2 CFR 215 (A-110) or 2 CFR 230 (A-122) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.

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1 Significant Changes for Selected Items of Cost Office of Management and Budget Guidance PART 200 UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS Item of Cost 2 CFR 215 (A-110) or 2 CFR 230 (A-122) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Supplies/ Equipment Personnel Costs Proceeds from disposition of supplies and equipment are program income Personnel activity reports are required The disposal of supplies in aggregate or equipment per unit with a fair market value of $5,000 or less can be treated as unrestricted income Personnel activity reports are not required Non-profits Records that accurately reflect the work performed can be utilized Local government Alternative systems can be utilized Proposal Costs Not allowable Allowable when treated as indirect costs and charged to all activities of the non-federal entity Methods of Procurement Fixed Amount Subawards Some form of cost or price analysis shall be made and documented in the procurement files in connection with every procurement action Simplified acquisition threshold of $100,000 Not specifically addressed No longer specifies that some form of cost or price analysis shall be made and documented for every procurement action, only those purchases exceeding the Simplified Acquisition Threshold. Micro-purchases ($3,000 or less) may be awarded without soliciting competitive quotations, if the price is determined reasonable. Simplified Acquisition Threshold of $150,000 Up to Simplified Acquisition Threshold, with prior approval, fixed amount subawards based on meeting specific requirements (performance) with no review of actual costs incurred can be utilized

2 Item of Cost 2 CFR 215 (A-110) or 2 CFR 230 (A-122) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subrecipient Monitoring and Management Requirements are not very specific regarding monitoring and management Detailed specific requirements for monitoring and management of subrecipients Audit Services Audit costs are allowable for A- 133 audits, or other audits if included in indirect cost rate or approved by the awarding agency as a direct cost to an award Audit costs can only be charged to Federal grants if related to performance of a Single Audit, or if the non-federal entity does not currently have any federal funding and the audit cost is in the indirect cost pool for a cost allocation plan or indirect cost proposal. Single Audit or Program-Specific Audit $500,000 $750,000 Direct & Indirect (F&A) Costs Indirect cost rates must be negotiated with the Cognizant agency A non-federal entity may elect to charge a de minimis indirect (F&A) cost rate of 10% of modified total direct costs (MTDC), if the entity has never received an indirect cost rate. A higher rate must be negotiated.

3 Supplies/Equipment Supplies. Definition: Supplies means all tangible personal property other than those described in Equipment. A computing device is a supply if the acquisition cost is less than the lesser of the capitalization level established by the non-federal entity for financial statement purposes or $5,000, regardless of the length of its useful life. (a) Title to supplies will vest in the non-federal entity upon acquisition. If there is a residual inventory of unused supplies exceeding $5,000 in total aggregate value upon termination or completion of the project or program and the supplies are not needed for any other Federal award, the non-federal entity must retain the supplies for use on other activities or sell them, but must, in either case, compensate the Federal government for its share. The amount of compensation must be computed in the same manner as for equipment Equipment. Definition: Equipment means tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-federal entity for financial statement purposes, or $5,000. (e)(1) Items of equipment with a current per unit fair market value of $5,000 or less may be retained, sold or otherwise disposed of with no further obligation to the Federal awarding agency. (e)(2) Except as provided in Federally-owned and exempt property, paragraph (b), or if the Federal awarding agency fails to provide requested disposition instructions within 120 days, items of equipment with a current per-unit fair-market value in excess of $5,000 may be retained by the non-federal entity or sold. The Federal awarding agency is entitled to an amount calculated by multiplying the current market value or proceeds from sale by the Federal awarding agency's percentage of participation in the cost of the original purchase. If the equipment is sold, the Federal awarding agency may permit the non-federal entity to deduct and retain from the Federal share $500 or ten percent of the proceeds, whichever is less, for its selling and handling expenses. Tangible personal property that has a per unit cost of less than $5,000, or the local capitalization threshold if lower than $5,000, is considered a supply. The disposal of supplies in aggregate or equipment per unit with a fair market value of $5,000 or less can be treated as unrestricted income, with no further obligation to the Federal awarding agency.

4 Personnel Costs Compensation personal services. (i) Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted and all other activities compensated by the non- Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-federal entity; and (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. (ix) Because practices vary as to the activity constituting a full workload (for IHEs, IBS), records may reflect categories of activities expressed as a percentage distribution of total activities. (x) It is recognized that teaching, research, service, and administration are often inextricably intermingled in an academic setting. When recording salaries and wages charged to Federal awards for IHEs, a precise assessment of factors that contribute to costs is therefore not always feasible, nor is it expected. (2) For records which meet the standards required in paragraph (i)(1) of this section, the non- Federal entity will not be required to provide additional support or documentation for the work performed, other than that referenced in paragraph (i)(3) of this section.

5 (3) In accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA), charges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must also be supported by records indicating the total number of hours worked each day. (4) Salaries and wages of employees used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner as salaries and wages claimed for reimbursement from Federal awards. (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (1) if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, rolling time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. (ii) Allocating charges for the sampled employees' supervisors, clerical and support staffs, based on the results of the sampled employees, will be acceptable. (iii) Less than full compliance with the statistical sampling standards noted in subsection (5)(i) may be accepted by the cognizant agency for indirect costs if it concludes that the amounts to be allocated to Federal awards will be minimal, or if it concludes that the system proposed by the non-federal entity will result in lower costs to Federal awards than a system which complies with the standards. (6) Cognizant agencies for indirect costs are encouraged to approve alternative proposals based on outcomes and milestones for program performance where these are clearly documented. Where approved by the Federal cognizant agency for indirect costs, these plans are acceptable as an alternative to the requirements of paragraph (i)(1) of this section. (7) For Federal awards of similar purpose activity or instances of approved blended funding, a non-federal entity may submit performance plans that incorporate funds from multiple Federal awards and account for their combined use based on performance-oriented metrics, provided that such plans are approved in advance by all involved Federal awarding agencies. In these instances, the non-federal entity must submit a request for waiver of the requirements based on documentation that describes the method of charging costs, relates the charging of costs to the specific activity that is applicable to all fund sources, and is based on quantifiable measures of the activity in relation to time charged. (8) For a non-federal entity where the records do not meet the standards described in this section, the Federal government may require personnel activity reports, including prescribed certifications, or equivalent documentation that support the records as required in this section.

6 Personnel activity reports are no longer required, IF you meet the standards described in this section ( Compensation personal services). Non-Profit Entities: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated Incorporated into official records Reasonably reflect the total activity for which the employee is compensated Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Estimates can be utilized initially, if the system utilized to determine estimates provides reasonable approximations of actual efforts, significant changes in work activity are addressed timely, and internal controls include a review process to ensure adjustments were made and resulted in accurate charging of payroll costs. Time records for non-exempt employees must reflect total hours worked each day in compliance with the FLSA. Local Governments: Substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records required for the non-profit entities Such systems may include, but are not limited to, random moment sampling, rolling time studies, case counts, or other quantifiable measures of work performed Cognizant agencies for indirect costs are encouraged to approve alternative proposals

7 Proposal Costs Proposal costs. Proposal costs are the costs of preparing bids, proposals, or applications on potential Federal and non-federal awards or projects, including the development of data necessary to support the non-federal entity's bids or proposals. Proposal costs of the current accounting period of both successful and unsuccessful bids and proposals normally should be treated as indirect (F&A) costs and allocated currently to all activities of the non-federal entity. No proposal costs of past accounting periods will be allocable to the current period. Proposal costs are allowable when treated as indirect costs and charged to all activities of the non-federal entity.

8 Methods of Procurement Methods of procurement to be followed. The non-federal entity must use one of the following methods of procurement. (a) Procurement by micro-purchases. Procurement by micro-purchase is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed $3,000 (or $2,000 in the case of acquisitions for construction subject to the Davis-Bacon Act). To the extent practicable, the non-federal entity must distribute micro-purchases equitably among qualified suppliers. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable. (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold ($150,000). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. (c) Procurement by sealed bids (formal advertising). Bids are publicly solicited and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. (d) Procurement by competitive proposals. The technique of competitive proposals is normally conducted with more than one source submitting an offer, and either a fixed price or cost reimbursement type contract is awarded. It is generally used when conditions are not appropriate for the use of sealed bids. (f) Procurement by noncompetitive proposals. (must meet sole source requirements) Contract cost and price. (a) The non-federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-federal entity must make independent estimates before receiving bids or proposals. The procurement requirements no longer specify that Some form of cost or price analysis shall be made and documented in the procurement files in connection with every procurement action, only those purchases exceeding the Simplified Acquisition Threshold. Micro-purchases, which are purchases of supplies or services that in aggregate do not exceed $3,000, may be awarded without soliciting competitive quotations, if the price is determined reasonable. The threshold for small purchases was updated to reflect $150,000 or less; however, local policy may contain a lower threshold. Small purchases require price or rate quotations from an adequate number of qualified sources.

9 Fixed Amount Subawards Fixed amount awards. Fixed amount awards means a type of grant agreement under which the Federal awarding agency or pass-through entity provides a specific level of support without regard to actual costs incurred under the Federal award. This type of Federal award reduces some of the administrative burden and record-keeping requirements for both the non-federal entity and Federal awarding agency or pass-through entity. Accountability is based primarily on performance and results. See Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts, paragraph (b) and Fixed amount subawards Fixed amount subawards. With prior written approval from the Federal awarding agency, a pass-through entity may provide subawards based on fixed amounts up to the Simplified Acquisition Threshold, provided that the subawards meet the requirements for fixed amount awards in Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts. Important aspects of fixed amount subawards: for fixed amounts up to the Simplified Acquisition Threshold of $150,000 require prior approval payments made based on meeting specific requirements (performance) with no review of actual costs incurred cannot be used in programs which require mandatory cost sharing or match must certify in writing to the Federal awarding agency or passthrough entity at the end of the Federal award that the project or activity was completed or the level of effort was expended Use of Fixed Amount Awards is intended to reduce administrative burden.

10 Subrecipient Monitoring and Management Requirements for pass-through entities. All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. (b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraph (e) of this section, which may include consideration of such factors as: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F Audit Requirements of this Part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). (c) Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in Specific conditions. (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and programmatic reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the passthrough entity detected through audits, on-site reviews, and other means. (3) Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity as required by Management decision. (e) Depending upon the pass-through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: (1) Providing subrecipients with training and technical assistance on program-related matters; (2) Performing on-site reviews of the subrecipient's program operations; (3) Arranging for agreed-upon-procedures engagements as described in Audit services. (f) Verify that every subrecipient is audited as required by Subpart F Audit Requirements of this Part when it is expected that the subrecipient's Federal awards expended during the

11 respective fiscal year equaled or exceeded the threshold set forth in Audit requirements. (g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity's own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in Remedies for noncompliance of this Part and in program regulations Specific conditions. (a) Based on the criteria set forth in Federal awarding agency review of risk posed by applicants or when an applicant or recipient has a history of failure to comply with the general or specific terms and conditions of a Federal award, or failure to meet expected performance goals as described in Information contained in a Federal award, or is not otherwise responsible, the Federal awarding agency or pass-through entity may impose additional specific award conditions as needed under the procedure specified in paragraph (b) of this section. These additional Federal award conditions may include items such as the following: (1) Requiring payments as reimbursements rather than advance payments; (2) Withholding authority to proceed to the next phase until receipt of evidence of acceptable performance within a given period of performance; (3) Requiring additional, more detailed financial reports; (4) Requiring additional project monitoring; (5) Requiring the non-federal entity to obtain technical or management assistance; or (6) Establishing additional prior approvals. (b) The Federal awarding agency or pass-through entity must notify the applicant or non- Federal entity as to: (1) The nature of the additional requirements; (2) The reason why the additional requirements are being imposed; (3) The nature of the action needed to remove the additional requirement, if applicable; (4) The time allowed for completing the actions if applicable, and (5) The method for requesting reconsideration of the additional requirements imposed. (c) Any special conditions must be promptly removed once the conditions that prompted them have been corrected.

12 Subrecipients should be clearly identified in the contract/agreement and monitoring of subrecipients MUST be performed. Initial evaluation of each subrecipient s risk of non-compliance. Considerations are: o Prior experience o Audit results, including whether a Single Audit was performed o Changes in personnel or systems o Results of Federal awarding agency monitoring, if applicable Consideration of imposing specific conditions. Examples are: o Required performance to continue through phases of the contract o More detailed financial reports o Additional project monitoring o Additional prior approvals However, if specific conditions are imposed, the subrecipient has to be notified of the nature of the requirements and the reasons. Perform on-going monitoring of the subrecipient, including financial compliance and program performance. This monitoring MUST include: o Reviewing required financial and programmatic reports o Following-up to ensure timely and appropriate action on all deficiencies noted through monitoring, audit, or other means o Issuing a management decision for audit findings pertaining to the Federal award provided Verify that every subrecipient is audited as required by Audit Requirements ( ) Consider whether adjustments need to be made based on monitoring or audits

13 Audit Services Audit services. (a) A reasonably proportionate share of the costs of audits required by, and performed in accordance with, the Single Audit Act Amendments of 1996 (31 U.S.C ), as implemented by requirements of this Part, are allowable. However, the following audit costs are unallowable: (1) Any costs when audits required by the Single Audit Act and Subpart F Audit Requirements of this Part have not been conducted or have been conducted but not in accordance therewith; and (2) Any costs of auditing a non-federal entity that is exempted from having an audit conducted under the Single Audit Act and Subpart F Audit Requirements of this Part because its expenditures under Federal awards are less than $750,000 during the non-federal entity's fiscal year. (b) The costs of a financial statement audit of a non-federal entity that does not currently have a Federal award may be included in the indirect cost pool for a cost allocation plan or indirect cost proposal. (c) Pass-through entities may charge Federal awards for the cost of agreed-upon-procedures engagements to monitor subrecipients who are exempted from the requirements of the Single Audit Act and Subpart F Audit Requirements of this Part. This cost is allowable only if the agreed upon-procedures engagements are: (1) Conducted in accordance with GAGAS attestation standards; (2) Paid for and arranged by the pass-through entity; and (3) Limited in scope to one or more of the following types of compliance requirements: activities allowed or unallowed; allowable costs/cost principles; eligibility; and reporting. Audit costs can only be charged to Federal grants if related to performance of a Single Audit or if the non-federal entity does not currently have any federal funding and the audit cost is in the indirect cost pool for a cost allocation plan or indirect cost proposal.

14 Single Audit or Program-Specific Audit Audit requirements. (a) Audit required. A non-federal entity that expends $750,000 or more during the non-federal entity's fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this Part. (b) Single audit. A non-federal entity that expends $750,000 or more during the non-federal entity's fiscal year in Federal awards must have a single audit conducted in accordance with Scope of audit except when it elects to have a program-specific audit conducted in accordance with paragraph (c) of this section. Single Audit or program-specific audit requirements increased from $500,000 to $750,000

15 Direct and Indirect (F&A) Costs Classification of costs. There is no universal rule for classifying certain costs as either direct or indirect (F&A) under every accounting system. A cost may be direct with respect to some specific service or function, but indirect with respect to the Federal award or other final cost objective. Therefore, it is essential that each item of cost incurred for the same purpose be treated consistently in like circumstances either as a direct or an indirect (F&A) cost in order to avoid possible doublecharging of Federal awards. Guidelines for determining direct and indirect (F&A) costs charged to Federal awards are provided in this subpart Direct costs. (a) General. Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect (F&A) costs. See also Allocable costs. (b) Application to Federal awards. Identification with the Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. Typical costs charged directly to a Federal award are the compensation of employees who work on that award, their related fringe benefit costs, the costs of materials and other items of expense incurred for the Federal award. If directly related to a specific award, certain costs that otherwise would be treated as indirect costs may also include extraordinary utility consumption, the cost of materials supplied from stock or services rendered by specialized facilities or other institutional service operations. (c) The salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs. Direct charging of these costs may be appropriate only if all of the following conditions are met: (1) Administrative or clerical services are integral to a project or activity; (2) Individuals involved can be specifically identified with the project or activity; (3) Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency; and (4) The costs are not also recovered as indirect costs. (d) Minor items. Any direct cost of minor amount may be treated as an indirect (F&A) cost for reasons of practicality where such accounting treatment for that item of cost is consistently applied to all Federal and non-federal cost objectives. (e) The costs of certain activities are not allowable as charges to Federal awards. However, even though these costs are unallowable for purposes of computing charges to Federal awards, they nonetheless must be treated as direct costs for purposes of determining indirect (F&A) cost rates and be allocated their equitable share of the non-federal entity's indirect costs if they represent activities which: (1) Include the salaries of personnel, (2) Occupy space, and (3) Benefit from the non-federal entity's indirect (F&A) costs. (f) For nonprofit organizations, the costs of activities performed by the non-federal entity primarily as a service to members, clients, or the general public when significant and necessary

16 to the non-federal entity's mission must be treated as direct costs whether or not allowable, and be allocated an equitable share of indirect (F&A) costs. Some examples of these types of activities include: (1) Maintenance of membership rolls, subscriptions, publications, and related functions. See also Memberships, subscriptions, and professional activity costs. (2) Providing services and information to members, legislative or administrative bodies, or the public. See also Memberships, subscriptions, and professional activity costs and Lobbying. (3) Promotion, lobbying, and other forms of public relations. See also Advertising and public relations and Lobbying. (4) Conferences except those held to conduct the general administration of the non-federal entity. See also Conferences. (5) Maintenance, protection, and investment of special funds not used in operation of the non- Federal entity. (6) Administration of group benefits on behalf of members or clients, including life and hospital insurance, annuity or retirement plans, and financial aid. See also Compensation fringe benefits Indirect (F&A) costs. (a) Facilities and Administration Classification. For major IHEs and major nonprofit organizations, indirect (F&A) costs must be classified within two broad categories: Facilities and Administration. Facilities is defined as depreciation on buildings, equipment and capital improvement, interest on debt associated with certain buildings, equipment and capital improvements, and operations and maintenance expenses. Administration is defined as general administration and general expenses such as the director's office, accounting, personnel and all other types of expenditures not listed specifically under one of the subcategories of Facilities (including cross allocations from other pools, where applicable). For nonprofit organizations, library expenses are included in the Administration category; for institutions of higher education, they are included in the Facilities category. Major IHEs are defined as those required to use the Standard Format for Submission as noted in Appendix III to Part 200 Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs) paragraph C. 11. Major nonprofit organizations are those which receive more than $10 million dollars in direct Federal funding. (b) Diversity of nonprofit organizations. Because of the diverse characteristics and accounting practices of nonprofit organizations, it is not possible to specify the types of cost which may be classified as indirect (F&A) cost in all situations. Identification with a Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. However, typical examples of indirect (F&A) cost for many nonprofit organizations may include depreciation on buildings and equipment, the costs of operating and maintaining facilities, and general administration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting. (c) Federal Agency Acceptance of Negotiated Indirect Cost Rates. (See also Cost sharing or matching.) (1) The negotiated rates must be accepted by all Federal awarding agencies. A Federal awarding agency may use a rate different from the negotiated rate for a class of Federal awards or a single Federal award only when required by Federal statute or regulation, or when approved by a Federal awarding agency head or delegate based on documented justification as described in paragraph (c)(3) of this section.

17 (2) The Federal awarding agency head or delegate must notify OMB of any approved deviations. (3) The Federal awarding agency must implement, and make publicly available, the policies, procedures and general decision making criteria that their programs will follow to seek and justify deviations from negotiated rates. (4) As required under Notices of funding opportunities, the Federal awarding agency must include in the notice of funding opportunity the policies relating to indirect cost rate reimbursement, matching, or cost share as approved under paragraph (e)(1) of this section. As appropriate, the Federal agency should incorporate discussion of these policies into Federal awarding agency outreach activities with non-federal entities prior to the posting of a notice of funding opportunity. (d) Pass-through entities are subject to the requirements in Requirements for passthrough entities, paragraph (a)(4). (e) Requirements for development and submission of indirect (F&A) cost rate proposals and cost allocation plans are contained in Appendices III-VII as follows: (1) Appendix III to Part 200 Indirect (F&A) Costs Identification and Assignment, and Rate Determination for (2) Appendix IV to Part 200 Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations; (3) Appendix V to Part 200 State/Local Government and Indian Tribe- Wide Central Service Cost Allocation Plans; (4) Appendix VI to Part 200 Public Assistance Cost Allocation Plans; and (5) Appendix VII to Part 200 States and Local Government and Indian Tribe Indirect Cost Proposals. (f) In addition to the procedures outlined in the appendices in paragraph (e) of this section, 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 modified total direct costs (MTDC) which may be used indefinitely. As described in Factors affecting allowability of costs, costs must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both. 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. (g) Any non-federal entity that has a federally negotiated indirect cost rate may apply for a onetime extension of a current negotiated indirect cost rates for a period of up to four years. This extension will be subject to the review and approval of the cognizant agency for indirect costs. If an extension is granted the non-federal entity may not request a rate review until the extension period ends. At the end of the 4-year extension, the non-federal entity must re-apply to negotiate a rate.

18 A non-federal entity may elect to charge a de minimis indirect (F&A) cost rate of 10% of modified total direct costs (MTDC), if the entity has never received an indirect cost rate. The 10% indirect rate may be used indefinitely; however, a higher rate must be negotiated. Indirect costs must be treated consistently and be classified under the two broad categories of Facilities and Administration. Salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs, but can be excluded and directly charged to grants if certain requirements are met (integral, specifically involved, specifically included in grant budget or approved by federal agency). Costs must not be both charged directly and included as indirect costs.