The de minimis rate for indirect costs of 10% is a rate recognised by the Confederation that non-federal institutions can use to cover indirect costs eligible for grants or cooperation agreements. A: No. The de minimis rate of 10% applies to non-federal works, undertakings, or businesses that have never received a negotiated indirect cost rate. Where an intermediary undertaking has paid negotiated or actual indirect costs to a particular sub-beneficiary in the past, it should continue to negotiate the indirect costs and allocate them to that subcontractor in accordance with its previous practice. If an intermediate enterprise has never assigned or negotiated actual indirect costs to that sub-recipient and the sub-recipient does not have a federally approved agreement on indirect cost rates, the intermediate enterprise may provide the 10% de minimis rate or negotiate a rate with that sub-recipient. If the intermediate undertaking has negotiated an approved indirect cost rate with its sub-beneficiary in the past, no de minimis rate may be applied. (1 MB) Infographic: When can an organization use the 10% de minimis rate for indirect costs? 1) An approved indirect cost rate approved by the State negotiated between the sub-beneficiary and the federal government, or,2) If such a rate does not exist, either a negotiated rate between the transmission unit and the sub-beneficiary, or the de minimis rate of 10%. There is no universal rule for classifying certain costs as direct or indirect (Q&A) in an accounting system. Costs may be direct to a particular service or function, but indirect to federal procurement or another final cost target. Therefore, it is important that each cost element incurred for the same purpose be treated consistently in similar circumstances as direct or indirect (Q&A) costs to avoid a potential double burden on federal premiums. Guidelines for determining direct and indirect (Q&A) costs charged to federal premiums are included in this subsection. Q: Does a non-federal organization that uses the 10% de minimis indirect cost rate have to provide documentation proving that its indirect costs represent at least 10% of the total modified direct cost of its organization? The de minimis rate is a glimmer of hope in the uniform guidelines and deserves careful consideration by the NRPs, although adequate internal controls must be put in place in the application of the de minimis rate.
The lack of indirect cost recovery through federal grants is not new to not-for-profit organizations (NFPs). This is especially true for NON-BUTN ORGANIZATIONS that do not have an indirect cost rate negotiated by the federal government, as they receive all or most federal grants from transfer agencies. The Uniform Guidelines of the Bureau of Management and Budget (OMB) recognize that NFPs do incur indirect costs and, when implemented initially, the Uniform Guidance provides for the use of the de minimis rate. 2 CFR 200.414(f) states that an eligible non-federal entity that chooses to calculate the 10% de minimis rate may only apply the rate to its MTDC. The MTDC as a basis removes “false elements” (e.g., capital expenditures, contracts, and sub-grants). Non-federal works, undertakings or businesses are allowed to account for the 10% de minimis compared to the first $25,000 of their subprices. Q: Our organization previously had a negotiated indirect cost rate. However, all federal scholarships expired, resulting in a breakdown in our relationship with the federal government.
During the breakdown of the relationship, our negotiated indirect cost rate expired. Our organization has now received a new federal award. Are we entitled to the de minimis rate of 10%? Q: Is the 10% de minimis rate available to new organizations that have never negotiated an IDC rate of 200,414 (f), government organizations, or tribal government agencies that have never negotiated an IDC rate? PNRs may be able to automate the calculation of de minimis recovery in their accounting systems to reduce the risk of error. Alternatively, the PNR could develop a form to document the calculation of de minimis recovery. This form would ensure that the creator of the statement of subsidy takes into account all deductions received by the MTDC. This would also allow a simple review of the de minimis calculation before submitting subsidy declarations. The de minimis rate is only one way of covering indirect costs. In addition to the de minimis option, in accordance with Annex IV to Part 200, PNR may negotiate an indirect federal cost rate or an indirect cost rate with the transmitting entity. There are two groups of non-federal institutions that cannot use the de minimis rate: As a general rule, the NFE informs the federal procurement agency in the application proposal of its eligibility and intention to charge the de minimis rate.
Subject to legal or regulatory restrictions, the Federal Public Procurement Agency must approve the use of the de minimis rate. 2 CFR 200 allows any non-federal enterprise (NFE) that has never received a negotiated indirect cost rate to apply a de minimis rate of 10% of the modified total direct cost (MTDC), which the NFE can use indefinitely as a federally negotiated rate. This option of covering the Fis of indirect costs incurred under federal grants removes the administrative barriers previously faced by small organizations that received and implemented federal financial support. With the introduction of the de minimis rate, these organizations can now charge eligible costs that indirectly support direct work on the federally funded project(s); this was previously difficult because of the significant administrative burden of the negotiation process. A: No. Organizations that experience a break in the federal relationship are not eligible to receive the 10% de minimis rate when they receive a new reward. The availability of the de minimis rate is specifically limited to a non-federal agency that has never received a negotiated indirect cost rate (200,414(f)).
