One of the goals of the new grant management regulations is to reduce administrative burden for grant recipients.
At this moment, the change in the grant guidance may not feel like a reduction in your workload.
But don’t lose hope.
You just have to do a little digging to find these two gems in the new “Super-Circular” 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
The needles in the haystack are two new options for indirect costs rates.
Indirect Cost Rates: Problem Child for Federal Agencies and Grant Recipients
Getting an indirect cost rate reviewed, negotiated and accepted by your cognizant agency has been a perennial problem for many grantees and agencies over the years.
Sometimes it’s been difficult to get a rate negotiated.
Or perhaps your indirect cost rate proposal just seems to languish in a pile on someone’s desk.
And not having an approved rate in place can be a big hurdle to overcome, especially for organizations new to the grant community.
The updated grant management guidance incorporates a couple of new options that should simplify life for many grant recipients.
Indirect Cost Rates: New Option #1
Are you an organization or local government with a fairly low indirect overhead structure?
This first option may appeal to you.
What the new grant guidance says is:
“Okay, if you’re willing to accept a 10% “de minimis” indirect cost rate of 10%, then we’re going to make it easy for you”
And just to make it even simpler, you can keep this rate indefinitely without having to go through the whole process of developing an indirect cost rate proposal and putting that in place.
Check this option out if you can live with a 10% indirect cost rate.
Indirect Cost Rates: New Option #2
Perhaps, the idea of a 10% indirect cost rate makes you choke.
And for many organizations, institutions of higher learning and state and local governments, that is probably a common reaction to this aspect of the new grant management guidance.
(Though if your indirect cost rate is higher than 10%, you need to have on your radar that there’s going to continue to be pressure in coming years to drive down your indirect costs.)
The second new option is a one-time extension of an existing negotiated cost rate proposal for up to four years.
You will still have to have the extension reviewed and approved by the cognizant agency.
But if you have a rate that seems to work for your organization, this is a feature that may be a benefit to you.
You may be wondering:
“Can I extend for two years instead?”
The grant guidance says “up to four years” which allows for periods of less than 4 years as well.
Indirect Cost Rates: What’s the Catch?
If you take advantage of this one-time extension on your currently negotiated indirect cost rate, you need to be aware of a couple “gotchas”
First, if the extension is approved by the cognizant agency, you can’t request a review of the extended rate until the timeframe of the extension is done.
That means you live with the rate for the whole period of the extension.
No crying after the fact.
Next, because this extension is one-time….
You will need to get ready to submit another indirect cost rate proposal at the end of the extension period for review and negotiation.
So if your current situation is one you can live with for a few years, then this new option in the grant management guidance will be a nice feature for your organization.
Do you feel your administrative burden being reduced now?
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
P.S. If you missed the recent MyFedTrainer webinar on the new grant regulations, we didn’t let the weather and a few technical glitches stop us.