U.S. Department of Justice

Office of Community Oriented Policing Services

 Fact Sheet www.cops.usdoj.gov

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 submit the new rate agreement or approved onetime 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. 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 

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

Identification and Assignment, and Rate Determination 

for Institutes of Higher Education (IHEs) through 

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

Government and Indian Tribe Indirect Cost Proposals. 

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 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 costs 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).

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 Appendices III – VII to 2 C.F.R. 

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 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.

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 copy of the new approved rate to the COPS Office 

and must request a modification to reflect any rate 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 COPS Office 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.

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Indirect Cost Rate
What should an agency expect at the 

end of the award period regarding indirect 

costs rate?

If a provisional indirect cost rate is in effect at grant 

closeout, the awardee 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 awardee drew down excess 

COPS Office funding for indirect costs, the awardee must 

return the overpayment to the COPS Office and submit a 

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

incurred additional indirect costs, the awardee may request 

a budget modification if the award is still open and award 

funds are available. If the awardee returns or draws down 

COPS Office funding, the awardee will 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 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, 

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.

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Indirect Cost Rate

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.

Contact the COPS Office

September 2016