Indirect Cost Rate

COPS Office Grant Programs

If a COPS Office applicant is requesting indirect costs under a program that 

allows those costs, a copy of the applicant’s most current, signed, federallyapproved Negotiated Indirect Cost Rate Agreement must be included with 

the application. If the rate agreement is expired at the time of application, the 

applicant must submit a copy of the indirect cost rate proposal that was sent 

to the cognizant federal agency to demonstrate that the rate is under review. If 

your agency is awarded indirect costs under the COPS award, your agency may 

not draw down funding for indirect costs until the approved rate agreement is 

submitted to the COPS Office. Additionally, if the rate agreement expires or 

changes during the award period, the grantee must inform the COPS Office and 

submit the new rate agreement to the COPS Office.

An Indirect Cost Rate is the percentage of an agency's indirect costs to its 

direct cost base and is a standardized 

method of charging individual programs 

for their share of indirect costs.

U.S. Department of Justice

Office of Community Oriented Policing Services

 Fact Sheet www.cops.usdoj.gov

What are indirect costs? 

Indirect Costs are costs that are incurred for common or joint purposes and are not readily assignable to a particular project, but are 

necessary to the operation of the agency and the performance of the project. Examples of indirect costs include those incurred for facility 

operation and maintenance, depreciation, and administrative salaries. Indirect Costs must adhere to the standards set forth in the applicable 

Office of Management and Budget (OMB) Costs Principles for your entity, 2 C.F.R. Part 225, Appendix E (state, local, and Indian tribal 

governments), 2 C.F.R. Part 230, Appendix A (nonprofit organizations), or 2 C.F.R. Part 220, Appendix A (educational institutions). 

What is an indirect cost rate?

An indirect cost rate is the percentage of an agency’s indirect costs to its direct cost base and is a standardized method of charging individual 

programs for their share of indirect costs. 

There are several types of indirect costs rates:

1. PROVISIONAL RATE is a temporary rate applicable to a specified time period which is used for funding, interim reimbursement, and 

reporting of indirect costs pending establishment of a final rate for that period. 

2. 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.

3. 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.

4. 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.

How does an agency establish an indirect cost rate? 

If an applicant 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 the applicable OMB Costs Principles for your entity, 2 C.F.R. 

Part 225, Appendix E (state, local, and Indian tribal governments), 2 C.F.R. Part 230, Appendix A (nonprofit organizations), or 2 C.F.R. 

Part 220, Appendix A (educational institutions).
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, 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 Grant Program Specialist for help determining when a budget modification is necessary.

If the agency experiences an increase or a decrease in their 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:

•	 ORI number

•	 Grant number

•	 A copy of the new approved rate

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 

award that your agency received. Please contact your COPS Grant Program Specialist or COPS 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 grant 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 OMB Circulars A-133 and A-122. 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, an Office-Based Grant Review (OBGR), or may need to address an alleged noncompliance complaint during a compliance 

review by the COPS 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 Grant 

Owner’s Manual or COPS Award Owner’s Manual or contact your COPS Grant Program Specialist or COPS Program Manager.

For more information about COPS Office programs, please call the COPS Office Response Center at 800.421.6770, or visit COPS 

online at www.cops.usdoj.gov. Rev July 2012