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Fall 2018 Newsletter

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INSIDE THIS ISSUE:

• Changes in Your Legal Form
• New Financial Reporting Implementation Guide
• New Publications and Updates from IRS
• The De Minimis Indirect Cost Rate: Not All It’s Cracked Up to Be
• Affordable Housing: Paying for Your Section 168(h) Election
• The Other Public Support Test: the 10% Facts and Circumstances Test
• WebStar Winner
Download the complete newsletter HERE

The 10% De Minimis Indirect Cost Rate-Not All It’s Cracked up to Be

Several nonprofit organizations that receive federal funds and carry on multiple programs elect the 10% de minimus indirect cost rate for reimbursement because of the complexity of applying for an indirect cost rate. However, indirect costs are usually more than 10% and often significantly more, which means that an organization will need to find other resources to pay for indirect costs that are not covered.
Also, 10% doesn’t mean 10% of all of your direct costs. The 10% rate only applies to what the federal government calls “Modified Total Direct Costs”. These are payroll and
payroll overhead, materials and supplies, direct services, travel, and up to the first $25,000 of each sub award.
The 10% does not apply equipment purchases, capital expenditures, rental, tuitions, scholarships or fellowships in any patient care, or participant support. Nonprofits selecting the 10% de minimis reimbursement also need to have proper controls to be sure that no items that should be categorized as indirect are included with their direct costs.
It is helpful to structure your general ledger so that it is easy to identify direct and indirect costs and also because they are subject to limitation (such as subawards). Doing this will
make your true indirect costs clearer and may prompt you to request an indirect cost rate that all federal programs should reimburse for.
Contact us if you would like some help or guidance with these calculations or with
applying for an indirect cost rate.