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Posted by on Apr 24, 2015

De Minimis for IDC Rates

De Minimis for IDC Rates

“But how do I get a Federal agency to negotiate an indirect cost rate with me?”

MoneyIf 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.


  1. hi, if I decide to use the direct allocation method, can I then still charge a de minimis indirect cost rate?

    second question: does a ICR have to be incorporated in the approved budget? What happens if that wasn’t there?

  2. Thanks for your question, Mike. I ran this question by several of our instructors. Here are some excerpts from what I got back. These variations reflect the experiences of the instructors. The common themes – like many things in grants – are documentation and consistency.

    In addition to these responses, check with the granting agency – either the listed point of contact on the listing, or the grant program’s website. Good luck!

    Instructor 1
    In the Cost Principles regulations (section 200.414) it states:….”In addition to the procedures outlined in the appendices in paragraph (e), any non-Federal entity that has never received a negotiated indirect cost rate, except for those non-Federal entities described in Appendix VII to part 200, States and Local Government and Indian Tribe Indirect Cost Proposals, paragraph D.1.b may elect to charge a de minimis rate of 10% of its modified total direct costs (MTDC) which may be used indefinitely.” There are some exceptions as specified in 200.403.

    “If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time.”

    My interpretation is that you can’t do both. If an organization selects the de minimis rate, they could use this rate indefinitely until such time it chooses to negotiate either a predetermined, provisional, or fixed rate to use.

    Instructor 2
    The direct allocation method is a type of calculation for indirect costs. Calculations are used for negotiated rates. The de minimis rate requires no calculation and is not negotiated. They would not be used together. Either the non-Federal entity would calculate a rate to be negotiated or simply apply the flat 10 percent de minimis rate if eligible.

    If the non-Federal entity wants to use either a negotiated rate or the de minimis flat rate, it should be included in the proposal budget. While it is possible to amend a budget post-award, it is difficult to reallocate funds between direct and indirect categories. That type of amendment request would require expanded authority and some programs or regulations may not allow that type of amendment.

    A best practice for non-Federal entities who wish to use the de minimis rate is to create a local policy or certification that describes what they consider to be indirect costs such as utilities, payroll and human resource costs (all shared costs) so the Federal agency would have reasonable assurance that the non-Federal entity understands the difference between indirect and direct costs, would apply costs consistently, and would not double charge direct and indirect costs.

    Instructor 3
    There is no prohibition against using both a CAP and the de minimis indirect rate, but the caveat is that the same costs cannot be charged both directly and indirectly to avoid “double-dipping.”

    The CAP must clearly state which costs are included in the plan along with an explanation of how those costs directly benefit the grant. Along with the explanation, I have also seen some plans that estimate the amount of each direct cost leading to an estimated total cost base that is then used in the calculation of the indirect rate. This is a useful exercise because it leads to a conclusion as to whether the de minimis rate is reasonable, or whether a more appropriate rate above the 10% rate should be negotiated.

    The second question cannot be answered accurately until there is cost history on which to base an estimated indirect rate. Total direct costs cannot be determined until the end of an accounting cycle when all costs have been accumulated. If you include an estimated rate in the budget, you will be locked into that rate for the budget period which may not be an accurate reflection of the actual rate that would be allowable and reasonable based on the organization’s cost structure.

    If you absolutely must include some indirect costs in the budget, be very conservative and under-estimate those costs in the first budget period with a view toward recovering a larger portion of costs in subsequent periods when your total cost base is known, and you can make the convincing argument that a higher rate should be negotiated.

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