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NEA Office of Inspector GeneralIndirect Cost Guide For NEA GranteesNOTE: The following questions and answers are simplified and intended for the majority of National Endowment for the Arts (NEA) grantees that receive their primary Federal funding from NEA each year. The situation becomes more complex for grantees that receive multiple grant awards from various Federal agencies. What Are Direct Costs?Direct costs are those costs which can be identified and assigned to a specific project or grant activity. These include:
What Are Indirect Costs?Indirect costs are overhead or administrative costs (facilities and administration, rent, electricity, depreciation, telephone, etc.) that cannot be identified to a specific project or function. However, these are actual costs that are incurred by an entity. What Is An Indirect Cost Rate?An indirect cost rate is a method to allocate indirect costs to a specific project or function, usually as a percentage of salaries and wages or as a percentage of total direct costs. Does Our Entity Need An Indirect Cost Rate?Most NEA grantees do not need an indirect cost rate. Whether or not your organization qualifies for an indirect cost rate will not increase or decrease the amount of your grant award. If your organization is single function entity (e.g., a small theater company), an indirect cost rate is probably not necessary. All costs should be assignable directly to a project or production. However, if your organization is one such as a multidisciplinary arts center with a variety of activities (e.g. a gallery, a media screening space, and a black box theater), costs may not be assignable directly. The indirect cost rate is a method to allocate those unassignable costs and is not to be misconstrued as an additional payment benefit. Some expenses such as production supplies might be readily identifiable to a particular project, while other expenses might not. An indirect cost rate is generally advantageous if your expenditures cover a broad range of activities and functions. Does Our Entity Need An Indirect Cost Rate From Nea If We Already Have An Indirect Cost Rate From Another Federal Agency?No, if your entity already has an indirect cost rate negotiated by another Federal agency, that rate can be used for NEA grants. (The exception is a non-negotiated flat indirect cost rate used by some Federal agencies for their specific grants.) Typically, the Federal agency providing the most Federal funds to the entity has the responsibility for negotiating the indirect cost rate. Please note that rate negotiations must be kept current and are usually renegotiated annually. Does Our Entity Need An Indirect Cost Rate Before Including Such Costs On Our Grant Application?No, indirect costs can be estimated for grant application purposes if it is determined that an indirect cost rate is needed. An entity must submit its initial indirect cost proposal immediately after the award is made and not later than three months after the effective date of the award. How Is An Indirect Cost Rate Determined?Generally, for NEA grantees, the indirect cost rate is determined by dividing total indirect costs of the entity by the total direct costs of the entity. This results in a percentage that can be used to determine indirect costs on a project-by-project basis. For example, the total direct costs of the organization are $100,000 and the total indirect costs are $20,000. The calculation would result in an indirect cost rate of 20 percent. Thus, if a project incurs direct costs of $20,000, indirect costs would be calculated to be $4,000 ($20,000 x 20 percent), resulting in total project costs of $24,000. What Can Be Included As Indirect Costs?Allowable indirect costs typically include:
What Cannot Be Included As Indirect Costs?Unallowable indirect costs include, but are not limited to:
When Must Our Entity Submit An Indirect Cost Rate Proposal?Attachment "A" to Office of Management and Budget Circular A-122, "Cost Principles for Non-Profit Organizations," requires that non-profit organizations that have not previously established an indirect cost rate with a Federal agency, submit its initial indirect cost proposal immediately after the award is made and not later than three months after the effective date of the award. Organizations with previously established indirect cost rates must submit a new indirect cost proposal within six months after the close of its fiscal year. (Similar requirements for State and Local Governments are found in OMB Circular A-87). What Does Our Entity Need To Submit With Our Indirect Cost Proposal?In order to ensure that your indirect cost rate agreement is completed in a timely manner, please submit the following information with your proposal:
Where Can Our Entity Obtain Assistance On Preparing An Indirect Cost Rate Proposal?The U.S. Department of Labor's "A Guide for Indirect Cost Rate Determination" details the information required and provides sample indirect cost proposals. This is available online at: http://www.dol.gov/oasam/programs/guide.htm If you need a copy of this guide or have additional questions, please contact NEA's Office of Inspector General at (202) 682-5402 or by email at oig@arts.endow.gov. Where Does Our Entity Submit The Proposal?If your organization needs an indirect cost rate and it is determined that NEA is your oversight agency, please submit your proposal to:
National Endowment for the Arts National Endowment for the Arts · an independent federal agency |
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