What Is the Standard for Allowable Indirect Costs?
There is little agreement in the nonprofit or funding community about how to calculate the rate, what to include, and how much is fair. There are no across-the-board standards or maximum levels for indirect costs. Some foundations have informal, unwritten guidelines for a maximum level. Under federal guidelines, allowable indirect costs range from 3 percent to 70 percent, varying from agency to agency. Contrary to popular belief, indirect costs are not an easy measure of an organization s efficiency or stewardship. For example, imagine a multi-service agency where each program has its own bookkeeper, purchases its own supplies, and has all its own equipment. Such an organization would have no indirect costs at all, but would be clearly less efficient than if the programs shared bookkeeping costs, supplies and equipment.
