GUIDE TO GRANTS MANAGEMENT AND
ADMINISTRATION
FIC Approved March 2013
Co-Chairs – Tanya Muniz, Dick Butcher
Sub-committee first convened November , 2011
FINANCIAL ISSUES COMMITTEE
Background - The purpose of the Grants Committee is to assist United Ways by
providing guidance and best practices regarding organizational standards,
financial accounting issues and compliance pertaining to grants. FIC’s roll in this
process should include a focus on creating the tools and examples that members
need to guide them through the process. It has become clear from the questions
being raised by members that they are facing new complexities in accounting for
grants than those from the traditional fund-raising campaign accounting.
TASK FORCE CHARGE
The Grants sub-committee will develop guidance to help United Ways deal with the
complex issues pertaining to grants. The sub-committee will attempt to have
guidance for FIC during the March 2012 meeting.
SCOPE OF WORK
Set goals of Grants Sub Committee
Survey United Ways for successful tools and processes already being utilized
Develop document of guidance and best practices to use within the network.
IDENTIFIED TOPICS
Organizational Standards/Collaboration
Application and Implementation
GL Accounting/GL Structure
 Revenue recognition– campaign vs. grant revenue, restrictions (time, activity etc)
 Expenses – allocations, cost center, etc
Cost Recovery –indirect cost rates, sub-contractors
Compliance/Regulatory/Reporting requirements
THE PROCESS
The sub-committee initially consisted of 18 members
The work process involved weekly conference calls and side-bar working sessions and
conversations
The group was then broken into four working groups to focus on four areas involving
grants management and accounting:
FOUR AREAS OF FOCUS
Applying for Grants
Audit and Compliance
Accounting for Grants
Indirect Cost Rates
WHEW!
The final document draft was prepared by a smaller working group consisting of Subcommittee members from large markets like NYC, Detroit, Chicago, Boston, and
other smaller markets.
The entire process lasted approximately 18 months and required an estimated 1,200
hours or work.
OVERVIEW & SCOPE
This document is intended to provide guidance and information on commonly
encountered issues of particular interest to UW Members when receiving or
awarding grants. The sub-committee recognizes accounting for grants will
increase as more UW Members are moving towards community impact and thus
are experiencing new revenue streams, especially those associated with the
various types of grants available to non-profit entities. The guidance includes
information regarding evaluating a grant for organization-fit; what is a grant life
cycle; grant management roles and responsibilities; audit and compliance
including subcontracting considerations; reimbursable direct and indirect costs;
the reporting and accounting for grants; and applying for a Federal indirect cost
rate.
ORGANIZATIONAL FIT
Preparation – understand the grant application process
Understand how the grant will be managed
Organizational Fit – does the grant fit into your strategic plan?
Does your organization have the capacity to manage the grant?
Does your organization have the capacity to sustain the program during its life cycle?
What resources will be required to meet the grants compliance requirements?
UNDERSTANDING THE GRANT
Understand the requirements
 Full disclosure from grantor
 Requirements of the grant
What role will your organization have?
 Recipient
 Sub-recipient
 Service Provider
 Restrictions
 Contract requirements
 Control
FINANCIAL IMPLICATIONS
Cost/benefit
Business Case
Matching Fund Requirements
Are administrative costs allowed?
Adequate accounting and systems
Grant ending implications
APPLYING FOR THE GRANT
Cross functional team
Grant Owner
Meetings and Communication
Planning
Task assignment
Grantor Communications
Terms
Staffing
APPLYING FOR THE GRANT (CONT)
Capital Purchases
Administrative costs – fees
External Partners
Check-list
Net benefit
Geography
Finance Involvement is a key
Collaborative roles and commitments
IMPLEMENTATION
The following practices should be adhered to:
 All department leads involved in the development of the grant should review the grant
award documents to determine if requirements have changed since submission. A legal
review may also be considered.
 All signed contracts should be kept in a central, organization-wide location.
 A contract directory should be maintained by an appropriate staff member. This directory
should be accessible to all appropriate staff (on a read-only basis?).
 Program implementation, monitoring and report preparation should all be assigned to
specific staff for accountability.
 If sub-recipients are needed, ensure required monitoring procedures are in place.
 Continue cross-functional collaboration and ongoing communication, set expectations,
and review regularly.
 Ensure your infrastructure and technology will meet requirements of the contract. (i.e.,
adequate timekeeping system, cost allocation procedures, procurement, etc.)
 Ensure providers/vendors have signed contracts on file outlining deliverables, specific
deadlines, performance requirements and penalties.
GRANTS MANAGEMENT ROLES AND
RESPONSIBILITIES
Once an award has been made, a grants management team should be assembled.
Ideally, that team will have many of the same members as the team that
designed the grant proposal. The grants management team should be comprised
of both programmatic and financial personnel. The team should at least include:
 Project Coordinator
 Grant Accountant/Project Accountant/Fiscal Manager
GRANTS MANAGEMENT ROLES AND
RESPONSIBILITIES
Reporting
The grants manager should communicate with the program lead and finance department
to ensure grant reporting and closeouts are compiled according to grant requirements
and timelines.
Financial reports should be prepared by the finance department and channeled to the
funder through the grants manager or as required by the contract/award letter.
Apply best practices for monitoring ongoing operational feasibility (when is it not beneficial
to renew or opt out of an ongoing grant?) Bad decisions do not have to continue in
perpetuity.
Schedule sub-recipient monitoring and perform timely monitoring, reviews, and audits..
Follow up on all observations and recommendations provided during monitoring.
Review and share financial and program reports, milestones, successes and failures with
the cross-functional teams and with Senior Management as necessary.
AUDIT & COMPLIANCE
AUDIT AND COMPLIANCE
What documents govern the grant? Governing documents may come in different
forms depending upon the source of the funding. Initial notification may come in
verbal form which would then be followed by an official written document.
DIRECT FEDERAL GRANTS
For Direct Federal Grants, a notice of grant award will be sent by the funding agency.
The award number, amount of award, date of award and any other critical
information is included in the notice. The award notification becomes a legally
binding contract and usually includes a brief description of the federal agency’s
expectations and assurances. Other documents that may be provided by the
agency at the time of award include the conditions or laws governing the
acceptance of the award, and the program guidelines.
FEDERAL GUIDANCE
A-87 - This circular focuses on state, local, and Indian tribal governments. It
establishes regulations for costs associated with government grants, cost
reimbursements, contracts and other agreements. This circular is applicable if
the federal funding passes through a state or local government agency.
A-110 - This circular contains guidance to federal agencies on the administration of
grants to, and agreements with, institutions of higher education, hospitals and
other nonprofit organizations.
A-122 - This circular provides cost principle regulations for nonprofit organizations.
A-133-This circular establishes the provisions for audits of state and local
governments and other nonprofit organizations. It provides consistent and
uniform regulations about audits and defines the responsibilities and monitoring
requirements that apply to recipients of federal funds.
STATE AND LOCAL GRANTS
For State and Local grants, grantees will typically enter into a contract or other form of
agreement with the government agency. The agreement should contain all terms and
conditions of the grant including program scope, deliverables, a budget and payment
terms. The agreement may also reference terms and conditions that may have been
part of any Request for Proposal (RFP) issued prior to the grant award.
Some government agencies issue manuals that provide guidance specific to grants they
award. These manuals will often specify reporting requirements, allowable costs,
budget modification rules, etc.
It is also important, when managing public grants, to understand the enacting legislation
from which the grant was established. The legislation often provides clues as to what
is allowable from both a programmatic and financial point of view.
PRIVATE GRANTS
Private grants are typically explained in a letter to the UW Member and may refer to a
previous solicitation or other correspondence. As with any grant, understanding
the grant terms is essential to ensure that the grant is properly managed,
accounted for, and that grantor/donor intent is met.
SUBCONTRACTING –
COMPLIANCE/REGULATORY/REPORTING
REQUIREMENTS
Flow Down Clauses If sub contracts are permissible, the awarding
agency may require that certain sections of the UW Member's
contract also apply to the subcontractor. These are known as
subcontract flow-down clauses. A standard clause is that all
requirements, as a consequence of the grant agreement,
automatically follow to the sub recipients of the UW Member. As
a best practice UW Member’s should hold all sub recipients to
the same standards and should be in the agreement as required
by the code of federal regulations. Reference title 2-CFR Part 215
- Uniform Administrative Requirements for Grants and
Agreements with Institutions of Higher Education, Hospitals, and
Other Non-Profit Organizations (OMB Circular A-110) and title 2CFR Part 230 - Cost Principles for Non-Profit Organizations (OMB
Circular A-122).
SUB-CONTRACTING – SUB RECIPIENTS
The awarding entity is usually a government agency entering into a contract or
agreement with the UW Member. The awarding entity acknowledges the UW
Member as the primary recipient and as the primary recipient the UW Member is
ultimately responsible for all of the award’s obligations.
SUB-CONTRACTING – SUB RECIPIENTS
(CONT.)
A key determinant in the sub-contracting/sub recipient selection is ensuring the subcontractor has the aptitude to perform the duties required. The sub-contractor
should be able to clearly demonstrate the following to the UW Member:
 Aligned Mission and/or Values
 Geographic Specific
 Match Funding for initiative (if applicable)
 Board, Advisory Board or Oversight Committee in place
 Sustainable Revenue Source(s) for the agency
 Human Capital and Capacity
SUB-CONTRACTING – SUB RECIPIENTS
(CONT.)
The UW Member must:
 Disclose compliance requirements to sub-recipient
 Monitor sub-recipients use of funds
 Ensure audit compliance when necessary
 Evaluate sub-recipient activities
 Ensure timely and accurate program and financial reporting
 Outline expectations for reporting
 Site visits
SUB-CONTRACTING – SUB RECIPIENTS
(CONT.)
The UW Member must:
 Ensure regulations are followed regarding advances
 Project plans
 Standard or customized reporting templates
 Progress reports
 Project budget
 Reporting timetable—program and financial
 Penalties for non-reporting or late reporting
SUB-CONTRACTING – SUB RECIPIENTS
(CONT.)
Supporting documentation for grant requirements
 Many agencies that a UW Member may award a grant to could have capacity
challenges in their accounting shops. Therefore, it is critical that the subcontracts
include clauses that stress the importance of invoice accuracy and due dates for
the submission of invoices.
SUB-CONTRACTING – SUB RECIPIENTS
(CONT.)
It is recommended that a penalty clause for submission of inaccurate invoices be
included in the award documents. Several possibilities exist:
 A pre-determined penalty for submission of an invoice to the UW Member for
payment that must be returned to the subcontractor for corrections
 A pre-determined penalty if invoices must be returned to a subcontractor for the
same type of error more than one time in a month. This approach allows the
subcontractor one chance to resubmit an inaccurate invoice without penalty.
 A higher pre-determined penalty if invoices must be returned to a subcontractor for
the same type of error previously made in prior months. This may seem harsh, but
some subcontractors make the same errors month after month.
SUB-CONTRACTING – SUB RECIPIENTS
(CONT.)
Subcontractors must be made aware of the documentation requirements to support
invoices. This can be accomplished in a variety ways:
 Include clauses in the subcontract detailing the documentation required including
what must be submitted with each invoice. In some instances, the UW Member’s
awarding institution may have specific requirements for what must be submitted
with its invoices to the funder. These requirements will need to be communicated
to all subcontractors.
 Provide written notices to the subcontractors specifying documentation
requirements.
 Conduct subcontractor meetings and review documentation requirements with
subcontractors.
 Ensure the subcontractors are aware of documentation retention requirements to
meet grant requirements.
SUB-CONTRACTING – SUB RECIPIENTS
(CONT.)
Communication to subcontractors
 Communication between subcontractors and UW Member staff should be
conducted on a regular basis. At times, communication will impact the financial
administration of the awards therefore it is critical for financial personnel be
included in communications.
 The UW Member has the responsibility to ensure all expenses submitted by the
subcontractor are allowable under the terms of the award. This means the UW
Member financial staff must be aware of allowable expenses under the terms of its
award from the funder. Any restrictions must be communicated to the
subcontractors.
AUDITS
Internal Audit / Self-Assessment
Keys to a successful internal audit or self-assessment include the following:
 Independent group - The group conducting the internal audit or self-assessment
should be independent from the agency accounting and finance processes for a
truly objective review of processes and employees. The group would report to either
the audit committee or the CEO.
 Annual audit plans - Just like any group, for an internal audit function to be
effective, annual plans with goals and objectives as well as final deliverables should
drive the primary focus of the group.
 Flexibility – An internal auditor will often be called into a situation after an issue has
come up, therefore be able to balance unforeseen issues and the annual plan is
important.
 Internal audit work can be utilized as support for internal control testing and risk
assessments by external auditors which can reduce overall testing and costs.
AUDITS
Annual organization audit
 Additional grant revenue does not necessarily mean additional audit testing. With a
contract in place, most grants are easily substantiated and tested. Because most
grants are short term in scope, typical contract accounting does not apply.
Depending on the timing of the grant and the UW Member’s year end, cutoff of
expenditures and revenue are absolutely vital.
STATE, FEDERAL, LOCAL AND OTHER
MUNICIPALITY AUDIT/MONITORING
The UW Member should be prepared to be monitored if they receive funding as a sub
recipient. The awarding entity is most likely to formally monitor the use of these
funds as a contract requirement. The UW Member should be prepared to provide
all documentation to support all charges/invoices submitted to the grantee.
ACCOUNTING FOR GRANT REVENUE AND EXPENSE
Accounting treatment for revenues raised in a non-profit are governed by FAS
116,117, and 136.
Typically there are three types or revenue in a non-profit
 Contributions
 Exchange Transactions (fee for service)
 Agency Transaction (FAS 136) – “Pass-throughs”
CONTRIBUTIONS
Contribution - An unconditional restricted pledge (for example, an asset to be donated
which must be used to support a particular program service (i.e. use restriction)
or extends over multiple fiscal years (i.e. time restriction) is recognized when the
pledge is made. These are campaign revenues.
CAMPAIGN REVENUE
The importance of making a determination for a grant as campaign or non-campaign
is twofold:
 Grant revenue may be included in campaign revenue or separately stated as its own
line item. If grant revenue is considered material, generally accepted accounting
principles requires all major classes of revenue to be reported separately.
 The determination will affect what the UW Member reports to UW Worldwide on the
database II report, which will be used to calculate membership dues.
GRANT REVENUE
Conditions for Grant Revenue:
 Typically the key factor in when a commitment to fund would be considered a grant is when
there are donor imposed stipulations or conditions commonly known as restrictions. This
funding would not be available for use in the general fund or for any purpose that was not
associated with the restriction. Restricted funding would restrict the use of these funds to the
specific purpose or initiative associated with those restrictions. Typically this would require
negotiation and a formal application for the funding. An example of a grant would be a
foundation or governmental funding a specific need or purpose with a detailed description of
the program.
 A contract exists with specific donor restrictions and reporting requirements. These include
would typically include details disclosing the details of any periodic reporting on the use of the
grant funds and any evaluation reporting required that documents and memorializes the
details of the organization’s results as the grantee – the grant impact, outcomes and
accomplishments.
 Any funds received from local, state or federal governments would most likely be grants.
Consideration must be given to the UWW NPC policy on reporting total resources generated
which specifies that government grants that directly fund initiatives are reported as
“contributions beyond campaign” or UW3 in the UW Member Continuum.
DECISION TREE
Grant Transaction Type Decision Tree
Examine Grant Characteristics
to determine transaction type
1) Agency transaction
(specified beneficiary – no
variance power)
2) Exchange
transaction
(accrual)
Determine
transaction
type
Record as
Asset and
Liability
Recognize/accrue
Revenue as it is
earned; Expense
as incurred
3) Contribution
(SFAS 116)
3B) Is there a grantorimposed restriction
(i.e. cross fiscal years’
or specific purpose?
3A) Is there
a grantorimposed
condition?
Yes
Yes
No
Recognize as
Unrestricted Revenue
in period received
Treat cash
advances as a
Liability (e.g.,
Deferred Revenue)
No
Yes
Recognize conditional portion of
revenue when the condition
(event) has occurred or is
substantially complete as Temp
Restricted Revenue and Grant
Receivable
Recognize that portion of
Grant no longer restricted as
Unrestricted Revenue (or
Net Assets Released from
Restrictions after Year 1)
Recognize net present
value of the non-current
portion of remaining
Grant (less cash
advances) as
Temporarily restricted
Revenue along with
Grants Receivable
Recognize as
Unrestricted Revenue
in period received
FINANCIAL STATEMENT PRESENTATION
AND DISCLOSURE
Accounting for grant revenue and expense in the audited financial statements should
be consistent with reporting in the UW Member Guide to FASB Statements
116,117 and 136 and the Functional Expense and Overhead Reporting
Standards for UW Members.
The Statement of Functional Expenses should report grant related expenses (e.g.
salaries, fringe/tax, and distributions) by natural classification as a separate
column under Program Expenses.
Included in the organization’s notes to the audited financial statements, significant
accounting policies should disclose the revenue recognition method for material
classes of revenue.
COST RECOVERY
Cost recovery for grants involves segregating all grant costs into direct and indirect
costs based upon the indirect cost methodology used by the UW Member. A
primary goal is to recover all of the UW Member’s costs related to providing a
particular grant funded project or program.
DIRECT COSTS
Direct costs are expenses which can be specifically identified to directly benefit a specific
project or program.
Direct costs can include a portion of an individual’s salary, plus benefits, taxes and other
allocated direct support costs.
Depending upon the UW Member’s methodology for allocating such costs, direct support
costs may include building occupancy costs (phone, repairs and maintenance,
insurance, depreciation and rent) and software and technology support. Direct support
costs are often referred to as overhead.
Some of these costs may be considered indirect if they are not specifically identified to a
specific project or program. The identification of a cost as direct or indirect may vary by
UW Member.
These expenses are typically charged directly and supported by an invoice, contract,
employee reimbursement form or other type of documentation supporting the
expense.
INDIRECT COSTS
Indirect costs are those that have been incurred for common or joint objective. Indirect costs are
often referred to as administrative costs and would typically include areas such a human
resources, finance, purchasing, occupancy, executive management, audit, insurance, or legal
expenses.
While fundraising costs are not allowable in a federal indirect cost rate, they may be included as
part of the indirect cost allocation for a non-federal grant. These costs as well as
management and general may be calculated as a percentage of the total grant award or total
direct costs. The calculation can be based upon the methodology used by the UW Member to
calculate the overhead ratio per UWW’s “Functional Expense and Overhead Reporting
Standards for UW Members” (calculated based upon time sheet/time studies or FTE
allocations) for actual personnel engaged in grant activity plus any other associated costs.
Guidance, further clarification, and examples of these types of expense and allocation methods
is contained in the UWW document entitled “Functional Expense and Overhead Reporting
Standards for UW Members”, written and approved by the FIC in November 2004.
INDIRECT COST OVERHEAD COST ASSIGNMENT
METHODOLOGIES
Time Sheet/Time Study Method - Employees, including the Chief Executive Officer report time worked in various
functional classifications such as fund raising, management and general, and programs. Indirect expenses
(allocable management and general) are allocated by the resulting percentage of time.
Fulltime equivalent employee method – The full-time equivalent (FTE) employee method is based on the premise
that each employee has an associated overhead cost. In most UW Members, salaries will account for the
majority of the operating expenses. The FTE method re-allocates a portion of the management and general
expense to program expenses and to other supporting service expense, where applicable. The FTE employee
method is a common indirect cost method used by many UW Members.
Square Footage Method – This method is not recommended due to poorly controlled variables such as inefficient
space usage, large amounts of common areas and other factors.
Indirect Cost Documentation The organization should also have adequate documentation to support their indirect
cost allocation methodology, to include time studies or other payroll related records and budget vs. actual
comparisons for indirect cost pools in order to substantiate the rate charged to grants.
INDIRECT COSTS
The documentation provided to your independent audit firm should include a summary of
the indirect cost allocation methodology (time sheet/time study method, full time
equivalent employee method, etc.), justification for the method used and the general
approach to allocating indirect costs to specific programs.
The indirect cost allocation method should be consistent from year to year. If there is a
change in methodology, the change should be well documented. One example of a
change is the implementation of detail time reporting for all employees resulting in the
use of the time sheet/time study method of cost allocation.
The result of the indirect cost allocation will be reflected in organization’s financial
statements - the Statement of Activities (SOA) and the Statement of Functional
Expenses (SOFE). The allocation method should be performed at least annually for
audited financial statement purposes but preferably more frequently for internal
review. After the indirect cost allocation is complete, total expenses in the SOA should
tie to total expenses in the SOFE.
FOOTNOTES
Financial statement footnote disclosure should include a description of program
services (for each program included in the SOFE) and for supporting services (to
include management and general, fundraising, and membership development).
There should also be an accounting policy in the footnotes describing the functional
allocation of expenses and any significant change in the allocation method that
may cause a material change in the allocation of expenses between program
services and supporting services.
OTHER COST INFORMATION
It is important to note that federal grants (and possibly non-federal grants) disallow certain
items of cost. For more information on unallowable costs, see Federal OMB Circular A122.
When there are unallowable costs charged to the grant the general ledger for that grant
may reflect expenses in excess of the revenue resulting in a net loss for that cost
center/program. In this case, the UW member policy may be to move the unallowable
costs out of the grant/project but leave them in the same program cost center.
To promote transparency for the UW Member, project budgets should clearly identify all
funding sources and each grantor’s share of direct and indirect costs. Multi-year and
cross fiscal year budgets may be required depending upon the grantor’s funding cycle
or the project itself.
Matches - The UW Member may be required to report on amounts incurred that are not
reimbursed by the grantor. These amounts are typically referred to as grant-matching
in-kind contributions and may also be required as part of grant acceptance.
INDIRECT COST RATE
The federal government recognizes the costs to administer a grant by a grantee
organization as a normal occurrence. Therefore, an indirect cost rate
reimbursement system has been implemented and in operation for many years.
However, the costs must be reasonable and comparable with other like agencies
performing the same task. When applying for an indirect cost rate, the proposal
will be scrutinized by the cognizant agency. Therefore be prepared to demonstrate
each expense type and the allocation methodology in detail.
IDC RATE (CONT.)
According to OMB Circular A-122 (2CFR Part 230) “Indirect Costs are those that have
been incurred for common or joint objectives and cannot be readily identified with
a particular final cost objective”.
Applying for a Federal Indirect Cost Rate will require a professional understanding of
the requirements of OMB A-122 for non-profits, the Federal Acquisition
Regulation – Part 31.2 for Commercial Organizations, as well as a strong internal
control and accounting system which can capture all costs/functions and easily
identify relevant indirect costs.
Applying for a Federal Indirect Cost Rate will require a professional understanding of
the requirements of OMB A-122 for non-profits, the Federal Acquisition
Regulation – Part 31.2 for Commercial Organizations, as well as a strong internal
control and accounting system which can capture all costs/functions and easily
identify relevant indirect costs.
ICD RATE (CONT)
The rate negotiation is a “backwards” process. An initial indirect cost rate proposal
must be submitted as part of the initial grant application to the agency. This rate
proposal is for a “provisional rate”.
The rate is determined to allow an organization to charge each grant a single amount
to cover its fair share of overhead costs rather than directly allocating multiple
line items to every grant award. This will simplify accounting for allocated
expenses and reduce the burden of posting multiple allocation entries to each
grant for shared expenses. The amount transferred from the grant is treated like
an inter-fund transfer throughout the grant cycle.
ICD RATE (CONT.)
Use this link for an excellent discussion of the IDCR application process and exhibits
required:
http://www.dol.gov/oasam/programs/boc/costdeterminationguide/cdg.pdf
Obtaining an Indirect Cost Rate is typically a negotiated, iterative process.
Data used would come from the organization’s audits (SOFE)
IDC RATE (CONT.)
Items you will need to provide:
Personnel Cost Worksheet
 Generally, this is a worksheet for listing all employee salaries and related benefits for the
organization. Additionally, footnotes are included to explain the rates and costs for
related employee benefits
Allocation of Personnel Worksheet
 This worksheet is a key document and demonstrates how the personnel expenses
included on the personnel cost worksheet are allocated among various grants. This
worksheet may require specific formatting and data to the specific cognizant agency. It
will be important that the correct information and formatting is submitted)
Employee Time Distribution Report
 This will be a sample of the timekeeping document used by an organization to track the
various actual expenses and subsequent allocations.
IDC RATE (CONT.)
Statement of Employee Benefits
 A statement of employee benefits is usually required explaining the detailed benefit accounts and stated as a
percentages of total salaries.
Cost Policy Statement
 The Cost Policy Statement is a detailed description of all the cost elements in the indirect cost proposal. It
should also include the cost element allocation methodology. This document must be signed and dated.
Certificate of Indirect Costs
 The Certificate of Indirect Costs is a document certifying compliance with all regulations and requirements by
GAAP. In particular, it must state that all unallowable expenses have been eliminated from the calculation.
Unallowable expenses include: donated or contributed salaries and benefits and services, bad debts, fund
raising, advertising, independent research and development (IR&D), depreciation of federally funded assets.
Listing of Grants and Contracts (See Appendix C)
 This document is a listing of all currently awarded Federal and Non-Federal Grants. It should include grant
terms, amount, any indirect cost limitations or CAP limitations, and a copy of each award letter, also include the
Federal Codes, if applicable.
IDC RATE (CONT.)
Other Documents as requested:
 Organizational Chart
 Audited Financial Statements
 IRS Form 990
 Any OMB A-133 supplemental information that is not included in the audit
 Internal Financial Statements, particularly reconciling the final costs to the final rate
proposal
 Written notification of any accounting method or policy change which impacts the
internal financial statements
IDC RATE (CONT.)
There are three basic cost allocation methods as alternatives for an IDC:
 Simplified Allocation Method
 With this method the agency captures all indirect costs into a pool and allocates
based on the calculated rate and distributes proportionately. Direct costs are
expenses which can be specifically identified to a program or function. In this
method all “shared” costs are indirect. In essence, this organization has only
one major function, or where all major functions benefit from its indirect costs
approximately to the same degree. An example would be a smaller organization
which has only one or a few functions which share the indirect costs equally. All
shared or indirect costs would be identified in the indirect cost pool and
allocated equally to each function and the proposed grant, proportionately
according to its relative total dollar value or total personnel cost.
IDC RATE (CONT.)
Direct Allocation Method (See Appendix I)
 The direct allocation method utilizes the same format and steps as the simplified allocation
method. The difference is that several of the line items in the Indirect Cost column are first
allocated to programs based on a direct approach. For example please refer to the DOL cost
determination guide section III-10. Consumable supplies expense has been allocated to
Federal and Non-Federal programs directly leaving only the unallocated portion in the Indirect
Costs column. This method utilized a direct method, such as actual inventory, floor space, head
count, FTE, or some other method to allocate these costs. The notes following this example in
the DOL guide’s III-10 explain each line item directly allocated and the basis used to determine
the allocation.
 This method assumes that each function of the organization does not benefit from the shared
or indirect cost pool equally. It utilizes a more direct approach of first determining a reasonable
basis for much of the shared costs and allocated accordingly across its current functions and
the grant being proposed. Only the shared costs which cannot be readily identifiable to any
function are pooled as indirect. This method is perhaps a bit more realistic to most UW
Members which utilize various programs and grants as well as established operational divisions
that vary in size and cost.
IDC RATE (CONT.)
Multiple Allocation Base Method
 The Multiple Allocation Base Method utilizes the same format as the simplified and
the direct method, however the organization structure will dictate if this method is
required. If an organization has multiple functions and the indirect costs benefits
its major functions in varying degrees, Indirect Costs will be accumulated in
separate pools and allocated to benefiting functions by means of separate indirect
cost pools which best measures the relative benefits.
 The Indirect Cost Proposal will reflect the different pools and apply the indirect
costs only to the function actually benefitting from the grant.