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CHAPTER 3-110

INDIRECT COST RATES

3-110-00 What does this chapter do?

3-110-10 Where do these principles come from?

3-110-20 What are indirect costs?

3-110-30 How do you establish an indirect cost rate?

3-110-40 How will we document your approved indirect cost rate?

3-110-00 What does this chapter do?

This chapter explains the basic principles of indirect costs for all assistance agreements awarded 

by us, the Office of Surface Mining Reclamation and Enforcement (OSMRE). These principles 

also apply to subgrants and cost-type contracts that you award under OSMRE assistance 

agreements. 

3-110-10 Where do these principles come from?

The Office of Management and Budget (OMB) has established principles for determining

allowable costs for all OSMRE assistance agreements. These principles cover indirect as well as 

direct costs. You can find this in the Uniform Administrative Requirements, Cost Principles, and 

Audit Requirements for Federal Awards 2 CFR Part 200.

3-110-20 What are indirect costs?

A. Indirect costs are common or joint-purpose costs that benefit more than one office,

agency, or program. Rather than incur excessive costs to trace these expenses to the

specific program they benefit, you will normally charge indirect costs to Federal

assistance agreements by prorating them based on an indirect cost rate. Some examples

of functions which organizations may choose to treat as indirect costs are accounting,

facility maintenance, and human services.

B. You should provide for the full reimbursement of your organization’s indirect costs under

an approved indirect cost rate.

3-110-30 How do you establish an indirect cost rate?

A. Your indirect cost rate for all Federal assistance is reviewed, negotiated and approved by

your cognizant Federal agency. Your cognizant agency as assigned by OMB is generally

the Federal agency with the largest amount of funding for your organization.

B. If you do not have an approved indirect cost rate, you must submit an initial indirect cost

proposal to your Federal cognizant agency except as provided in subsection 200.414 of 2

CFR.
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C. You should base your cost proposal on your organization's actual costs for your most 

recently completed fiscal year. However, if you are aware of factors that may result in a 

significant change during the agreement period, you should base your proposal on 

projected costs for that fiscal year. 

D. Requirements for development and submission of indirect cost rate proposals are 

contained in the applicable OMB cost principles listed above.

3-110-40 How will we document your approved indirect cost rate? 

A. You must include a copy of your current indirect cost agreement approved by the 

cognizant Federal agency with your assistance application. 

B. If your cognizant Federal agency delays approval of your agreement, you may 

alternatively include in your application, a copy of the timely indirect cost rate 

application that you sent to your cognizant agency. 

C. You should be familiar with your organization’s indirect cost agreement and what costs 

are included in it. You must ensure that you do not charge expenses as direct costs which 

are already being charged to the assistance agreement as indirect costs. We may review 

your actual costs to ensure that they are being charged appropriately in accordance with 

your indirect cost agreement.

D. We will maintain a copy of your indirect cost agreement in our official assistance 

agreement file to support our award.