FEDERAL COST RECOVERY - INDIRECT COST RATE PROPOSAL AND COST ALLOCATION PLANS - 9216.2
Each agency/department that receives federal funds shall prepare an Indirect Cost Rate Proposal (ICRP), 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 U.S. Department of Health and Human Services.
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 SWCAP reports are available in the Finance Accounting SWCAP Library.
The agency/department must include the SWCAP apportionment in the ICRP, CAP, or PACAP to allow for the recovery of federally approved statewide central services costs unless exempted by statute or grant provisions.
For ICRPs only, in addition to the supporting documentation required by OMB Guidance at 2 CFR 200, agencies/departments shall complete a Finance ICRP Summary Form. This form acts as a checklist for proper preparation of the ICRP and is available in the Finance Accounting ICRP Library. The ICRP shall include a summary sheet identifying the indirect cost rate calculation, cross-referenced to the supporting documentation. The formula used to calculate the indirect cost rate is shown below.
Agencies/Departments shall submit their ICRPs, CAPs, or PACAPs to FSCU for review before sending them 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 federal cognizant agency approves the ICRP, CAP, or PACAP, the agency/department may recover indirect costs from the federal government. For requirements to transfer the recoveries to the General Fund, see SAM Section 9216.1.
CALCULATION OF INDIRECT COST RATE
([1] Agency/Department's Net Total Indirect Costs + [2] SWCAP Apportionment) / [3] Total Direct Cost Base = Proposed Indirect Cost Rate
- Indirect costs, sometimes known as overhead, are costs incurred for a joint or common benefit and cannot be identified with a particular program, function, or cost objective (e.g., accounting, budgeting, or human resources). 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.
- Indirect costs include the agency/department’s allocation of statewide central services costs (SWCAP apportionment).
- 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.).