Business man pulling a big green dollar sign concept on background
Business man pulling a big green dollar sign concept on background

Q: If a funder does not allow any administration costs, can Part C funds make up a larger portion?

A: If the funds are pass through to consumers, they may be treated differently, and you may not be required to apply the indirect cost rate if you are passing through home modifications, equipment, or other things that directly benefit the consumer and support Independent Living. Typically, though, the expectation is that your indirect cost rate is applied fairly to each of your cost objectives. It is expected that most funds received will be charged the proportionate amount in indirect costs. If they do not allow any administration costs, you may need to break your costs out to tell them the specific amount being charged and for what, so that the detail meets their requirement as an actual cost and not administrative cost. If that is not allowed, you need to pay their portion of indirect costs through your discretionary funds. You cannot charge a larger proportion to one grant than to another, and certainly Part C funds cannot absorb more than their share of indirect costs.

Q: How is funding classified when it is a fee received through Employment Networks? Phase 1 and 2 payments?

A: The payments you describe are fees for service. You are not required to charge indirect costs to fee for service projects; however if you development them with Part C funds they would be considered program income and must be spent in the same way Part C funds are spent.

Q: Will funding increase based on indirect rate?

A: Part of the purpose of establishing clear guidelines for indirect rates is to allow each funding source to pay its fair share of indirect costs. In addition, ACL has requested additional funding for Independent Living. However, we have no indication that an increase in the base grants is forthcoming. Remember, though, that your CIL is required to conduct fund development. You should be developing services that will pay for themselves. Many CILs do this through Employment contracts like the one mentioned above, or through contracts for Youth through schools or for Veterans through the VA, or transition services through state Olmsted plans.

Q: What does it mean that a contractor is not subject to cost allocation rules?

A: While employees must track their time to properly allocate it between cost objectives, a contract is divided based on the CIL’s assessment of the contractor’s value to the various cost objectives. The allocation is based on either your indirect, if your contractor is benefiting all programs (for example, IT contractors) or directly to a program if the contractor benefits only one program.

Q: Is it better for my organization to have a higher percent or a lower percent indirect rate?

A: While we all want to make sure our indirect costs are fair, indirect costs are not the same thing as administrative costs. Keeping administrative costs low is a goal when showing efficiency of your organization. Indirect cost rates, on the other hand, are determined through decisions about specific costs. Some CILs bundle more into their indirect costs — all of the time of the ED, accountant, program manager and receptionist, for example, while the next center strives to allocate as much as possible as direct costs and requires all those workers to split out their actual time benefiting various programs. You can see your Information Technology as indirect or you can divide most of it up directly based on square footage or staff salaries and have a much smaller amount that is indirect.

For more information from this workshop, go to the page for the workshop. As they are available, the captioned videos, PowerPoint Presentations and transcripts will be posted there. The sample financial policies and procedures are already available.

Q and A from Financial Workshop – Indirect Cost Rate

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