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Posted by on Nov 16, 2016

#GPAConf16: Good Times and IDC Dreams

#GPAConf16: Good Times and IDC Dreams

GPA Conference 2016 presentation photoI had such a good time at the 2016 Grant Professionals Association National Conference that I think I need a week to recover. I enjoyed meeting and reconnecting with colleagues from around the country who are dedicated to making the world a better place through grants.

But there is a dark side to going to events like this—you might go to a session on a topic that causes you to look at things from another perspective. And this perspective interrupts your dream cycle with scenarios and spreadsheets on indirect cost (IDC) rates.

As the person responsible for our grants curriculum, I think that it’s important to check in on what the others are saying about topics covered in our classes, like indirect costs.

So, I think that I have a good handle on the underpinnings of what indirect costs are at any organization—those things that require financial resources to do business, and can’t be charged directly to a project. Think health insurance (hey, it’s open enrollment season).

Like most things, indirect costs through the lens of Federal grants get a bit more complex. For instance, taxpayers don’t want to pay for fundraising costs, even indirectly. In other instances, a program’s authorizing statute might limit indirect cost recovery to something like 8%. Note: there is a reason we offer a two-day course on this subject.

And then I learned that many foundations only allow direct costs or cap the IDC rate at 10-20%.

So, if an organization is savvy and lucky, it has multiple streams of grants revenue. And it’s conceivable that each award has a different rate. Let’s look at a hypothetical situation, represented in the table below, of a recipient organization with four IDC rates from four different funders.

Example grant recipient with four very different IDC rates from four different funders.
Looking at this situation, I think you’d agree that:

  • This is a complex situation
  • You don’t know the organization’s overall IDC rate

I heard many insightful questions posed to experts on whether or not to pursue a negotiated IDC rate with their Federal cognizant agency, to use the de minimis rate allowed in 2 CFR 200, or to seek recovery of IDCs at all.

Managing all of the variety of IDC rates is complex—and costly.

That said, I am of the opinion that avoiding the complexity and cost creates long-term risk in many cases. At the strategic level, when you don’t recognize the total cost of carrying out your mission, you may inadvertently signal to your funders a gap in your organization’s business acumen. Tactically, you may miss the opportunity to recover some of the real costs of maintaining insurance, making payroll, and promoting your organization’s mission.

I want to close out with my most recent IDC dream: I win the lottery and then set up a foundation that funds the establishment and maintenance of IDC rates.

I could be a winner.

I’d like to credit Dr. Richard Redfearn from the University of Arkansas and the participants who peppered him with questions for inspiring this post.

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