FEDERAL COST RECOVERY - INDIRECT COST RATE PROPOSAL AND/OR COST ALLOCATION PLANS - 9216.2

(Renumbered: 01/2022)

(Revised and renumbered from 8756.1)

Each agency/department that receives federal funds must prepare an Indirect Cost Rate Proposal (ICRP), and/or Cost Allocation Plan (CAP) or Public Assistance Cost Allocation Plan (PACAP), unless exempted by the Department of Finance (Finance), Fiscal Systems and Consulting Unit (FSCU). An ICRP, CAP or PACAP establishes the basis for recovering full costs associated with programs or activities. The ICRP, CAP or PACAP must be prepared in accordance with the Office of Management and Budget (OMB) Guidance at 2 Code of Federal Regulations (CFR) 200, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” published by the federal Department of Health and Human Services, which is available at: http://www.ecfr.gov.

Every fall, FSCU notifies agencies/departments with federal funding of the central service costs (or Statewide Cost Allocation Plan (SWCAP)) apportioned to them for the next fiscal year. The reports are available in the Finance Accounting SWCAP Library.

Inclusion of SWCAP costs is required in the agency’s/department’s ICRP, CAP, or PACAP to allow for the recovery of SWCAP costs apportioned to the agency/department, unless exempted by statute and/or grant provisions.

For ICRPs only, in addition to the supporting documentation required by OMB Guidance at 2 CFR 200, agencies/departments are required to complete a Finance ICRP Summary Form. This form primarily acts as a checklist for proper preparation of the ICRP and is available in the Finance Accounting ICRP Library. A summary sheet must also be included in the ICRP identifying the calculation of the indirect cost rate, cross-referenced to the supporting documentation. The formula used to calculate the indirect cost rate is shown below.

Agencies/departments must submit their ICRPs, and/or CAPs or PACAPs to FSCU for review and approval before sending to the federal cognizant agency for approval. ICRPs, CAPs, or PACAPs are typically due to the federal cognizant agency at least six months before the start of the fiscal year to which the ICRP, CAP, or PACAP applies.

Generally, the federal agency from which an agency/department receives the most funding is designated as the federal cognizant agency.

Once the ICRP, CAP, or PACAP is approved by the federal cognizant agency, the agency/department may recover indirect costs from the federal government. Refer to SAM section 9216.1 for requirements to transfer the recoveries to the General Fund.

CALCULATION OF INDIRECT COST RATE

 

(1) Net Total Agency/Department Indirect Costs + (2) SWCAP Allocation / (3) Total Direct Cost Base = Proposed Indirect Cost Rate

1. Indirect costs are costs incurred for a joint or common benefit and cannot be identified with a particular program, function, or cost objective. Sometimes known as “overhead,” these costs include costs for accounting, budgeting, human resources, etc. The total agency/department indirect costs are adjusted for unallowable costs and the addition of costs, such as equipment use allowance, per OMB Guidance at 2 CFR 200.

    

2. Indirect costs also include the agency’s/department’s allocation of central services costs (SWCAP).

    

3. Direct costs are costs identified specifically with a particular program, function, or cost objective. Typical direct cost bases include personal services and modified total direct costs.

 

The components of the indirect cost rate should be cross-referenced to supporting documentation in the ICRP (e.g., budget reports, financial statements, etc.)