What is the difference between the “simplified” and direct cost allocation methods for charging indirect costs? How do they affect the use of “rent” as matching?
Here are 2 general illustrations that apply frequently to both Nonprofit and small school grantees: 1) Simplified Method 2) Direct Allocation Method Under the “simplified method” everyone is housed in the same place and benefits from indirect support generally in the same manner. So their accounting is limited between indirect cost and direct costs. In the simplified method all rent would be accounted for as indirect. Conversely, in the “direct allocation method” only general administration and general expenses make up the indirect costs and all other are associated with direct activities accordingly by benefit. Indirect rent only represents space costs which support general and administration activity. Other rent would be allocated to direct activities and charged out accordingly. An easy way to distinguish between the two is to ask the grantee whether they charge all rent as indirect. If the answer is “yes” then they use the simplified method and they should not be able to say “unbil
Related Questions
- If an organization does not have a federally approved indirect cost rate; can the organization request indirect costs in the budget submission? If so, what is the limit?
- What is the difference between the "simplified" and direct cost allocation methods for charging indirect costs? How do they affect the use of "rent" as matching?
- If an agency has a federally negotiated indirect cost rate, can that serve as the operating cost allocation justification?
