection of an appropriate base for allocating indirect costs.

•

Review the contract/grant budget and payments, or contractor/grantee records, for

determination of: (if deemed feasible under the circumstances)

The direct funding of indirect costs.

Any limitations placed upon the full recovery of indirect costs, i.e. ceiling

rates or amounts.

Total Federal funds involved.

•

Check with the appropriate Federal Program Manager for any problems he/she may be

aware of relating to the charging of costs.

Administration Limits and Indirect Cost Claims

Various DOL funding instruments have statutory or regulatory limitations on the costs of

"administration". These costs can be both personnel and non-personnel and both direct and

II-7

indirect. The costs of administration are those portions of reasonable, necessary and allowable

costs associated with the overall program management and administration and which are not

directly related to the provision of services to participants or otherwise allocable to the program

cost objectives/categories.

Based on the above information, the statutory or regulatory limitation affects the combined claims

for indirect costs and direct administration costs. Generally, direct administration costs differ from

indirect charges in that the latter are considered organization-wide costs.

Examples of functions that are classified as direct "administration" are as follows:



Overall program management, program coordination, and office management

functions, including the salaries and related costs of the executive director, project

director, and project evaluator when directly allocated.



Preparing program plans, budgets schedules, and related amendments.



Monitoring of programs, projects, sub-recipients and related systems and processes.



Developing systems and procedures, including management information systems, for

assuring compliance with program requirements.



Preparing reports and other documents related to the program requirements.



Evaluating program results against stated objectives; and



Performing administration services such as program specific payroll, accounting,

auditing or legal activities.

Examples of non-labor costs for direct administration include:



Costs for goods and services required for administration of the program, including

such goods and services as the rental or purchase of equipment, utilities, office

supplies, postage, and rental and maintenance of office space.



Travel costs incurred for official business in carrying out program management and

administrative activities.

III-1

SECTION III

Examples of Exhibits to Support

Indirect Cost Rate Proposals

(Applicable excel exhibits are available through above link. Additional

information on exhibits is provided as part of this section – see pages below.)

Exhibit A

Personnel Cost Worksheet

Exhibit B

Allocation of Personnel Worksheet

Exhibit B-1

Time Distribution Report

Exhibit C

Statement of Employee Benefits

Exhibit D

Statement of Total Costs - using direct allocation method

Suggested Allocation Bases

III-2

Exhibit D-1

Supplemental Schedule Required for Organizations using the MTDC base

excluding subawards/subcontracts in excess of $25k

Notes to Exhibits D and D-1

III-3

Exhibit D-2

Supplemental Statement of Total Costs - Required for Nonprofit Organizations

receiving more than $10 million or more in direct federal awards

Exhibit E

Federal Listing of Grants and Contracts to verify Federal Cognizant Agency

Exhibit F

Cost Policy Statement

III-4

Exhibit G

Certificate of Indirect (F&A) Costs for Nonprofit Organizations

III-9

Exhibit G-1

Certificate of Indirect (F&A) Costs for Commercial Organizations

III-10

III-2

Exhibit D

Suggested Allocation Bases

The allocation base selected by the non-profit organization or commercial organization must be (1)

reasonable and consistently applied to direct costs or indirect costs, (2) supported by accurate and

current data, (3) appropriate to the cost being distributed, (4) and one which results in an accurate

measure of the benefits provided to each activity of the organization.

The following are suggested allocation bases for types of costs:

Allocation Bases

Types of Cost

Accounting

Number of transactions processed.

Auditing

Direct audit hours.

Budgeting

Direct hours of identifiable services of employees of central budget.

Building lease management

Number of leases.

Data processing

System usage.

Disbursing service

Number of checks or warrants issued.

Employees retirement system administration

Number of employees contributing.

Insurance management service

Dollar value of insurance premiums.

Legal services

Direct hours.

Mail and messenger

Number of documents handled or service employees served.

Motor pool costs including automotive

management

Miles driven and/or days used.

Office machines and equipment maintenance

repairs

Direct hours.

Office space use and related

costs(heat,

light, janitor service, etc.)

Sq. ft. of space occupied.

Organization and management services

Number of employees.

Payroll services

Number of employees.

Personnel administration

Number of employees.

Printing and reproduction

Direct hours, job basis, pages printed, etc.

Procurement service

Number of transactions processed.

Local telephone

Number of telephone instruments.

Health services

Number of employees.

Fidelity bonding program

Employees subject to bond or penalty amounts.

III-3

Notes to Exhibits D & D-1

(1)

Examples of expressly unallowable costs in this exhibit include entertainment expense and bad

debts. Other indirect unallowable costs include lobbying costs, bad debts or allowances for

doubtful accounts, fines and penalties, losses on Federal or non-Federal projects, provisions for

contingencies, and charitable contributions.

Note: the costs included in the indirect cost pool (as well as direct costs) shall be net of

applicable credits (2 CFR, Part 200, Subpart E, §200.402).

(2)

Examples of direct costs exclusions using the Modified Total Direct Cost (MTDC) allocation base

MTDCs in this exhibit include amounts over the first $25,000 of each subaward, purchase and

lease of equipment, emergency assistance and participant support costs. See MTDC definition in

2 CFR, Part 200, Subpart A, §200.1. Details of the direct costs’ exclusions are as follows:

The portion of subaward costs in excess of $25,000 each. As a general rule, the

organization and CPDD agrees that only the first $25,000 of each subcontract,

subgrant and professional service agreement should be included in the distribution

base. This recognizes that grantees/contractors expend a minimal amount of indirect

costs overseeing these subawards or subcontracts.

Equipment and other capital expenditures, such as major renovations, alterations

and improvements.

Participant support costs. This represents payments for stipends, travel allowances

and registration fees paid to participants (but not employees) in connection with

training projects.

Payments to participating agencies, e.g. OJT contractors, (flow-through- funds). If the

organization is significantly involved in the administration or oversight of the

participating agencies, a special rate might be necessary for that activity.

Other information

Exclusions of direct costs for the MTDC base are only presented in this exhibit for allocation purposes; it

is not related to direct costs reimbursement.

Note that if the organization's unallowable activities (lobbying, fundraising, membership) include salaries,

occupy space, and benefit from the organization's indirect cost, they should be included in the direct cost

allocation base for the purpose of determining the indirect cost rate and be allocated their share of the

organization's indirect costs. See 2 CFR, Part 200, Subpart E, §200.413(f). This sample exhibit includes

these types of costs in the base.

From the examples provided on Exhibit D, the data can be used to compute either an indirect cost rate

based on direct salaries and wages including applicable fringe benefits, or an indirect cost rate based on

modified total direct costs (MTDCs). As stated in 2 CFR, Part 200, Appendix IV, B.2.c., the distribution

base may be direct salaries and wages, or another base which results in an equitable distribution to all

activities that receive benefit from the indirect cost pool.

Since most organizations receiving grants are labor intensive, using a distribution base of direct salaries

and wages including applicable fringe benefits is most often recommended by CPDD.

III-4

Exhibit F

EXAMPLE: Cost Policy Statement (CPS)

for Indirect Cost Rate Proposal

The following CPS is intended to be used as guidance for organizations that seek reimbursement for

indirect costs under Federal awards. This model assumes that ABC Organization uses:

the direct allocation basis to charge individual elements of costs. That is, in addition to

direct costs, ABC has in place accounting procedures which enable it to direct charge some

costs that would otherwise be considered indirect costs (see, for example, the description

below on how the photocopy costs are charged).

the direct salaries and wages including applicable fringe benefits, to allocate the indirect

cost “pool”.

IMPORTANT NOTE: The CPS should have a detailed description of all the cost elements in the

indirect cost proposal. It should also include the cost element allocation methodology for

each element.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

COST POLICY STATEMENT

ABC ORGANIZATION/ADDRESS/PHONE

General Accounting Policies

Basis of Accounting - Accrual Basis

Fiscal Period - July 1 through June 30

Allocation Basis for Individual Cost Elements - Direct Allocation Basis

Indirect Cost Rate Allocation Base - Direct Salaries and Wages including applicable

Fringe Benefits.

If ABC Organization needed a fringe benefit rate, it would describe its fringe benefit

allocation base at this point.

ABC maintains adequate internal controls to insure that no cost is charged

both directly and indirectly to Federal contracts or grants. A description of the

accounting system software would be described at this point.

ABC accumulates all indirect costs and revenues in accounts titled, "Indirect Cost-

Expense" and "Indirect Cost-Revenue" respectively.

II.

Description of Cost Allocation Methodology -

Salaries and Wages

Direct Costs - The majority of ABC's employees direct charge their salary

costs since their work is specifically identifiable to specific grants,

contracts, or other activities of the organization such as lobbying, fund

raising or providing services to members. The charges are supported by

III-5

auditable labor distribution reports which reflect the actual activities of

employees.

Indirect Costs - The following staff charge 100% of their salary costs

indirectly:

Office Business Manager

Secretary/Receptionist

Mixed Charges - The following employees may charge their salary costs to

both direct and indirect activities:

Executive Director

Administrative Assistant

The distinction between direct and indirect is primarily based on functions

performed. For example, when the positions shown are performing

functions that are necessary and beneficial to all programs they are

indirect. When functions are specific to one or more programs they are

direct because they do not benefit all programs.

Auditable labor distribution records which reflect the actual activities of

employees are maintained to support the mix of direct/indirect charges.

The time records are certified by the Executive Director or designee.

Fringe Benefits

ABC contributes to the following fringe benefits for its employees:

unemployment insurance,

worker's compensation,

F.I.C.A., health insurance and

matching contributions to a defined benefit pension plan.

Treatment of Fringe Benefits: ABC's accounting system tracks fringe benefit

costs by individual employee and charges those costs directly or indirectly in

the same manner as salary and wage costs are recorded. ABC does not need

to have a fringe benefit rate established.

Treatment of Paid Absences - Release time costs (vacation leave earned,

sick leave used, and holiday pay) are considered part of salary costs.

Consequently, separate claims for release time costs are not made. ABC's

accounting system records release time as a direct or indirect cost in the same

manner that salary costs are recorded. Vacation leave earned but not used

during each fiscal period is recorded as a cost in the period earned.

Travel

Travel costs may be charged as either direct or indirect costs depending on the

purpose of the trip.

For example:

The Executive Director of Company ABC travels to a regional office to give

employees a quarterly update. This trip is indirect in nature and should be

III-6

charged as an indirect cost. However, if the Executive Director of Company ABC

travels to a regional office to perform a specific task for a contract, the trip would

be considered a direct cost.

Board Expenses

Board expenses charged on an indirect basis are for travel to/from Board meetings

(limited to expenses allowed under the Federal Travel Regulations) and an annual

fee of $250 paid to each Board member.

Other Board expenses are absorbed by ABC and are not charged either directly or

indirectly to Federal contracts or grants.

Supplies and Material

To the maximum extent possible, office supplies and materials are direct charged to

the contract/grant which uses the supplies or materials.

Supplies and materials used by staff who are engaged in indirect activities will be

charged on an indirect basis.

Occupancy Expenses

Rent - ABC occupies space it leases from Lessor Corporation. The lease provides for

equal monthly payments during the term of the lease. Monthly lease costs are

allocated, based on: square footage, directly and indirectly as follows:

Direct Costs - The cost of space occupied by staff whose salaries are

directly charged is charged directly.

Indirect Costs - The cost of space occupied by staff whose salaries are

indirectly charged is charged indirectly. The cost of space for staff whose

salaries are charged on a mixed basis will be allocated on a mixed basis in

the same ratio as their salaries are allocated.

The cost of space required for common areas (hallways, restrooms, and

ABC's conference room) will be accounted for as an indirect cost.

ABC has developed a floor plan which identifies what areas are designated

as direct and indirect charge space (based on square footage).

Utilities

ABC's lease includes the cost of all utilities except electricity. The cost of electricity is

charged directly and indirectly in the same ratio as its space costs are charged.

Communications

A log is maintained of all fax transmissions. The cost of fax services is

charged either directly or indirectly based upon whether a direct or indirect

activity benefits from the transmission.

Long distance telephone calls are charged either directly or indirectly

based upon whether a direct or indirect activity benefits from the

transmission.

III-7

Local telephone service costs are prorated to direct and indirect charges

based upon the number of telephone instruments assigned to ABC.

Each telephone instrument is identified to either an indirect or a direct

activity. For example:

ABC has 50 telephone instruments assigned to it:

(1)

Nine (9) of the 50 instruments are assigned to the program

funded by HHS. Therefore, 9/50ths of the monthly local

service telephone charges are direct charged to the HHS

grant.

(2)

Five (5) of the instruments are assigned to indirect staff.

Therefore, 5/50ths of the monthly local service charges are

charged indirectly.

No telephone instruments are charged on a mixed basis since

the costs incurred on that basis are immaterial in amount.

ABC uses a meter system for postage charges. The postage meter has

been programmed to identify the specific program or activity to charge

costs against. Express mail costs are also specifically identified to the

program or activity incurring the cost.

Photocopying and Printing

ABC maintains a photocopy activity log. From this log, ABC is able to prorate its

photocopy expenses to each program based on the specific volume of copies made

for each program.

Administrative personnel will record copies made to the benefiting program to the

maximum extent practical. In situations where the photocopies being made by

administrative personnel cannot be identified to a specific program and the matter

being copied relates to the activities of ABC in general, the cost of such copies will be

charged to the "Indirect Cost-Expense" account.

Printing expenses are charged to the benefiting activity.

Outside Services

ABC incurs outside services costs for its annual audit, legal fees, and for staff

development specialists.

The cost of the annual audit is charged indirectly.

In general, legal fees are charged directly to the benefiting program or

activity.

Legal fees that are not identifiable to specific direct programs are charged

indirectly.

Capital Items

Capital expenditures are charged directly to programs only in cases where a contract

or grant specifically authorizes such charges. No capital item is charged indirectly.

The cost of capital items is purchased with non-Federal funds are recovered through

depreciation charges. ABC's capitalization threshold is $5,000.

III-8

Depreciation

The cost of capital items purchased with non-Federal funds which are used in a

manner which benefits Federal programs is recovered through depreciation charged.

The cost of capital items purchased with direct Federal funds cannot be depreciated

for indirect cost recovery purposes.

ABC recovers the cost of capital items using straight line depreciation methods in

accordance with generally accepted accounting principles. Depreciation is charged

indirectly.

Service to Members

The cost of activities performed primarily as a service to members, clients, or the

general public are classified as direct costs and bear their fair share of indirect costs.

These activities include:

maintenance of membership rolls,

subscriptions,

publications, and related functions, providing services and information to

members, legislative or administrative bodies, or the public;

promotion, lobbying, and other forms of public relations;

meetings and conferences except those held to conduct the general

administration of ABC Organization;

maintenance, protection, and investment of special funds not used in

operation of ABC; and administration of group benefits on behalf of

members or clients including life and hospital insurance, annuity or

retirement plans, financial aid, etc.

Unallowable Costs

ABC recognizes that unallowable costs, as defined in 2 CFR Part 200, Subpart E, or

the FAR (Subpart 31.205), cannot be charged to Federal awards and has internal

controls in place to insure that this is followed. Examples of unallowable costs are:

advertising and public relations,

entertainment/alcoholic beverages,

capital expenditures,

defense claims by or against the Federal Government,

interest,

lobbying and fund raising.

Signature Date

Title

ABC

Organization

1111 Main Street

City, USA 12345

III-9

Exhibit G

CERTIFICATE OF INDIRECT (F&A) COSTS – NONPROFIT ORGANIZATIONS

2 CFR 200, Appendix IV, D

This is to certify that to the best of my knowledge and belief:

(1)

I have reviewed the indirect (F&A) cost proposal submitted herewith;

(2)

All costs included in this proposal [identify date] to establish billing or final indirect (F&A) costs rate for

[identify period covered by rate] are allowable in accordance with the requirements of the Federal

awards to which they apply and with Subpart E—Cost Principles of Part 200.

(3)

This proposal does not include any costs which are unallowable under Subpart E—Cost Principles of

Part 200 such as (without limitation): public relations costs, contributions and donations, entertainment

costs, fines and penalties, lobbying costs, and defense of fraud proceedings; and

(4)

All costs included in this proposal are properly allocable to Federal awards on the basis of a beneficial or

causal relationship between the expenses incurred and the Federal awards to which they are allocated in

accordance with applicable requirements.

(5)

Nonprofit organizations only. See 2 CFR 200.414(a) for F&A rate basis, definition of major nonprofit

organizations (receive more than $10 million of direct Federal funding in a fiscal year), and 2 CFR

200.415(c) for required certification. An example of the F&A breakdown is provided in CPDD’s indirect

cost guide, Exhibit E-2.

Based on above requirements, please mark as appropriate:

We did not meet the definition of a major nonprofit organization.

We met the definition of major nonprofit organization and provided the F&A breakdown as

part of the indirect cost proposal.

(6)

The requirements and standards on lobbying costs (stated in 2 CFR Part 200.450) have been complied

with for the fiscal year ending .

Applicable to proposals with incurred costs on or after August 13, 2020:

(7)

The covered telecommunications and video surveillance services or equipment cited in Section 889 of the

National Defense Authorization Act (NDAA) of 2019 and covered at 2 CFR 200.216 which are unallowable,

were not charged as part of the indirect cost proposal directly or indirectly to Federal awards.

I declare that the foregoing is true and correct.

Nonprofit Organization:

Signature:

Name of Official:

Title:

Date of Execution:

III-10

Exhibit G-1

CERTIFICATE OF FINAL INDIRECT COSTS – COMMERCIAL ORGANIZATIONS

Federal Acquisition Regulation, Subpart 52.242-4

This is to certify that I have reviewed this proposal to establish final indirect cost rates and to the best of

my knowledge and belief:

All costs included in this proposal (identify proposal and date) to establish final indirect cost rates for

(identify period covered by rate) are allowable in accordance with the cost principles of the Federal

Acquisition Regulation (FAR) and its supplements applicable to the contracts to which the final indirect

cost rates will apply; and

This proposal does not include any costs which are expressly unallowable under applicable cost

principles of the FAR or its supplements.

Applicable to proposals with incurred costs on or after August 13, 2020:

This proposal does not include any costs associated with covered telecommunications and video

surveillance, services or equipment mentioned in Section 889 of the National Defense Authorization Act

(NDAA) of 2019 (Re: FAR 4.2101 and 52.204-24, 52.204-25, and 52.204-26).

Firm:

Signature:

Name of Certifying Official:

Title:

Date of Execution:

SECTION IV

Common Indirect Cost Proposal Problems

A. Introduction

This section presents examples of some common problems with organizations. Many of these items

have been disclosed in OIG audits. The problems are summarized below under the following categories:

Incomplete indirect cost proposals.

Problems with timekeeping practices

Consistent Treatment and Specific Identification of Costs

Costs of "Unallowable Activities"

Credits

Indirect Cost Allocation Base

Expressly Unallowable Costs

Inter-organizational Transfers and Related-party Transactions

Budget Limitations

10.

Unsupported costs

B. Examples of Problems

Incomplete indirect cost proposals – Processing delays could be attributable to receiving

incomplete proposals. We recommend using the checklist available in page II-4 of this guide to

obtain the required documentation.

Timekeeping Practices

To be allowable, labor costs, whether charged directly or indirectly to DOL grants/contracts, must

be based on accurate time records reflecting the actual activities of all employees. These records

must account for the "total activity" for which employees are compensated and which are required

in fulfillment of their obligations to the organization. In many cases, a timekeeping system was

either not used at all or was used for payroll purposes only (time and attendance and not for labor

distribution purposes). For more information, see §200.430 Compensation—personal services

(a)(i), Standards for Documentation of Personnel Expenses.

Consistent Treatment and Specific Identification of Costs

To be allowable under DOL grants/contracts, costs must be treated consistently on all programs

of the organization. OIG audits have disclosed numerous instances in which non-profit

organizations have charged DOL grants and/or contracts, either directly or indirectly, for

(1)

costs specifically identifiable with programs and activities other than its DOL awards,

(2)

costs which were not treated consistently with other costs incurred for the same purpose

in like circumstances.

Costs of "Unallowable Activities"

Problems disclosed by OIG audits which related to so-called "unallowable activities" can usually

be categorized in two areas.

IV-1

IV-2

(1)

First, not all costs associated with "unallowable activities" were properly charged as costs

to the final cost objectives for such activities.

(2)

Second, because not all such costs were direct charged to "unallowable activities" cost

objectives, an appropriate share of indirect costs was not allocated to these "unallowable

activities." As a result, DOL and other Federal grants and contracts were allocated a

disproportionate share of the organization's indirect costs.

See 2 CFR, Part 200, Subpart E, §200.413(f) provides that the costs of certain "unallowable

activities" must be treated as direct costs (e.g., charged to separate final cost objectives) and

allocated an equitable share of the organization's indirect costs.

Examples of unallowable activities include: services to members, maintenance of membership

rolls, public relations, lobbying, and fund raising.

Even if an organization's own activities, non-DOL/non-government grants and/or contracts

provide for little or no reimbursement of indirect costs, the full share of indirect costs must be

allocated to such grants/contracts in accordance with 2 CFR, Part 200, Subpart E, §200.405

Allocable costs (c), which states:

may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions

imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for

other reasons. However, this prohibition would not preclude the non-Federal entity from shifting

costs that are allowable under two or more Federal awards in accordance with existing Federal

statutes, regulations, or the terms and conditions of the Federal awards

Credits

OIG audits have disclosed that a number of non-profit organizations failed to reduce the total

costs claimed under DOL grants/contracts by the amount of credits applicable to costs charged

either directly or indirectly to the DOL grants/contracts. These credits were generated through

various transactions, including fees for conferences held for the benefit of DOL programs,

building rental operations, insurance credits or adjustments, data processing and office services

performed for others, etc.

All receipts, refunds and adjustments applicable to direct costs charged to DOL grants/contracts

must be credited to the DOL grants/contracts and those applicable to indirect costs must be

credited to the appropriate indirect cost pools.

Indirect Cost Allocation Base

To meet the benefits received test, the allocation base must allocate indirect costs to all programs

equitably. To ensure that this test is met, organizations must continuously evaluate whether the

allocation base elements among all of its programs is proportionate to the benefits to be received

from the indirect costs.

Many organizations use total direct personnel costs (salaries/wages, plus fringe benefit costs) as

the allocation base to allocate indirect costs to their grants/contracts and other programs.

Another cost allocation base commonly used is modified total direct costs (see definition at 2

CFR, Part 200, Subpart A, §200.1.

In most instances, one of the above bases may allocate indirect costs in reasonable proportion to

relative benefits received by the various cost objectives. In some cases, they may result in

allocating a disproportionate share of the organizations' indirect costs to DOL grants. Use of an

inappropriate base which does not allocate indirect costs on the basis of relative benefits received

could result in substantial questioned costs.

IV-3

Expressly Unallowable Costs

Indirect costs that are unallowable are found in 2 CFR, Part 200, Subpart E, §200.420 General

Provisions for Selected Items of Cost. Common examples of expressly unallowable indirect costs

include: Alcoholic beverage, Bad debts, Contributions, Entertainment costs, Fund raising, and

Lobbying.

Inter-Organizational Transfers and Related-Party Transactions

Supplies and services acquired from affiliates, related parties, and organizations under common

control, must be based on the actual costs of the organizations providing the supplies and

services. No profit should be included.

OIG audits disclosed that some organizations charged directly or indirectly to DOL

grants/contracts, the "costs" of supplies and services which included "profits" and/or other mark-

ups added by the affiliates, related parties and/or organizations under common control.

Budget Limitations

Non-profit organizations must adhere to any budget limitations incorporated into their

grants/contracts. DOL grants/contracts limit reimbursements to grantees/contractors by

incorporating a special clause titled "Budget Line Item Flexibility." This clause provides that no

single line item of direct cost shall be increased or decreased in excess of 20 percent of the

budget provided the total estimated cost of the grant/contract is not exceeded. The clause further

provides that no increase in wages, salaries, and fringe benefits line items (including the mixture,

number of hours or wages of personnel paid under the grant/contract) is permitted without the

prior review and approval of the DOL Grant/Contracting Officer.

If a contract/grant specifically includes a ceiling rate(s), the indirect cost rate(s) or amount(s)

which are indicated in the organization's indirect rate cost agreement, will be subject to the

ceilings stipulated in the contract/grant agreement. The ceiling rate or the rate(s) cited in the

organization's indirect rate cost agreement whichever is lower, will be used to determine the

maximum allowable indirect cost on the contract or grant agreement.

The grantee/contractor must submit a proposal to establish a final rate within six months after

their fiscal year end. Billings and charges to Federal awards must be adjusted if the final rate

varies from the provisional rate. If the final rate is greater than the provisional rate and there are

no funds available to cover the additional indirect costs, the organization may not recover all

indirect costs. Conversely, if the final rate is less than the provisional rate, the organization will be

required to pay back the difference to the funding agency.

10.

Unsupported Costs

To be allowable, all direct costs and indirect costs must be adequately supported by source

documentation which clearly shows the purposes and circumstance of the cost incurred. For

example, canceled checks, credit card invoices and travel agents' invoices alone are not

sufficient to determine whether the costs are chargeable as direct costs or indirect costs, and

whether DOL grants/contracts received the benefit of the cost incurred.

In order to determine whether a cost is allowable under or allocable to a DOL grant/contract, the

purpose and circumstance of the cost incurrence must be established. OIG audits disclosed that

IV-4

a large number of non-profit organizations did not have adequate documentation to support the

allowability/allocability of the costs claimed or proposed.

Also, verbal approval from a Contracting/Grant Officer is insufficient documentation for supporting

costs under a contract/grant. Any modifications to a contract/grant must be in writing and signed

by both the Contracting/Grant Officer and the contractor/grantee.

V-1

SECTION V

Typical Questions and Answers (Q&As)

How do we get a copy of the Indirect Cost Guide?

Visit our website to get access to our “A Guide to Indirect Cost Rate Determination”.

Who needs an indirect cost rate?

Any organization being awarded cost reimbursable grants and contracts, also having more than one

source of funding (including direct Federal funding), needs an indirect cost rate.

Why do I need an indirect cost rate?

Your organization needs an indirect cost rate for: management information, to be in compliance with

Federal regulations, 2 CFR Part 200, Subpart E & Appendix IV, or the FAR (whichever applies),

close-out purposes, and for audit documentation.

Where can I find information on the applicable cost principles?

Visit our website to get access to the cost principles.

What is an indirect cost rate?

An indirect cost rate is a percentage (indirect cost pool/direct cost base) used to distribute indirect

costs to all cost centers benefiting from those costs.

Which agency should approve my indirect cost rate(s) and issue a Negotiation Agreement?

Your cognizant agency is responsible for negotiating your indirect cost rate and issuing the

appropriate Negotiation Agreement. Unless specifically assigned by OMB, the Federal agency with

the preponderance of direct funding is normally your cognizant agency.

What documentation is required as part of the provisional (based on budgetary costs) or final

(based on incurred costs) indirect cost rate proposal?

Please refer to our website’s “checklist”. Also available in Section II (Page II-4) of our indirect cost

guide.

How many days do we have to submit a provisional (based on budgetary information) indirect

cost rate proposal - 1

time?

All organizations must submit their initial indirect cost rate proposal to their cognizant agency

within 90 days of receiving a cost reimbursable grant/contract award. For example, 2 CFR, Part

200, Appendix IV, C.2.b., states:

“b. Except as otherwise provided in §200.414 Indirect (F&A) costs paragraph (e) of this

Part, a nonprofit organization which has not previously established an indirect cost rate

with a Federal agency must submit its initial indirect cost proposal immediately after the

organization is advised that a Federal award will be made and, in no event, later than

three months after the effective date of the Federal award.”

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How many days do we have to submit a final (based on incurred costs) indirect cost rate

proposal?

All organizations must submit their final indirect cost rate proposals within 180 days of the end of

your organization’s fiscal year. For example: 2 CFR, Part 200, Appendix IV, C.2.c., states:

“c. Unless approved by the cognizant agency for indirect costs in accordance with

§200.414 Indirect (F&A) costs paragraph (f) of this Part, organizations that have

previously established indirect cost rates must submit a new indirect cost proposal to the

cognizant agency for indirect costs within six months after the close of each fiscal year.”

10.

For how long do we need to submit annual indirect cost rate proposals based on incurred

costs?

For the life of the cost reimbursable contract/grant period. For example: You receive a three-

year grant award (July 1, 2019 through July 1, 2022). Your fiscal year ends on December 31st.

Based on the above example, your organization would need to submit final incurred cost

proposals for the organizations’ fiscal year ending (FYE):

12/31/19, 12/31/2020, 12/31/2021, and 12/31/2022.

11.

How many days does it takes my Federal cognizant agency to process my indirect cost rate

proposal?

The DOL’s Cost & Price Determination Division (CPDD) typically issues indirect cost rate

agreements within 150 days of proposal receipt pending no unforeseen negotiation issues.

12.

What is the correct DOL address for submission of an indirect cost proposal?

Please send electronic versions of the proposal to your assigned cost negotiator. Visit our

OSPE-CPDD@dol.gov.

13.

What can the submitting organizations do to help the Federal Cognizant Agency facilitate their

review of an indirect cost rate proposal?

To avoid delays, organizations should submit complete proposals. If proposals are based on

actual costs, they must reconcile to financial statements. If there are any questions concerning

any aspect of the proposal, contact CPDD to resolve the issue prior to formal submission. Also, if

during a prior negotiation you agreed to take corrective action(s) on any issues, you must

disclose the status of your action(s). Finally, you must inform CPDD about all significant

organizational or accounting changes and their impact. If these actions are taken, it could save

time in getting the proposal negotiated.

14.

When a grantee/contractor is required by DOL to submit a closeout package prior to

negotiating a final indirect cost rate, what is the procedure?

The grantee/contractor should prepare the closeout package using the approved provisional

indirect cost rate and include a statement indicating that a provisional indirect cost rate was used

pending negotiations of a final indirect cost rate. Upon receipt of a final indirect cost rate, the

grantee/contractor must notify the applicable Federal funding agency of the final rate issued and

V-3

request an amended final closeout adjustment. Refer to 2 CFR, Part 200, Subpart D, §200.344

and §200.345 for information on closeout and post-closeout adjustments and continuing

responsibilities.

15.

What do we do if some grants/contracts do not provide for any indirect costs or provide for

indirect cost rates that are lower than those established, provisional or final?

All indirect costs, using the approved rate, must be allocated to all grants/contracts regardless of

any restrictions or funding limitations. Any allocable indirect costs that exceed any administrative

or statutory restrictions on a specific Federal grant/contract may not be shifted to other Federal

grants/contracts, unless specifically authorized by legislation. Non-Federal revenue sources must

be used to pay for these unrecovered costs.

2 CFR Part 200, Subpart E, §200.414(c), states, however:

§200.306 Cost sharing or matching.)

(1)

The negotiated rates must be accepted by all Federal awarding agencies. A

Federal awarding agency may use a rate different from the negotiated rate for a

class of Federal awards or a single Federal award only when required by Federal

statute or regulation, or when approved by a Federal awarding agency head or

delegate based on documented justification as described in paragraph (c)(3) of

this section.

(2)

The Federal awarding agency head or delegate must notify OMB of any

approved deviations.

(3)

The Federal awarding agency must implement, and make publicly available, the

policies, procedures and general decision making criteria that their programs will

follow to seek and justify deviations from negotiated rates.

(4)

As required under §200.204 Notices of funding opportunities, the Federal

awarding agency must include in the notice of funding opportunity the policies

relating to indirect cost rate reimbursement, matching, or cost share as approved

under paragraph (e)(1) of this section. As appropriate, the Federal agency should

incorporate discussion of these policies into Federal awarding agency outreach

activities with non-Federal entities prior to the posting of a notice of funding

opportunity.

16.

Will DOL provide technical assistance to grantees/contractors in obtaining proper approval of

the indirect cost rate from other Federal agencies and State and local units of Government?

Yes. Visit our website to get access to a partial list of other Federal cognizant agencies (FCAs).

Reiterating a prior Q&A, the Federal agency providing most of the direct Federal funding is the

FCA for the grantee/contractor and they should negotiate and approve indirect costs for non-

Federal entities. See also Q&A # 15 above citing information from 2 CFR Part 200, Subpart E,

§200.414(c), Federal Agency Acceptance of Negotiated Indirect Cost Rates.

Regarding subawards and responsibilities of pass-through entities, it is important to highlight that

2 CFR Part 200, Appendix VII, D.1., states: “…Where a non-Federal entity only receives funds

as a subrecipient, the pass-through entity will be responsible for negotiating and/or monitoring the

subrecipient's indirect costs.” On that regard, pass-through entities must also follow guidance

from 2 CFR Part §200.332 Requirements for pass-through entities.

V-4

17.

Our grant with DOL totals $500,000 and includes a provisional indirect cost rate of 10%. Our

actual, final indirect cost rate is 13%. Will DOL provide us with additional grant funds due to

our higher indirect cost rate?

DOL could provide your organization with additional grant funds due to a higher final indirect cost

rate than the established provisional rate subject to funds available. Also, a grant modification

may be allowed to transfer budgeted direct costs to the indirect cost category due to the

increased indirect costs. This would be subject to the terms and conditions of the grant

agreement, e.g. approval of grant officer, indirect cost ceilings, and administrative cost limitations.

Contact your grant officer or grant officer technical representative for additional questions on this

topic.

18.

In the event that a grantee/contractor does not exceed the total grant/contract but exceeds the

ceiling placed on the indirect cost by DOL, can the excess indirect cost be recovered?

No. The ceiling on the indirect cost was included in the agreement to limit the amount of

grant/contract funds used for indirect cost purposes by the grantee/contractor. This condition was

known by the grantee/contractor before any grant/contract funds were expended.

19.

Can our indirect cost rate proposal be based only on Federal funds since it only represents

15% of our total revenue?

No. Your indirect cost rate proposal must be accompanied by a schedule of costs incurred for all

projects, Federal and non-Federal, and the amount of the proposed allocation base must tie-in

with the applicable direct cost base for all projects.

20.

Accrued annual leave cost – Is it allowable under 2 CFR Part 200?

2 CFR Part 200, Subpart E, §200.403 Factors affecting allowability of costs, details that allowable

costs must be determined in accordance with Generally Accepted Accounting Principles.

The Financial Accounting Standards Board issued Financial Accounting Standard Number 43

"Accounting for Compensated Absences" to establish uniformity in the accounting for annual

leave pay. This standard requires employers to accrue during each accounting period the liability

for compensated absences earned by employees during that period provided that all of the

following conditions are met:

The employer's obligation relating to employees' rights to receive compensation for future

absences is attributable to employee's services already rendered;

The obligation relates to rights that vest or accumulate;

Payment of compensation is probable; and

The amount can be reasonably estimated.

The accrual of annual leave does not result in increased costs, but allows recognizing the cost in

the proper accounting period to improve actual cost determination. In general, compensated

absences are to be accrued in the period in which they are earned rather than when they are

paid. In order for accrued leave to be an allowable cost, the personnel policies of the organization

must comply with the Financial Standard Number 43.

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21.

What is the difference between bid and proposal costs and fund raising costs and how does a

grantee/contractor treat such costs in its indirect cost proposal?

Bid and proposal costs represent the salaries, consultant fees, printing, postage, travel, etc.

associated with an organization's preparation of bids, proposals and applications to perform

specific tasks for remuneration under potential Federal and non-Federal grants, contracts or other

agreements. An organization should treat bid and proposal expenses as allowable indirect costs

subject to any limitations imposed by the Cognizant Federal agency.

Fund raising costs represent the salaries, consultant fees, printing, postage, travel, etc. associated

with an organization's requests to private institutions or individuals for donation of funds for non-

specific purposes. Fund raising costs are unallowable for Federal reimbursement purposes.

However, this activity (cost objective) shall be allocated an appropriate share of indirect costs.

Accordingly, fund raising costs are to be included in the distribution base used to compute an

organization's indirect cost rate.

22.

Can the audit costs under 2 CFR Part 200, Subpart F, be recovered?

Audit costs could be recovered as either direct or indirect costs in accordance with applicable

cost principles and the benefits received concept. However, there is no special appropriation for

audit costs. To recover audit costs, the organization must build them into the specific

grant/contract documents (if direct) or into the overhead proposal (if indirect).

For more information on this topic, see language below from 2 CFR, Part 200, Subpart F:

§200.501 Audit requirements.

(1)

Audit required. A non-Federal entity that expends $750,000 or more

during the non-Federal entity's fiscal year in Federal awards must have

a single or program-specific audit conducted for that year in accordance

with the provisions of this part.

(2)

Single audit. A non-Federal entity that expends $750,000 or more during

the non-Federal entity's fiscal year in Federal awards must have a single

audit conducted in accordance with §200.514 Scope of audit except when

it elects to have a program-specific audit conducted in accordance with

paragraph (c) of this section.

(3)

Program-specific audit election. When an auditee expends Federal

awards under only one Federal program (excluding R&D) and the Federal

program's statutes, regulations, or the terms and conditions of the Federal

award do not require a financial statement audit of the auditee, the auditee

may elect to have a program-specific audit conducted in accordance with

§200.507 Program-specific audits. A program-specific audit may not be

elected for R&D unless all of the Federal awards expended were received

from the same Federal agency, or the same Federal agency and the same

pass-through entity, and that Federal agency, or pass-through entity in the

case of a subrecipient, approves in advance a program-specific audit.

23.

If the grantee's policy is to capitalize equipment under the $5,000 threshold specified in 2 CFR

Part 200, §200.439 (Equipment and other capital expenditures), do they need Federal approval

prior to directly charging the grant with the cost of equipment?

Not from the CPDD since no indirect costs are being charged. Instead, these direct costs would

need to be reviewed and approved by the grant/contract officer.

24.

A grantee has contracted to update its computer network with its affiliates for a total cost of

$50,000. Since each component; i.e., monitor, printer, personal computer, software, modem,

etc., costs less than the $5,000 per unit threshold specified in 2 CFR Part 200, §200.439, can

this "equipment" be charged to the indirect cost pool?

No. The components of the computer network make it useable for the purpose for which it was

acquired and therefore establishes the "system" as a capital expenditure. Accordingly, this

equipment can be appropriately charged to Federal grants either as a direct or indirect cost, on

the basis of depreciation and the benefits received concept.

25.

Can transactions with an affiliate affect allowable costs?

Yes. A problem may arise in transactions between parent organizations and their affiliates when

the parent organization has an equity interest in the affiliate. When an equity interest exists, any

profits made by the affiliate improve the equity interest of the parent. If an affiliate sells a good or

service to the parent and the selling price includes a profit to the affiliate, the parent's equity

interest in the affiliate has been increased. If the parent then includes the purchase price as a

direct or indirect charge to a Federal award, it has violated the applicable cost principles that

charges will be at cost and not include a profit factor.

For example, suppose your organization (the parent) obtains accounting services from an affiliate

and the parent organization has an equity interest in the affiliate. The fee that the parent pays to

the affiliate must be based on the cost incurred by the affiliate and the fee and should not include

a profit to the affiliate.

If the fee does include a profit factor to the affiliate, the allowable part of the fee is limited to that

portion which represents the cost to the affiliate exclusive of any profit factor.

This principle works in reverse as well. When an organization provides a good or service to an

affiliate, the full cost of providing that good or service must be recovered from the affiliate and an

appropriate credit must be applied to the indirect cost pool.

26.

What is the period of time that an indirect cost rate agreement covers?

A provisional indirect cost rate is negotiated to cover a one-year period. However, because of the

time lapse between the submission and approval of a rate, provisional rates are usually

established by DOL for a two-year period. A final indirect cost rate agreement is negotiated to

cover one fiscal year period. A new final indirect cost rate must be negotiated for subsequent

fiscal years.

27.

Where can I get access to Q&As related 2 CFR 200 issued by the US Chief Financial Officers

Council?

Click on the following External Regulations and Q&A Guidance which provides 2 CFR 200 Q&As

published on July 2017, as well as May 2021.

V-6

APPENDIX I

NEGOTIATED INDIRECT COST RATE AGREEMENT

NON-FEDERAL ENTITY

UEI: N6Y7WXPEDW25

DATE: 11/22/2023

ABC Organization

3600 East Chicago Ave.

Milwaukee, WI 53609-3241

EIN: 39-1722369

FILE REF.: This

replaces the agreement

dated 1/27/2023

The indirect cost rate(s) contained in this Agreement are for use on grants, contracts, and other agreements

with the Federal Government. This Agreement was negotiated by ABC Organization (non-Federal entity)

and the U.S. Department of Labor in accordance with the authority contained in the Federal Acquisition

Regulation (FAR) for commercial entities, or Title 2 of the Code of Federal Regulations, Part 200 for

nonprofit and state/local entities. This Agreement is subject to the limitations in Section II, A, below.

When applicable, the rates presented in this Agreement may only be applied to: (1) cost-reimbursement

contracts and (2) actual costs for materials in time-and-materials (T&M) contracts. Any indirect rates for

labor costs in T&M, labor-hour and fixed-price contracts must be negotiated with the Contracting Officer

during pre-award in accordance with FAR Part 15.404-1(c).

SECTION I: RATES

TYPE APPROVAL

FROM

RATE

BASE LOCATION

APPLY

Indirect

Final

01/01/2022

12/31/2022

28.20%

SW-1

Loc-1

AP-1

Indirect

Provisional

01/01/2023

12/31/2023

39.79%

SW-1

Loc-1

AP-1

Indirect

Provisional

01/01/2024

12/31/2024

28.20%

SW-1

Loc-1

AP-1

(SEE SPECIAL REMARKS)

BASE

SW-1: Total direct salaries and wages including vacation, holiday, sick pay, other paid absences, and

all applicable fringe benefits.

LOCATION

APPLY TO

Loc-1 All Locations

AP-1: All programs

TREATMENT OF FRINGE BENEFITS: Fringe benefits are specifically identified to each employee

and/or are charged individually as direct or indirect cost (as applicable). See Special Remarks section of

this Agreement for more details.

TREATMENT OF PAID ABSENCES: Vacation, holiday, sick leave pay and other paid absences are

included in salaries and wages and are claimed on grants, contracts and other agreements as part of the

normal cost for salaries and wages. Separate claims are not made for the cost of these paid absences.

SECTION II: GENERAL

A. LIMITATIONS

Use of the rate(s) contained in the Agreement is subject to all statutory or administrative limitations and is

applicable to a given Federal award or contract only to the extent that funds are available. Acceptance of

the rate(s) agreed to herein is predicated upon the following conditions:

1. No costs other than those incurred by the non-Federal entity or contractor were included in its indirect

cost pool as finally accepted and that such incurred costs are legal obligations of the non-Federal entity

and allowable under the governing cost principles.

2. The same costs that have been treated as indirect costs have not been claimed as direct costs.

3. Similar types of costs have been accorded consistent treatment.

4. The information provided by the non-Federal entity or contractor which was used as a basis for

acceptance of the rate(s) agreed to herein is not subsequently found to be material1y inaccurate by the

Federal government. In such situations, the rate(s) may be subject to renegotiation at the discretion of

the Federal government.

5. The rates cited in this Agreement are subject to audit.

6. Indirect costs charged to Federal grants/contracts by means other than the rate(s) cited in this Agreement

should be adjusted to the applicable rate(s) cited herein and be applied to the appropriate base to identify

the proper amount of indirect costs allocable to the program.

7. Contracts/grants providing for ceilings as to the indirect cost rate(s) or amount(s) which are indicated

in Section I above, will be subject to the ceilings stipulated in the contract or grant agreements. The

ceiling rate or the rate(s) cited in this Agreement, whichever is lower, will be used to determine the

maximum allowable indirect cost on the contract or grant agreement.

8. Administrative costs consist of all Direct and Indirect costs associated with the management of a non-

Federal entity’s programs. Non-Federal entities should refer to their contracts/grants terms and specific

program legislation for the applicable definition of Administrative Costs and any related limitations.

B. ACCOUNTING CHANGES

This agreement is based on the accounting system purported by the non-Federal entity or contractor to be in

effect during the Agreement period. Changes to the method of accounting for costs which affect the amount

of reimbursement resulting from the use of this Agreement require prior approval from the Cost & Price

Determination Division (CPDD). Such changes include, but are not limited to changes in the charging of a

particular type of cost from indirect to direct. Failure to obtain approval may result in cost disallowances.

C. NOTIFICATION TO FEDERAL AGENCIES

A copy of this document (original, and revised (if applicable)) is to be provided by the non-Federal entity or

contractor to other Federal funding sources as a means of notifying them of the Agreement contained herein.

D. DEFINITION OF RATES

1. Final rate means an indirect cost rate applicable to a specified past period which is based on the actual

costs of the period. A final rate is not subject to adjustment.

2. Provisional rate or billing rate means a temporary indirect cost rate applicable to a specified period which

is used for funding, interim reimbursement, and reporting indirect costs on Federal awards pending the

establishment of a final rate for the period.

3. Predetermined rate means an indirect cost rate, applicable to a specified current or future period, usually

the organization's fiscal year. The rate is based on an estimate of the costs to be incurred during the

period. A predetermined rate is not subject to adjustment.

4. Fixed rate means an indirect cost rate which has the same characteristics as a predetermined rate, except

that the difference between the estimated costs and the actual costs of the period covered by the rate is

carried forward as an adjustment to the rate computation of a subsequent period.

The Special Remarks section of this agreement may include a carry forward amount(s) for the applicable

fiscal year(s).

5. G&A rate – If published in Section I, it is the acronym for “General and Administrative” type of indirect

expenses. G&A means any management, financial, and other expense which is incurred by, or allocated

to, a business unit and which is for the general management and administration of the business unit as a

whole.

E. SPECIAL REMARKS

1. Provisional/Final Rate approval and impact to closeout adjustments:

When seeking initial reimbursement of indirect costs using the provisional/final rate methodology, a

provisional proposal must be submitted within 90 days of receiving a Federal award (financial assistance,

grants, cooperative agreements, and cost reimbursable contracts) that requires accounting for actual costs

incurred. The non-Federal entity or contractor must submit an indirect cost rate proposal within six (6)

months after the end of their fiscal year to establish a final rate.

Once a final rate is negotiated, billings and charges to Federal awards must be adjusted if the final rate varies

from the provisional rate. If the final rate is greater than the provisional rate and there are no funds available

to cover the additional indirect costs, the non-Federal entity or contractor may not recover all indirect costs.

Conversely, if the final rate is less than the provisional rate, the non-Federal entity or contractor will be

required to reimburse the funding agency for the excess billings.

Non-Federal entities or contractors receiving a Federal cost reimbursable contract(s) - Must adhere with

FAR 52.216-7(d)(2)(v), to settle final indirect cost rates typically on an annual basis:

“The contractor shall update the billings on all contracts to reflect the final settled rates and update the

schedule of cumulative direct and indirect costs claimed and billed, as required in paragraph (d)(2)(iii)(I)

of this sections, within 60 days after settlement of final indirect cost rates.”

In addition, the contractor shall provide to the Contracting Officer the noted cumulative costs schedule

within 60 days of the execution of this agreement.

If the non-Federal entity or contractor has completed performance under any of the contracts covered by this

Agreement, a final invoice or voucher must be submitted no later than 120 days from the date on which this

Agreement is executed, following guidance from FAR 52.216-7(d)(5) and FAR 52.216-7(h).

Non-Federal entities receiving Federal awards (financial assistance, grants, and cooperative agreements) –

Note that even if Federal awards are administratively closed prior to the settlement of final indirect cost

rates, non-Federal entities still must comply with the following 2 CFR Part 200 clauses stating, in part:

§200.344 Post-closeout adjustments and continuing responsibilities

(a) The closeout of a Federal award does not affect any of the following:

(1) The right of the Federal awarding agency or pass-through entity to disallow costs and recover

funds on the basis of a later audit or other review. The Federal awarding agency or pass-through

entity must make any cost disallowance determination and notify the non-Federal entity within

the record retention period.

(2) The obligation of the non-Federal entity to return any funds due as a result of later refunds,

corrections, or other transactions including final indirect cost rate adjustments.

§200.345 Collection of amounts due

(a) Any funds paid to the non-Federal entity in excess of the amount to which the non-Federal entity is

finally determined to be entitled under the terms of the Federal award constitute a debt to the Federal

Government.

(b) Except where otherwise provided by statutes or regulations, the Federal awarding agency will charge

interest on an overdue debt in accordance with the Federal Claims Collection Standards (31 CFR

parts 900 through 999). The date from which interest is computed is not extended by litigation or the

filing of any form of appeal.

2. Fringe benefits include the following: FICA-Medicare/WI State Unemployment Insurance/Workers'

Compensation and Health, Vision and Life Insurance.

3. Equipment is defined as tangible personal property (including information technology systems) having

a useful life of more than one year and a per-unit acquisition. The capitalization threshold for equipment

is $1,000; for individual items that have a useful life greater than one year; when acquired.

4. The indirect salaries approved as part of the Rate/CAP in Section I comply with the applicable ETA

TEGL 5-06 and/or Job Corps salary and bonus restrictions.

ACCEPTANCE

BY THE NON-FEDERAL ENTITY

BY THE COGNIZANT AGENCY FOR

INDIRECT COSTS, ON BEHALF OF THE

U.S. FEDERAL GOVERNMENT

ABC Organization

3600 East Chicago Ave.

Milwaukee, WI 53609

-3241

U.S. Department of Labor

Cost & Price Determination Division

Office of Strategy and Administration

Office of the Senior Procurement Executive

Washington, DC 20210

(Non-Federal Entity)

(U.S. Federal Government Agency)

(Signature)

Michael Smith

(Signature)

Victor M. López

(Name)

President/CEO

(Name)

Chief, Cost & Price Determination Division

(Title)

11/22/2023

(Date)

Negotiated By: Victor M. Lopez

Office Phone: (202) 693-4106

Email: [email protected]