In November, 1967, we published the brochure entitled "A Guide for Non-Profit Institutions - Establishing Indirect Cost Rates for Research Grants and Contracts with the Department of Health, Education, and Welfare" (OASC-5). It contained a set of principles for determining costs applicable to research and development grants and contracts with non-profit institutions other than educational institutions, hospitals and State and local agencies and described the procedures for establishing indirect cost rates for use on DHEW research grants and contracts. Since that issuance, the Division of Cost Policy and Negotiation, Office of the Deputy Assistant Secretary for Grant Administration Policy has been assigned responsibility for the determination of indirect cost rates for all grants and contracts awarded by the DHEW to non-profit institutions. Assumption of this additional responsibility, along with the issuance of new policies and changes to existing policies have made necessary this revision of the initial brochure. This brochure, like its predecessor contains sample indirect cost proposal formats. They are intended to provide a helpful illustration of the mechanics of proposal preparation. Administrators, however, will need to adapt the formats to the particular accounting system, organizational structure and program activity of their individual institutions. We hope that this brochure proves useful, and will welcome your comments on it as well as on the other steps being taken to improve the rate determination process. Your indirect cost rate proposals, and any inquiries concerning them should be addressed to Division of Cost Policy and Negotiation, Office of the Deputy Assistant Secretary for Grant Administration Policy, Department of Health, Education, and Welfare, 330 Independence Avenue, S.W., Washington, D.C. 20201. Sincerely yours, Blanaus James B. Cardwell A GUIDE TO THE ESTABLISHMENT OF INDIRECT COST RATES FOR GRANTS Non-Profit Institutions PREFACE The Department of Health, Education, and Welfare recognizes that careful determination of costs is essential to the continued vigor of its programs conducted under grants or contracts in non-profit institutions. The Department recognizes, too, that costs are both direct and indirect; and that the determination of indirect costs is a matter of critical importance in the sponsored project relationship. For this reason, it wishes to encourage the fullest understanding of statutory, procedural, or other requirements in relation to costing, believing that such understanding will facilitate the administration of programs that are of great importance to the Department, to the institutions performing them and to the nation. Within the Department, responsibility for the development and issuance of cost policies and the establishment of indirect cost rates for non-profit organizations is assigned to the Office of the Deputy Assistant Secretary for Grant Administration Policy of the Office of the Assistant Secretary, Comptroller. That Division was given these responsibilities to assure more uniform Department cost policies and to simplify, through centralization, the process of rate review and negotiation and thus to serve more directly and efficiently the institutions performing under grants or contracts with any of the Department's operating agencies. Centralization of these processes achieves three purposes of immediate significance to non-profit institutions: 1. Grants and contracts awarded to them by any of the Department's operating agencies are governed by a single set of costing principles 2. An institution seeking a rate determination is required to submit only one indirect cost proposal 3. An institution need participate in only a single annual negotiation to establish the rate or rates applicable to all of its grants or contracts with the Department's offices, institutes, or divisions. Beyond these, and in the larger frame work of developing Federal administrative policy, the consolidation permits the Department to pursue more effectively, in cooperation with other Federal agencies, the objective of placing in a single Federal agency responsibility for establishing, on behalf of the Federal Government, the indirect cost rates for any individual institution. This booklet describes in general terms the process of indirect cost rate determination and presents instructions for the submission of rate proposals by grantees and contractors. Section I contains information on basic considerations involved in rate determination and on Departmental views and practices. Section II sets out guidelines for preparation of an indirect cost rate proposal. Section III contains the DHEW cost principles applicable to non-profit institutions other than educational institutions, hospitals and State and local government agencies. Section IV contains sample proposal formats, suggested computation methods for establishing that actual indirect cost rates are in excess of the 8% limitation on training awards, a sample summary report of expenditure adjustment sheet and a sample notice of provisional indirect cost rate and negotiation agreement. The official policy of the Department of HEW, including those related to the award and payment of indirect costs on grants and contracts are contained in the DHEW Grants Administration Manual and the DHEW Procurement Manual respectively. Both manuals may be purchased from the Government Printing Office, Washington, D.C. 20402. |