Mandatory cost sharing and aggressive disallowance of direct costs by Government auditors have created cash flow pressures that strain the finances of many NGOs. Maximizing the recovery of allowable indirect costs is crucial to long term viability. Proper use of indirect expense rates can increase total cost recovery and improve timely cash inflows. This one day course starts with the strategy of selecting an indirect expense recovery method from the range of structures permitted for US Government funded programs subject to the Uniform Guidance 2 CFR 200 and associated regulations. We will cover the process of preparing and submitting a proposal to establish a NICRA, using the approved rates in monthly billings/reporting, and the year-end close-out. We will cover the “de minimis” fixed rate that may be available to some organizations as an alternate to a NICRA. We will go through the fundamental cost accounting requirements in detail and introduce advanced cost recovery concepts. This is a highly interactive seminar with group discussions and a real world case study executed in small groups.
Understanding the Options in Obtaining a NICRA
- Strategic planning for indirect expense recovery – What are the options?
- Requesting a NICRA with annual indirect rates – What are the steps? Will it be approved? Are my systems adequate? Am I prepared for the annual true-up from provisional to actual rates?
- Electing a fixed de minimis rate – Do you qualify? What rules apply? Will the Agency approve?
- Direct Charging – What if you are denied indirect cost recovery? What is the impact of charging all costs directly to projects?
- What is the Agency supposed to do? What are they actually doing?
- Indirect rates for subawardees – What is the role of the prime awardee in approving an indirect rate for a subaward?
Preparing/Reviewing an Indirect Cost Proposal
- 3 Acceptable Organization-Wide Indirect Cost Methods
- 13 Examples of Typical Indirect Cost Functions
- Acceptable Bases of Allocation/Distribution
- Proposal tools issued by Agencies
- Importance of a written Cost Policy Statement
Direct Costing Concepts
- 7 Mandatory Direct Cost Functions
- Direct-Costing Shared Field Office Costs
- Methods for Directly Allocating Administrative Costs
- Allocating Joint Direct Costs
Typical Indirect Cost Rates
- Range of Indirect Cost Rates Approved by Agencies
- Conforming to Ceilings Imposed by Non-US donors (Gates Foundation, Global Fund, etc.)
- Creating a Special Business Unit for Lower Indirect Cost Awards
- Creating Administrative Service Center(s) for Direct Costing
Implementing Actions with an Approved Indirect Cost Rate
- Applying/Proposing Indirect Costs on Prospective Awards
- Setting Up the Account Structure for Accounting for Indirect Costs
- Documenting, Accumulating, and Tracking Indirect Costs
- Monthly billings and expense reporting
- Preparing the Annual “True-Up” Report of Actual Indirect Costs
Reviewing an Indirect Cost Proposal/Annual True-Up Report
- Review of Major Indirect Cost Line-Items
- Consistency in Charging Direct and Indirect Costs
- Identify and Classify Any Unallowable Costs
- Verify the Base of Allocation/Distribution
- Preferred Annual Rate Calculation Format
Practice Set for Preparing an Indirect Cost Proposal There will be a 2-hour hands-on exercise in conceptualizing and preparing an indirect cost proposal for NFEs. (Participants to please bring a calculator.)