Indirect Cost Rate Proposal Submission Procedures

This webpage outlines the procedures for submitting a formal indirect cost rate proposal to the U.S. National Science Foundation (NSF) for the purpose of establishing a formally negotiated indirect cost rate agreement (NICRA).

NSF only negotiates indirect cost rates with those domestic entities who receive the preponderance of their direct funding from the agency.

Organizations who function solely as subrecipients (and who do not receive their funding direct from NSF) should negotiate an indirect cost rate with the prime awardee, in accordance with 2 CFR 200.332.

Foreign organizations that do not have a current U.S. federally negotiated indirect cost rate(s) are limited to a de minimis indirect cost rate recovery of 15% of modified total direct costs, unless they have negotiated a formal indirect cost rate agreement with another federal agency.

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Awardees that are new to NSF

Potential NSF SBIR Phase II awardees who do not hold a current NICRA with a federal agency and who wish to request indirect costs in excess of the SBIR "safe rate" may submit an indirect cost rate proposal as part of the documentation provided for the Phase II Administrative/Financial Reviews.

If your SBIR/STTR organization has been directed to provide the documentation needed by NSF to conduct administrative and financial reviews, the rate proposal should be sent in electronic format within 10 calendar days of the date of the request to bfacapsbir@nsf.gov.

Please note that submitting a rate proposal for the purpose of NSF SBIR/STTR Phase II funding will not result in the issuance of a formal NICRA but will establish a rate that the SBIR/STTR awardee may use for their NSF Phase II award only.

Potential NSF awardees who do not hold a current NICRA with a federal agency should generally budget indirect costs at the 15% de minimis rate (as authorized by 2 CFR 200.414(f)) unless otherwise authorized by the program solicitation and/or instructed to do by the cognizant NSF grants and agreements officer.

Existing NSF awardees who do not hold a NICRA

Existing NSF awardees who do not hold a current NICRA with a federal agency may choose to negotiate a formal rate agreement with NSF, provided that NSF provides the preponderance of their direct funding and is therefore their cognizant agency for indirect costs.

To begin a rate negotiation, the awardee should prepare the calculations and compile the documentation as detailed in these indirect cost rate proposal submission procedures.

Please note that once a formal NICRA is in effect, an awardee is no longer eligible to apply the de minimis rate while the NICRA remains current.

Awardees that negotiate a NICRA with NSF as the cognizant agency for indirect costs

Organizations that have previously established a NICRA with NSF must submit a new rate proposal to the NSF Cost Analysis and Pre-Award Branch within six months after the close of the organization's fiscal year.

Awardees that have not previously negotiated an ICR with NSF must submit their proposals no later than three months after the effective date of an award.

Proposals should be submitted electronically to bfacapidc@nsf.gov.

Federal requirements

NSF reviews indirect cost proposals for a diverse population of awardees. Each organization must comply with the applicable federal requirements contained in 2 CFR 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards related to:

Specific indirect cost requirements are applicable to different types of organizations, as follows:

Are required to follow the regulations contained in 2 CFR 200, "Appendix IV — Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations."

Are required to follow the cost principles contained in:

Audit requirements are the responsibility of the cognizant federal agency.

Are required to follow regulations contained in 2 CFR 200, "Appendix VII—States and Local Government and Indian Tribe Indirect Cost Proposals."

Note: Because the federal organization providing the preponderance of funding is normally the cognizant agency, NSF is rarely the cognizant agency for state and local government agencies.

Are required to follow the regulations contained in 2 CFR 200, "Appendix III—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education."

Note: NSF does not negotiate indirect cost rates with institutions of higher education. 2 CFR §200, Appendix III(c)(11) assigns cost negotiation cognizance for educational institutions primarily to the Department of Health and Human Services (HHS) or the Department of Defense's Office of Naval Research (ONR). NSF recommends that these institutions prepare an indirect cost proposal in accordance with the guidance on the HHS/ONR websites and use the rate calculated from that guidance in proposals submitted to NSF. If NSF subsequently issues an award, the institution should then go to HHS/ONR to complete a rate negotiation. For more information, visit the HHS website or the ONR website.

Checklist of required documents

The following documentation is required to be submitted as part of the organization's indirect cost rate proposal:

 

1. Cover letter

Indicating the organization's requested period(s) covered by the rate(s), the type of rate(s), and the allocation base(s).

2. Organizational information

The documents listed below must be submitted as part of an organization's first rate negotiation with NSF. Only revisions need to be submitted with subsequent proposals.

The organizational profile provides the basic structure of the organization and should include, at a minimum, the following components:

  • A statement of major activities performed at the organization, including a description of the organization's mission, services performed for the general public, member services, fundraising, lobbying, research grants and contracts, etc. (should be 1–2 pages in length).
  • Organizational chart(s) and any information or material explaining the various services and functions of each unit.
  • Based on the information provided in the statement of major activities, describe which services are allowable and allocable to federal grants and contracts, under 2 CFR 200 Subpart E, or FAR Part 31, as applicable.
  • Based on the organizational charts, indicate which units are indirect (administrative) functions of the organization.

The purpose of the CPS is to establish a clear understanding between the organization and the federal government regarding what costs will be charged directly and what costs will be charged indirectly. The CPS also provides awardee personnel with a record of the awardee's practices in the event of personnel changes.

The CPS should include the following information:

 

1. Statement on general accounting policies, including, but not limited to:

  1. Basis of accounting (accrual or cash basis).
  2. Fiscal year end.
  3. Method of allocating indirect costs.
  4. Statement of allocation base for the indirect cost rate.
  5. Statement of allocation base for the fringe benefits (if using a fringe benefit rate).
  6. Accounting system software description.

 

2. Statements for each general ledger expense account (or cost element):

Indicate whether each account is used to record direct or indirect expenses. For those accounts related to activities that are sometimes charged as both direct and indirect costs, indicate the circumstances under which the determination is made. Example accounts include, but are not limited to:

  1. Salaries and wages.
  2. Fringe benefits, including a statement of how fringe benefits are charged (e.g., actual basis by employee, via a fringe benefit rate, etc.) and a statement of the treatment of compensated leave costs (e.g., vacation, holiday, sick leave, etc.).
  3. Travel.
  4. Board expenses.
  5. Supplies and materials.
  6. Occupancy expenses.
  7. Utilities.
  8. Communications.
  9. Photocopying and printing.
  10. Outside services.
  11. Capital items.
  12. Depreciation.
  13. Services to members.

 

3. Allocation methodology:

For each of the above general ledger accounts in which costs are allocated to more than one activity, describe the method used to allocate the costs (e.g., actual usage, square feet, cost of space, volume, etc.)

 

For additional guidance on preparing a CPS, you may refer to one of the applicable guides listed below. These guides provide similar but different components to the above CPS requirements:

The statement will include the following:

  • A description regarding the accounting treatment of unallowable costs.
  • Methods and controls in place to segregate unallowable costs.
  • List of expense accounts to which the unallowable costs are charged.

The sample should provide for the distribution of hours to direct and indirect functions.

Provide the organization's written policies and procedures describing how the organization prepares its annual ICR proposal.

3. Finalized financial reports for the year under review

These should include:

  • A complete copy of the audited financial statements. If the organization does not maintain audited financial statements, then the organization's federal tax return for the year should also be submitted.
  • A copy of the Single Audit Report (previously OMB A-133 audit), if applicable.

4. Indirect cost rate calculation

The calculation should:

  • Detail indirect expenses by function and cost category.
  • Detail fund distribution of the direct cost base by function and cost category.
  • Reconcile to the financial statements for the applicable fiscal year. All differences must be thoroughly explained. In the case of large differences, a cross-walk that shows how the calculation reconciles to the financial statements should be included.
Sample ICR calculation for nonprofit organizations
Sample ICR calculation for for-profit organizations

5. Allocation of salaries and wages

This schedule shows the positions, functions, and annual salaries for the people who charge a portion of their time to the indirect cost pool (include employees who charge 100% of their effort to indirect tasks as well as employees who split time between direct and indirect tasks).

Sample allocation of salaries and wages

6. Statement of employee benefits

This schedule shows the actual costs of applicable employee fringe benefit expenses (such as vacation, sick leave or holiday pay, payroll taxes, employee health insurance, retirement contributions, etc.). Fringe benefits are taken into consideration in determining the reasonableness of personnel compensation.

Note: The CPS should provide a description of the treatment of fringe benefits, whereas this statement shows actual costs included in the employee fringe benefit pool.

Sample statement of employee fringe benefits

7. Identification and description of any unusual factors which affect the proposed rates

Such as anticipated increase or decrease on business, non-recurring costs, extenuating factors, or any memoranda of understanding or advance agreements which may affect the proposed rate(s).

8. Listing of all grants and contracts (by federal agency) that were active during the fiscal year

Include the total dollar amount, period of performance, and indirect costs limitations (if any) applicable to each, such as ceiling rates or amounts restricted by administrative or statutory regulations.

9. Lobbying cost certificate

This certifies that the organization does not include lobbying in its indirect cost pools. This certification must be signed by an organizational representative who has the ability to contractually bind the organization (generally at a level no lower than a chief financial officer, vice president or equivalent position within the organization).

Download the lobbying cost certificate template

10. Certificate of indirect costs

This certifies that the organization has removed unallowable costs and has prepared an indirect cost rate proposal that is in compliance with federal regulations. This certification must also be signed by an organizational representative who has the ability to contractually bind the organization (generally at a level no lower than a chief financial officer, vice president or equivalent position within the organization).

Download the certificate of indirect costs template
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