[Additional Indirect Cost Information and Example for Grants under
Restricted Rate Programs]{.underline}

If you are applying for a grant from the U.S. Department of Education
(ED) under a Restricted Rate Program that is subject to a statutory
"supplement not supplant" restriction, you are required to use a
restricted indirect cost rate. See the Education Department General
Administrative Regulations (EDGAR), 34 CFR 75.563 \[discretionary
grants\] at
<http://www.ed.gov/policy/fund/reg/edgarReg/edlite-part75e.html> or 34
CFR 76.563 \[formula grants\] at
<http://www.ed.gov/policy/fund/reg/edgarReg/edlite-part76f.html>, as
applicable, and 34 CFR 76.564 through 76.569 at
<http://www.ed.gov/policy/fund/reg/edgarReg/edlite-part76f.html>.

Restricted rates for State Educational Agencies (SEA) are included on
the SEA's negotiated indirect cost rate agreement. Restricted rates for
Local Educational Agencies are provided by the SEA, using a method
approved by ED. The restricted rate requirements also apply to any
subgrants from the prime recipient.

All applicants must use the restricted rate included on their negotiated
indirect cost rate agreement. Applicants for discretionary grants that
are not a State or Local government and do not have a negotiated
restricted rate, may use the 8% rate described at §76.564(c )(2). If an
applicant's calculated restricted rate is less than 8%, the lower rate
must be used for the application's budget. The 8% rate in §76.564(c)(2)
must also be multiplied by the modified total direct cost base described
in §76.569.

For grants under Restricted Rate Programs, §76.569 requires that
grantees multiply their restricted indirect cost rate by:

"Total direct costs of the grant minus capital outlays, subgrants, and
other distorting or unallowable items as specified in the grantee\'s
indirect cost rate agreement."

Commonly, such a procedure is referred to as multiplying by a modified
total direct cost base.

Below is a simplified example for calculating indirect costs for a
Restricted Rate program using budget categories from the ED 524 form,
Budget Information -- Non-Construction Programs. The ED 524 and
Instructions can be found at:
<http://www.ed.gov/fund/grant/apply/appforms/appforms.html>

For the purposes of this example, a 6% restricted rate from a negotiated
indirect cost rate agreement is used to calculate indirect costs.

  ----------------------------------- ---------------------- ------------- -----------------------
  1\. Personnel                                                            150,000

  2\. Fringe Benefits                                                      50,000

  3\. Travel                                                               10,000

  4\. Equipment                                                            5,400

  5\. Supplies                                                             600

  6\. Contractual                                                          3,700

  7\. Construction                                                         \-

  8\. Other (tuition)                                                      [72,000]{.underline}

  9\. Total Direct Costs                                                   291,700

                                                                           

  Calculate Modified Total Direct                                          
  Cost Base                                                                

  Total Direct Costs                                         291,700       

  Less:                                                                    

  Equipment                           5,400                                

  Tuition                             [72,000]{.underline}                 

                                                             77,400        

  Modified Total Direct Cost Base:                           214,300       

  Multiply \$214,300 by 6% restricted                        12,858        
  rate:                                                                    

                                                                           

  10\. Indirect Costs (using 6%                                            12,858
  restricted rate)                                                         

  11\. Training Stipends                                                   \-

  12\. Total Costs                                                         [304,558]{.underline}
  ----------------------------------- ---------------------- ------------- -----------------------