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How States Can Make the Most of Every Grant Dollar Through Indirect Costs

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In this latest webinar, eCivis’ Vice President of Indirect Services breaks down how state governments can leverage indirect costs to get their cost plans in order and get the most out of every dollar in grant funding coming their way.

Access the slides and full recording of the webinar here

With the presidential transition well underway, states can expect as much as $350 billion in emergency aid, along with billions of dollars in assistance for schools and transit. Considering how devastating revenue shortfall has been for state governments, states can ensure utmost effectiveness and cost efficiency by making sure every dollar counts. 

Why Do States Need to Think About Indirect Costs and Cost Plans Now? 

States are facing revenue shortfalls of over $400 billion over the next three years, and grant funding has become a vital source to offset the decrease in sales and tax revenue.

The latest updates in 2 CFR 200 Uniform Grant Guidance provide good incentive for state governments to pay attention to procurement, audit thresholds, and measuring grant performance as well as ensuring they’re capturing reimbursements for overhead (or indirect) costs.

Here is a quick overview of the latest updates in Uniform Grant Guidance pertaining to indirect costs: 

2 CFR 200.414(f)
  • Expands use of the de minimis rate of 10 percent of modified total direct costs (MTDC) to all non-Federal entities. 
  • Currently, the de minimis rate can only be used for non-Federal entities (NFE) that have never received a negotiated indirect cost rate.
  • The NFE is not required to provide proof of costs that are covered under that rate.
2 CFR 200.414(h)
  • The federally negotiated indirect rate, distribution base, and rate type for a non-Federal entity must be available publicly on an OMB-designated Federal website with the exception of tribal governments.

Using Indirect Costs to Meet Match Requirements

During the webinar, attendees got to see a practical example of how a state agency would use its indirect costs to meet match requirements. Consider if an agency was applying for a grant from the US Department of Labor/Employment and Training Administration and the indirect cost rate is 22 percent on the grant from the agency. 

The match requirement of 25% is for a $1 million grant. This requires $250,000 in match. Most states use direct costs to fulfill match requirements. Instead of using direct costs, the requirement can be fulfilled by using indirect costs. 

 

Applying the indirect cost rate of 22% by $1,000,000 = $220,000. 

 

$220,000 (indirect) + $30,000 (direct) = match requirement.

 

Now, the agency has $220,000 for direct expenses that it can increase on spending for the grant or use towards matching a new grant.

How Indirect Costs Make Every Dollar Count

When states leverage indirect costs accordingly, they can make grant funding go a long way. Here’s what indirect costs can help states cover:

  • Enterprise funds/outside funds: Indirect cost reimbursement or General Fund reimbursement can be used to subsidize outside fund services. 

  • User fees: Indirect cost reimbursement can be used to account for user fee services, such as for IT equipment or licenses. They can also help account for fully burdened rates. 

  • Federal/state grants: Indirect cost reimbursement can be used directly on federal grants so that states can properly apply for and acquire the full costs of their programs and projects.

  • Match: By using an indirect cost rate as the match component, states can free up funds and obtain new grants previously overlooked where cash may not have been available. 

eCivis benefits of indirect costs for states visual from Feb. 10 2021 webinar

 

Need help calculating your indirect costs to make the most of every grant dollar? Reach out to see if our indirect cost experts and cost allocation software can help. 

 

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