Uniform Guidance 2 CFR Appendix III to Part 200 (Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education) provides the requirements for application of negotiated federal rates and provisional rates.
Federal Awards
Fixed rates apply only to projects funded by the federal government either directly or as flow-through funds on federal prime awards.
Federal agencies shall use the negotiated rates for the F&A costs in effect at the time of the initial award throughout the life of the sponsored agreement.
- "Time of Initial Award' is defined as the effective date of the agreement rather than the execution date, since agreements can be signed by both parties well before or after the effective date of the agreement. If pre-award costs are authorized that cut across the first day of a fiscal year, indirect cost charges will reflect the rates in effect as the time of the expense.
- “Life” means each competitive segment of a project.
- A competitive segment is a period of years approved by the federal funding agency at the time of the award.
Common Scenarios
- If a negotiated rate agreement does not extend through the life of the sponsored agreement at the time of the initial award: The negotiated rate for the last year of the negotiated rate agreements shall be extended through the end of the life of the sponsored agreement. Award levels for sponsored agreements may not be adjusted in future years due to changes in negotiated rates.
- If a multiyear award with allocations and/or estimates for the individual out years: The rate should be fixed for the life of the agreement. Generally, but not always, this applies to the NSF, NIH, and DOD.
- If a multiyear award that only provides funding for the first year and then requests a proposal for the second year: Only the first year should have fixed rates. When the second-year funding comes in, then the rate will be fixed again at the time of the second-year award. Generally, but not always, this applies to NASA and the Environmental Protection Agency (EPA). Any request for proposal beyond what has been defined as the period of performance will result in a proposal that will contain the new rates.
- If submitting a proposal for a supplement to an existing award that does not extend the period of performance and the existing award has fixed rates for the life of the agreement: The proposal for the supplement should contain the rates established for the life of the agreement for the prime award.
For more information about application of fixed federal rates, contact your RAS CA.
Non-Federal Awards
Rates are not fixed on non-federal awards. Foundation, industrial and other non-federal awards are subject to the rate in effect at the time that expenses post.
Excerpt: 2 CFR Appendix III Part 200, Part C: Determination and Application of Indirect (F&A) Cost Rate or Rates
6. Provisional and Final Rates for Indirect (F&A) Costs
Where the cognizant agency for indirect costs determines that cost experience and other pertinent facts do not justify the use of predetermined rates, or a fixed rate with a carry-forward, or if the parties cannot agree on an equitable rate, a provisional rate must be established. To prevent substantial overpayment or underpayment, the provisional rate may be adjusted by the cognizant agency for indirect costs during the institution's fiscal year. Predetermined or fixed rates may replace provisional rates at any time prior to the close of the institution's fiscal year. If a provisional rate is not replaced by a predetermined or fixed rate prior to the end of the institution's fiscal year, a final rate will be established and upward or downward adjustments will be made based on the actual allowable costs incurred for the period involved.
7. Fixed Rates for the Life of the Sponsored Agreement
a. Except as provided in paragraph (c)(1) of § 200.414, Federal agencies must use the negotiated rates in effect at the time of the initial award throughout the life of the Federal award. Award levels for Federal awards may not be adjusted in future years as a result of changes in negotiated rates. “Negotiated rates” per the rate agreement include final, fixed, and predetermined rates and exclude provisional rates. “Life” for the purpose of this subsection means each competitive segment of a project. A competitive segment is a period of years approved by the Federal awarding agency at the time of the Federal award. If negotiated rate agreements do not extend through the life of the Federal award at the time of the initial award, then the negotiated rate for the last year of the Federal award must be extended through the end of the life of the Federal award.
b. Except as provided in § 200.414, when an educational institution does not have a negotiated rate with the Federal Government at the time of an award (because the educational institution is a new recipient or the parties cannot reach agreement on a rate), the provisional rate used at the time of the award must be adjusted once a rate is negotiated and approved by the cognizant agency for indirect costs.