Fact Sheet

Indirect Cost Rate

COPS Office programs

If you are requesting indirect costs under a COPS Office 

program that allows those costs, a copy of your agency’s 

most current, signed, federally approved Negotiated 

Indirect Cost Rate Agreement must be included with your 

application or it must be noted in your budget narrative 

that you have never received an indirect cost rate. If the rate 

agreement is expired at the time of application, then you 

must submit a copy of the indirect cost rate proposal that 

was sent to your cognizant federal agency to demonstrate 

that the rate is under review. If your agency is awarded 

indirect costs under the COPS Office award, your agency 

may not draw down funding for indirect costs until the 

approved rate agreement or an approved extension is 

submitted to the COPS Office. In addition, if your agency’s 

rate agreement expires or changes during the award period, 

you must inform the COPS Office in writing and submit 

the new rate agreement or approved one-time extension 

from your cognizant federal agency to the COPS Office.

What are indirect costs?

Indirect (F&A) costs are those costs incurred for a common 

or joint purpose benefiting more than one cost objective. 

They are not readily attributable to the cost objectives that 

are being benefited. To facilitate equitable distribution 

of indirect expenses to the specific cost objectives, it may 

be necessary to establish a number of pools of indirect 

(F&A) costs. Indirect (F&A) cost pools must be distributed 

to benefited cost objectives on bases that will produce 

equitable results in consideration of relative benefits derived. 

See 2 C.F.R. § 200.56 in the Uniform Administrative 

Requirements, Cost Principles, and Audit Requirements 

for Federal Awards, as adopted by the U.S. Department of 

Justice in 2 C.F.R. § 2800.101.

What is an indirect cost rate proposal?

An indirect cost rate proposal is the documentation 

prepared by a nonfederal entity to support its request for 

the establishment of an indirect cost rate as described in 

2 C.F.R. Appendix III to Part 200 (Indirect (F&A) Costs 

Identification and Assignment, and Rate Determination 

for Institutions of Higher Education (IHEs)) and through 

2 C.F.R. Appendix VII to Part 200 (States and Local 

Government and Indian Tribe Indirect Cost Proposals 

of this part). See 2 C.F.R. § 200.57 in the Uniform 

Administrative Requirements, Cost Principles, and Audit 

Requirements for Federal Awards, as adopted by the U.S. 

Department of Justice in 2 C.F.R. § 2800.101.

Indirect (facilities & administrative (F&A)) costs means those 

costs incurred for a common or joint purpose benefiting 

more than one cost objective. They are not readily 

attributable to the cost objectives that are being benefited.

There are several types of indirect costs rates:

•	 Final rate is applicable to a specified past period that is 

based on the actual costs of the period. A final rate is not 

subject to adjustment.

•	 Fixed rate has the same characteristics as a predetermined 

rate except that the difference between estimated costs 

and actual allowable costs of the covered period is carried 

forward as an adjustment for a future period.

•	 One-time extension allows your agency to apply for a 

one-time extension of a negotiated indirect (F&A) cost 

rate. The negotiated cost rate may be extended for up 

to four years. Once your cognizant federal agency has 

approved an extension for indirect costs, you must abide 

by the rate for the agreed-upon time period. No further 

U.S. Department of Justice

Office of Community Oriented Policing Services

www.cops.usdoj.gov
2

Indirect Cost Rate

negotiations regarding indirect cost rates may occur until 

the extension has expired. At the end of the extension 

period, you must negotiate a new indirect cost rate.

•	 Predetermined rate is applicable to a specified current 

or future period and is not subject to adjustment. A 

predetermined rate may be used where there is reasonable 

assurance that the rate is not likely to exceed a rate based 

on the agency’s actual costs. Predetermined rates may not 

be used by governmental units that have not submitted 

and negotiated the rate with the cognizant federal agency.

•	 Provisional rate is a temporary rate applicable to a 

specified time period that is used for funding, interim 

reimbursement, and reporting of indirect costs pending 

establishment of a final rate for that period.

•	 De minimis indirect cost rate provides the option for 

certain nonfederal entities that have never received a 

negotiated indirect cost rate to accept a flat rate of up to 

10% of modified total direct costs (MTDC).

Indirect cost rate proposal means the documentation 

prepared by a nonfederal entity to support its request for 

the establishment of an indirect cost rate as described in 

2 C.F.R. Appendix III to Part 200 (Indirect (F&A) Costs 

Identification and Assignment, and Rate Determination 

for Institutions of Higher Education (IHEs)) and through 

2 C.F.R. Appendix VII to Part 200 (States and Local 

Government and Indian Tribe Indirect Cost Proposals 

of this part). See 2 C.F.R. § 200.57 in the Uniform 

Administrative Requirements, Cost Principles, and Audit 

Requirements for Federal Awards, as adopted by the U.S. 

Department of Justice in 2 C.F.R. § 2800.101.

How does an agency establish an 

indirect cost rate?

If your agency does not have a previously established 

indirect cost rate, your agency can obtain a rate by 

contacting your agency’s cognizant federal agency, which will 

review all documentation and approve a rate for the covered 

time period. For more information on the submission and 

documentation of indirect cost rate proposals, please refer 

to 2 C.F.R. § 200.414 (e) and 2 C.F.R. Appendices III – VII 

to Part 200.

To identify your cognizant federal agency, please visit:

For units of state and local government: U.S. Department 

of Health and Human Services 

http://rates.psc.gov/fms/dca/s&l1.html

For Tribal Governments: U.S. Department of Interior 

http://www.aqd.nbc.gov/Services/tribal.aspx

For nonprofit organizations: U.S. Department of Health 

and Human Services 

http://rates.psc.gov/fms/dca/orgmenu.html and 

http://rates.psc.gov/fms/dca/np1.html

For educational institutions: U.S. Department of Health 

and Human Services

http://rates.psc.gov/fms/dca/c&u.html

What should an agency do if its indirect cost rate 

expires or changes during the award period?

If your agency’s approved indirect cost rate agreement 

expires during the award period, a current approved rate 

agreement must be obtained by the cognizant federal agency 

and submitted to the COPS Office. The agency must advise 

the COPS Office, in writing, of any changes to its approved 

indirect cost rate during the award period and, if necessary, 

request a budget modification that reflects the rate change. 

Please contact your COPS Office Program Manager to 

determine when a budget modification is necessary.

If the agency experiences an increase or a decrease in its 

indirect cost rate, it should submit the new rate to the 

COPS Office within 30 days of the change.

What documentation is required by the COPS 

Office if an agency’s indirect cost rate changes?

If an agency’s indirect cost rate changes, it is required to 

submit a plan in writing to the COPS Office for approval. 

The agency must request a modification to its indirect cost 

rate by submitting a letter on official letterhead that includes 

the following:

•	 ORI number

•	 Award number

•	 A copy of the new approved rate
3

Can an agency reprogram indirect costs to 

direct costs?

Reprogramming requests of indirect costs to direct costs are 

administered through the budget modification process for 

the specific COPS Office award that your agency received. 

Please contact your COPS Office Grant Program Specialist 

or COPS Office Program Manager to obtain modified 

budget detail worksheets and guidance on any additional 

requirements that may apply to your modification request. 

The COPS Office will then evaluate your request and notify 

you, in writing, of our decision.

Please be advised that if your agency’s revised indirect cost 

rate is lower than the rate approved at the time of award 

and a formal budget modification was not approved, excess 

indirect cost rate funds should not be drawn down and will 

be deobligated at closeout.

What should an agency expect at the end of the 

award period regarding indirect costs rate?

Before the COPS Office officially closes out your agency’s 

award, changes between your approved final indirect cost 

rate and approved provisional indirect cost rate must be 

reconciled. If your agency drew down excess funding for 

indirect costs as a result of the reconciliation, your agency 

must promptly return the overpayment and submit a revised 

Federal Financial Report (SF-425) to the COPS Office.

Other important factors

To support the indirect cost rate agreement, awardees are 

responsible for ensuring independent audits are conducted 

in accordance with existing federal auditing and reporting 

standards set forth in 2 C.F.R. § 200.300 et seq.; 2 C.F.R. 

§ 200.400 et seq.; and 2 C.F.R. § 200.500 et seq. in the 

Uniform Administrative Requirements, Cost Principles, 

and Audit Requirements for Federal Awards, as adopted by 

the U.S. Department of Justice in 2 C.F.R. § 2800.101. A 

copy of the audit report must be submitted to the cognizant 

federal agency to support the indirect cost rate agreement.

In accordance with ensuring proper award management and 

use of funding awarded through the COPS Office, awardees 

may be selected for a site visit or an enhanced office-based 

grant review (EOBGR) or may need to address an alleged 

noncompliance complaint during a compliance review by 

the COPS Office Grant Monitoring Division. Therefore, 

awardees must adhere to proper accounting practices and 

recordkeeping to ensure all necessary documentation is 

available for review if requested by the COPS Office. 

Noncompliance may result in the repayment of misused 

funds, suspension of funds, or other remedial actions 

available by law until the noncompliance is resolved.

Contact the COPS Office

If you have any questions regarding the federal requirements 

that guide indirect cost rates, please refer to the applicable 

COPS Office Award Owner’s Manual or contact your 

COPS Office Program Manager.

For more information about COPS Office programs, please 

contact the COPS Office Response Center at 800-421-6770 

or by e-mail at AskCopsRC@usdoj.gov or visit the COPS 

Office online at www.cops.usdoj.gov.

Indirect Cost Rate

May 2015