The generation of approvable indirect cost rates requires that a grantee follow the specific requirements contained in the cost principles for the type of organization in which it is classified.
Full recovery of all costs incurred in support of Federal grants and contracts is dependent upon the incorporation of the results generated by the cost allocation plan with the selection of the appropriate indirect cost rate process.
Alternative approaches
Each set of cost principles has identified more than one approach in identifying and documenting indirect costs associated with individual grants and contracts. These range from a “short” form, to a “multiple distribution basis” to a “direct allocation” approach.
Assessment
The selection of the appropriate approach is dependent upon numerous factors, including the accounting system used and the organizational structure of the grantee.
With its vast experience, the ICS team can assess the effects of each approach and recommend the one that provides the best cost/benefit results.
Developing the indirect cost rate(s)
With its in-depth knowledge of the cost principles and cognizant agency requirements, the ICS team can develop an indirect cost rate(s) that is fully documented and includes only allowable costs. These rates may either be based on salaries and wages or modified total direct costs.
Treatment of fringe benefits
Directly related to the development of an indirect cost rate is the proper treatment of fringe benefits. The composition of fringe benefits varies by organization. How these are treated in light of the Federal rules can govern the level of recovery. Again the ICS team, based on its experience, can perform this analysis and recommend the appropriate approach.
Negotiation assistance
Depending upon the decision of the cognizant Federal agency, the grantee may be required to submit the indirect cost rate proposal for review and negotiation or hold it for a OMB Circular A-133 audit.
When it is requested to be submitted for review, the ICS team can assist grantees in the successful negotiation of the indirect cost rate(s) with the cognizant Federal agency. In addition, if the rate(s) is subject to an A-133 audit, the ICS team can assist in the successful resolution of any audit questions.