What is the difference between an indirect cost rate and a cost allocation plan?
An indirect cost rate is a device for determining in a reasonable manner the proportion of indirect costs each program should bear. It is the ratio (expressed as a percentage) of the indirect costs to a direct cost base. Indirect costs are grouped into a common pool and then distributed to individual federal awards by the use of the indirect cost rate. Once negotiated by ICS, an indirect cost rate will be accepted by all federal agencies unless prohibited specifically by statute, meaning an entity can use the negotiated rate to take on new programs/grants from all federal agencies. Whereas, a cost allocation plan (CAP) is a document that explains an organization‘s methodology in identifying, accumulating, and allocating allowable costs to its all departments and agencies. Some federal agencies still require an approved indirect cost rate even though a CAP has already been approved.
Related Questions
- Must the indirect cost rate proposal or the central service cost allocation plan be prepared centrally for each state department performing under federal grant programs?
- What is the correlation between the cost allocation plan and the indirect cost rate?
- What is the difference between an indirect cost rate and a cost allocation plan?
