Organizations are required to support their indirect cost rate(s) shown on their grant proposal budget by submission of a current indirect cost rate agreement negotiated with a Federal agency.

If an organization does not have a current negotiated rate agreement with a Federal agency, CAAR will require organizations to support their proposed indirect cost rate by submission of an indirect cost proposal (view sample indirect cost proposal.) Based on various information available, e.g., historical cost information, and the level of funding being requested, CAAR will make a recommendation on the funding of indirect costs - either as an amount, or as a rate. Since indirect cost recoveries can be limited on NSF awards, and could require post-award repayments to NSF, awardees should ensure they understand the award conditions relating to indirect cost recoveries. These will be specified in the award letter. Conditions which could be included are as follows:

Maximum provisional rate:

A maximum provisional rate is a temporary rate established for an award to permit funding and reimbursement of indirect costs pending establishment of a final rate (that rate determined at the end of an accounting period using "actual" direct and indirect cost data). This type of rate limits indirect cost recoveries to the LOWER of the maximum provisional rate established at the time of award, or the final rate, established at the end of an accounting period.

As an example, if a maximum provisional indirect cost rate of 50% was established at the time of award, but an indirect cost rate of 65% was determined based on actual financial data for an accounting period, indirect cost recoveries would be limited to 50%. However, if a final indirect cost rate of 40% was determined, indirect costs recovered in excess of the 40% rate would need to be removed as charges to the project.

Organizations having awards which contain maximum provisional rates are required to submit indirect cost proposals reconciled to financial statements for those periods during which the award is active. CAAR will review indirect cost proposals and determine the appropriate final indirect cost rate.

Predetermined fixed rate:

A predetermined fixed indirect cost rate is a permanent indirect cost rate established for a discrete period of time, usually an organization's fiscal year. Organizations should charge NSF awards at the predetermined fixed rate(s) stipulated in the award document(s). However, if negotiations between the organization and NSF (or the cognizant federal agency, if not NSF) result in changes to the organization's indirect cost rate which are not reflected in an award, the organization may charge the award at the newly negotiated rate in effect when direct cost expenditures are made, subject to the restrictions in GPM 635.1.

Fixed dollar amount:

A fixed dollar amount limits organizations to that "amount" of indirect costs specified in the approved budget. It is not subject to adjustment.