De Minimis for IDC Rates
“But how do I get a Federal agency to negotiate an indirect cost rate with me?”
If I had started collecting quarters a dozen years ago for every time I heard that question, I’d have a hefty retirement fund. Now, with the Uniform Guidance, I’ll have to find a new retirement plan. The years of backlogs in negotiating rates have led the Office of Management and Budget (OMB) to make a necessary and welcome concession: Every grant recipient has indirect costs, and the Federal government doesn’t have time to negotiate with all of them.
Small entities should be rejoicing. Any grant recipient who has ever felt “cheated” by their lack of a Negotiated Indirect Cost Rate Agreement (NICRA) should be jumping on the furniture. Because now, without having to elicit any response at all from your cognizant agency, you can collect an indirect cost rate of 10% of Modified Total Direct Costs (MTDC), just by writing “de minimis” in the indirect cost line on your application budget! (Well, you do actually have to win the award.) The sun is shining and it’s a beautiful day in the grants world.
You could always directly allocate even minimal costs to every cost center, but it often required more in manpower costs than it was worth. Did anyone really want to sort through the phone bill, allocating long distance calls to each grant? Or charge by the light bulb? Or divvy out the time of the lawn-mowing services? Now common sense has prevailed. And the little guys can keep pace with the big guys.
Of course, you’ll need to understand how indirect cost rates work to make sure you’re applying the de minimis rate correctly, make sure you qualify for it, and know when it’s time to graduate from de minimis to NICRA. This means checking both the Uniform Guidance and awarding agencies’ policies. For instance, the National Science Foundation issued guidance stating that proposal budgets with indirect cost rates below the 10% de minimis rate are not acceptable.
Because your organization has unique characteristics that may affect the type of indirect cost rate method you select now and in the future, make sure you keep up to date in understanding how to navigate these changes. Why? Because an educated recipient is the best recipient.