Question: I am the fiscal person for a center. I participated in one of your webinars last year concerning indirect cost rates. Since we have previously used a Cost Allocation Plan, I just want to be sure that I am understanding the proper processes in applying the rate to our various funding sources in this fiscal year under that new rate.
This is what I’ve been doing – At the end of the month, after allocating all direct costs to our various programs or funding sources, I look at all of the unallocated (indirect) costs and spread them based on the direct costs. In October, the actual indirect cost rate was a little higher than our approved rate, so I only allocated based on our approved rate. This left $97 unallocated.
In November, the actual rate was lower than our approved rate, so I used the actual rather than the approved rate, as I was concerned that the Part C grant would not allow more costs than actually spent. If this is the correct way to do that, could I have included the unallocated costs from October in my allocation?
Answer: While it is acceptable to take a lower rate than what has been approved, you may want to stick with the approved rate if you feel it will average out over time. You will be required to reconcile what you charged to your actual at the end of your trial rate period, so you don’t what to draw more than you need and have to pay it back. On the other hand you want to fully cover your indirect costs as defined in your indirect cost rate proposal.
Question: One question I have is this – suppose we receive a restricted grant for something such as a home modification or adaptive equipment. If the grant specifies that the funds are to be used exclusively for that purpose, do I still need to allocate some indirect costs to that?
You are required to apply your indirect cost rate to every project, even to fund development and to lobbying if you do those activities. If a funding source does not allow an indirect rate they may allow you to itemize your indirect costs and include them in your total actual costs for the project. The only exception is if you are passing funds through your organization to consumers specifically. Your home modifications and adaptive equipment probably fall into this category. In those cases you are providing a direct benefit to your consumers as part of your overall Independent Living program, and the indirect costs are carried in the IL program.
Question: Also, am I making this more complicated than it should be? I want to be very transparent in how I determine the amount for our Part C drawdown.
Each center is different because you developed your own indirect cost rate proposal. As a result, it is as complicated or as simple as what you said you would do in that proposal.
Applying that new Indirect Cost Rate