A Guide for Educational Institutions Establishing Indirect Cost Rates with the Department of Health, Education, and Welfare n order that we might be more effective, more timely and more uniform in the establishment of ndirect cost rates for research and training activities we are modifying the arrangements for the andling of this function. Hereafter this function will be handled on a centralized basis for the ntire Department. The responsibility has been assigned to the Division of Grant Administration Policy in this Office. n developing a plan for improvement in the handling of the indirect cost activity we have consulted extensively with representatives of the many types of institutions affected and with staff of the various institutional associations. We are grateful for their interest, support and thoughtful observations. Their constructive suggestions and recommendations have been and will, I am sure, coninue to be helpful. The actions which we have taken thus far are: (1) We have established work-sharing arrangements with the Department of Defense and the National Science Foundation which provide that a rate established with a given institution by one agency will be utilized by the others. (2) We are working to extend these arrangements to all other federal agencies involved in the sponsorship of research. (3) We are utilizing fixed predetermined rates wherever feasible. We have also noted that many of our grantee institutions, both educational and other non-profits, have experienced difficulties in preparing indirect cost proposals because they did not fully understand the provisions of the governing policy, Bureau of the Budget Circular A-21, and could not readily translate those provisions into the mechanics of proposal preparation. In addition we have found that this Circular, which contains cost principles applicable to educational institutions, has proven particularly difficult for non-educational institutions to apply. In an effort to alleviate these difficulties we are developing three additional sets of cost principles applicable to hospitals, state and local agencies, and other non-profit institutions, respectively. We are also developing informational brochures which incorporate these cost principles and sample proposal formats and explain the rate determination process and our policies in relation to it. The enclosed brochure is applicable to educational institutions. It is also being sent to other grantee institutions pending the development of the cost principles and brochure specifically applicable to them, in the belief that in this interim period it will provide useful guidance to them. Two copies have been enclosed one of which is for the Business Manager. Additional copies may be purchased from the Superintendent of Documents. Non-educational institutions are cautioned that the principles contained in Circular A-21 must adapted to their own environment. The Division of Grant Administration Policy will be pleased advise those institutions that have difficulty in preparing their proposals. A similar word of ca tion is necessary for all institutions in connection with use of the sample proposal forms. The forms are intended to provide a useful illustration of the mechanics of proposal preparation. Ho ever, because of the widespread differences in accounting systems employed by institutions, t forms will require modification if they are to be adapted to the particular account structure of specific institution. We hope that this brochure proves useful and will welcome your comments on the brochure as we as on the other steps being taken to improve the rate determination process. Your proposals for indirect cost rates and any inquiries concerning them should be addressed n Mr. Nathaniel H. Karol, Director, Division of Grants Administration Policy, Department of Healt Education, and Welfare, 330 Independence Avenue, S.W., Washington, D. C. 20201. Department of Health, Education, and Welfare A GUIDE TO THE DETERMINATION OF INDIRECT COST RATES ON HEW RESEARCH PROJECTS Educational Institutions PREFACE Within the Department of Health, Education, and Welfare all functions related to the establishent of indirect cost rates for non-profit organizations are performed by the Division of Grant dministration Policy of the Office of the Comptroller. The Division was given these responsibilities in August, 1966, to simplify through centralizaon the processes of rate review and negotiation and thus to serve more directly and efficiently e educational and other institutions conducting research under grants or contracts with any of e Department's operating agencies. Centralization of these processes achieves two purposes of immediate significance to the olleges and universities: 1. An institution seeking a rate determination is required to submit only one indirect cost proposal. 2. When a formal negotiation is required, an institution need participate in only a single annual negotiation to establish the rate or rates applicable to all of its research grants or contracts with the Department's offices, Institutes, or divisions. Beyond these, and in the larger framework of developing Federal administrative policy, the onsolidation permits the Department to pursue more effectively, in cooperation with other gencies, the objective of placing in a single agency responsibility for establishing, on behalf of e Federal Government, the indirect cost rates for any individual institution. This booklet describes in general terms the processes of indirect cost rate determination and resents instructions for the submission of rate proposals by grantees and contractors. Section I contains information on basic considerations involved in rate determination and on epartmental views and practices. Section II sets out guidelines for preparation of an indirect cost rate proposal. Section III incorporates the text of Bureau of the Budget Circular A-21, "Principles for Deterining Costs Applicable to Research and Development Under Grants and Contracts With Educaonal Institutions," and sample proposal forms. |