U.S. Department of Justice

Office of Community Oriented Policing Services

 Fact Sheet www.cops.usdoj.gov

Indirect Cost Rate for FY 2017 Awards

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 should submit 

documentation demonstrating that the rate is under review 

by your cognizant federal agency. If your agency requests 

indirect costs for a COPS Office award based on an expired 

rate, your agency may not draw down funding for indirect 

costs until the current 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 submit the new rate 

agreement or approved one-time extension from your 

cognizant federal agency to the COPS Office.

What are indirect costs?

Indirect Facilities & Administrative (F&A) costs are 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.1

1 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 as defined in 2 C.F.R. § 200.57 

is the documentation prepared by a nonfederal entity to 

support its request for the establishment of an indirect cost 

rate, as described in Appendix III to 2 C.F.R. Part 200, 

Indirect (F&A) Costs Identification and Assignment, and Rate 

Determination for Institutions of Higher Education (IHEs) 

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

Government and Indian Tribe Indirect Cost Proposals.

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

are 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 cost rates:

 Final rate is applicable to a specified past period that is 

based on the actual costs of the period. A final audited 

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 

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). MTDC 

can include all direct salaries and wages, applicable 

fringe benefits, materials and supplies, services, travel, 

and up to the first $25,000 of each subaward (regardless 

of the period of performance of the subawards under 

the award). MTDC excludes equipment, capital 

expenditures, rental costs, tuition remission, scholarships 

and fellowships, participant support costs, and the 

portion of each subaward in excess of $25,000. Other 

items may only be excluded when necessary to avoid a 

serious inequity in the distribution of indirect costs and 

with the approval of the cognizant federal agency for 

indirect costs.

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 requirements 

for development and submission of indirect (F&A) cost 

rate proposals, please refer to 2 C.F.R. § 200.414 (e) and 

Appendices III – VII to 2 C.F.R. Part 200.

What is a cognizant federal agency?

Cognizant federal agency for indirect costs as defined in 

2 C.F.R. § 200.19 is the Federal agency responsible for 

reviewing, negotiating, and approving cost allocation 

plans or indirect cost proposals on behalf of all Federal 

agencies. The cognizant federal agency for indirect cost is 

not necessarily the same as the cognizant federal agency for 

audit. The COPS Office is not a cognizant federal agency. 

For nonprofit, state, local, and tribal governments your 

cognizant federal agency is generally the federal agency that 

provides your organization with the most federal financial 

assistance. For assignments of cognizant federal agencies, see 

the following:

(a) For institutions of higher education: Appendix III to 

Part 200—Indirect (F&A) Costs Identification and 

Assignment, and Rate Determination for Institutions 

of Higher Education (IHEs), paragraph C.11.

(b) For nonprofit organizations: Appendix IV to Part 

200—Indirect (F&A) Costs Identification and 

Assignment, and Rate Determination for Nonprofit 

Organizations, paragraph C.2.a.

(c) For state and local governments: Appendix V to 

Part 200—State/Local Government and Indian 

Tribe-Wide Central Service Cost Allocation Plans, 

paragraph F.1.

(d) For Indian tribes: Appendix VII to Part 200—States 

and Local Government and Indian Tribe Indirect 

Cost Proposal, paragraph D.1.

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 from the cognizant federal agency and 

submitted to the COPS Office. The agency must advise the 

COPS Office 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 Grant Program Specialist or Program Manager 

to determine when a budget modification is necessary.

Indirect Cost Rate 2
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.

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 Program Manager to obtain 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 its indirect costs rate?

If a provisional indirect cost rate is in effect at award 

closeout, the recipient shall proceed with closeout but 

will complete an expenditure analysis upon receipt of 

the approved final indirect cost rate to determine if an 

adjustment is necessary. If the recipient drew down excess 

COPS Office funding for indirect costs, the recipient must 

return the overpayment to the COPS Office and submit a 

revised Federal Financial Report (SF-425). If the recipient 

incurred additional indirect costs, the recipient may request 

a budget modification if the award is still open and award 

funds are available. If the recipient returns or draws down 

COPS Office funding, the recipient will need to submit a 

revised final Federal Financial Report (SF-425).

Other important factors

To support the indirect cost rate agreement, recipients are 

responsible for ensuring independent audits are conducted 

in accordance with existing federal auditing and reporting 

standards set forth in 2 C.F.R. Part 200, Subpart F - Audit 

Requirements. 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, recipients 

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, recipients 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 Grant 

Program Specialist or 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 3

May 2017