Most questions are addressed in the training provided on our website. Some questions, however, are “frequently asked”. Here are some with  responses from John Heveron and Paula McElwee.

The 990 (or the audited financial statement) that I am reconciling to is 2014. Is that okay? Yes, you will reconcile to the most recent, to either financial statements OR 990, and that will typically be 2014 because of the timing.

Now that I am looking at my audit I see some problems. I don’t like the way the auditor split out the costs and it doesn’t agree with what I am doing for the Indirect Cost Rate. You don’t have to reconcile back item by item. You can reconcile back to the total annual  without agreeing with the breakout.

But there are huge differences between our revenue and expenses now compared to 2014. If you don’t expect any significant differences, there won’t be any reconciling adjustments, but if there are changes, like a discontinued program or a new staff position, you should include them as adjustments in the reconciliation.

What methodology should I use for determining the rate? You get to choose which one makes the most sense to you. You can choose either method A (indirect costs are divided by direct salaries & benefits) versus method B ( indirect costs are divided by total direct costs). We generally suggest using total direct costs as a basis. However, using direct salaries is a little simpler and we have seen several organizations use that method. This is your Indirect Cost Proposal and you have some flexibility in how you define and structure it. There is not a one-fits-all plan.

I am from a 723 State, where the State contribution exceeds the federal contribution to the IL network. Do we still have to have an Indirect Cost Proposal? Any CIL that wants to claim indirect costs should be preparing an indirect cost rate proposal in accordance with 2 CFR 200.  Cost allocation plans are limited to those state and local government agencies that administer public assistance programs as identified in 45 CFR 95, Subpart E.  The DSE should continue the process of working with your CILs to transition the CILs  from a cost allocation plan to an indirect cost rate proposal  This will bring the CILs into compliance with 2 CFR 200, and be consistent with those entities that receive direct federal funding and have

made/or are in the process of making the transition from a cost allocation plan to an indirect cost rate proposal.

Where do we submit our proposal? You submit to the HHS regional office. Find your regional office here.

What format should we use?  HHS requires that all indirect cost rate proposals be submitted electronically. They require two separate PDF files (CD or flash drives if file size exceeds 25 MB) The first file marked “proposal” will contain the entire proposal including your transmittal letter, checklists and certifications as well as supporting schedules.  The second file, marked “financial statements” will contain financial information such as audited financial statements or your annual form 990. We suggest you add your two letter state designation and your organization’s initials so that files are distinguishable. The file name might look like this: proposalTXilru.pdf

What is the deadline? Because you need to include this rate on your next federal grant proposal, you want an approved rate by July 1. The March 31 deadline is our suggested target date, not a firm deadline. The sooner you get it in the better, just to be sure, but a late proposal will not be rejected — it will just take a little longer to get approved.

I found a sample indirect cost rate proposal on HHS website, would it be better to use that? That sample is not fully updated for Uniform Guidance. Also, it is partly a sample plan and partly an instructional resource, so if you use it you need to be careful what you include.

Can we change our indirect rate plan if circumstances change? Generally you will not change your plan although the calculations will change each year, more so in a year when your programs or personnel are different. You also need to be careful not to commit to procedures that are tedious and not required, for example tracking your copies and long distance phone calls by program. If you commit to that you will need to do it in future years. That detail is only required of you if you promised to do it.

 What should be in the transmittal letter? The transmittal letter will be your cover email or, if your files are too large, your cover letter for your CD or flash drive. It should contain your organization’s information in letterhead or signature form, should state that you are attaching the indirect cost rate proposal and that you are requesting a provisional rate, and give the contact name and information for informing you of your rate or asking questions about your proposal.

Art downloaded from

FAQs on Indirect Cost Proposals
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