Andrea,

I think that if you had read a little further in the FAQ's on the DOE web site (you quote # 10), you might have found your answer.

Below is are FAQ #s 15, 16, and 17.

~~~~~~~~~~~~~~~~~~~~~~~

Larry Waxler, Director
Office of Sponsored Programs
University of Southern Maine
P.O. Box 9300
Portland, ME  04104-9300
Telephone: 207-780-4413
Telefax: 207-780-4927

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FAQ 15:
This question concerns the 8% limit on training grants as described at 34 CFR 75.562 (c)(2). To quote therefrom: "Indirect cost reimbursement on a training grant is limited to the recipient's actual indirect costs, as determined by its negotiated indirect cost rate agreement, or eight percent of a modified total direct cost base, whichever amount is less. For the purposes of this section, a modified total direct cost base is defined as total direct costs less stipends, tuition and related fees, and capital expenditures of $5,000 or more. ( 1 ) The eight percent limit also applies to cost-type contracts under grants, if these contracts are for training as defined in this section."
The context of the question is that of a prime grantee for an award that is not considered training. A portion of the project work is being subcontracted out. The subcontractor will be required to perform some training functions. Is the recipient of the subcontract (the subcontractor under the prime grant) limited to a ceiling of 8% of a Modified Total Direct Cost (MTDC) base for their indirect cost rate reimbursement?
ANSWER:
The subcontractor may not be bound by the 8% MTDC limit, but may voluntarily adopt the restriction. The Department's definition of a training program grant is considered to be the program (under a specific CFDA number) where the prime recipient assumes fiduciary responsibility for grant administration. This responsibility is not meant to include parceling out separate and independent work scopes under CFDA programs for the purpose of applying the 8% limit, particularly when the program is not classified as training in the first place.
Second, even if the prime grant program and CFDA number at issue were for training, the 8% MTDC limit would apply only under unusual circumstances. An example would be where the prime recipient is subcontracting out major portions of work for the purpose of avoiding the 8% MTDC limitation. In this case, the recipient would be violating the Office of Management and Budget Circular provisions (for nonprofit grantees OMB Circular A-122 * Attachment A.4.b), which prohibit cost shifting to avoid funding limitations. Otherwise, we view a subcontract cost element as one unit of cost, and the prime recipient would limit the 8% reimbursement rate only to their own expenditures, using the MTDC base. This base, by the way, would include only the first $25,000 of any subcontract.
________________________________________
FAQ 16:
Frequently Asked Question (FAQ) Number 5 and FAQ Number 10 on your INTERNET site refer to an 8% rate which is applied to a TDC (total direct cost) base, without reduction for subcontracts or equipment. Is this 8% considered a "restricted rate?" Is the TDC basis for computing indirect costs discussed in EDGAR or in some other regulations? In discussing indirect rates, EDGAR refers to "modified direct cost" as the basis, as I remember. EDGAR provides a formula for computing a restricted rate. Is this formula not applicable when an 8% restricted rate is provided.
ANSWER:
The 8% "training" grant limit at 34 CFR 75.562(c) is often confused with the 8% alternative for restricted rates at 34 CFR 76.564(c). While they both accomplish similar results (reduced indirect cost reimbursement), they are mutually exclusive in implementation.
The 8% training grant limitation pertains to those discretionary grant programs that the Department of Education classifies as training. Training programs are not formula or discretionary grant programs with statutory requirements that prohibit the use of Federal funds to supplant non-Federal funds (otherwise known as "supplement not supplant"). Non-supplanting programs, instead, are called "restricted rate" programs because recipients must use a specific "restricted rate formula" to determine what indirect cost rate may be used for reimbursement of indirect costs. The formula essentially "restricts" what the recipient may allocate to the indirect cost pool. The formula reclassifies the accounts of these "supplanting" type costs to a modified total direct cost (MTDC) base for the purpose of calculating and tracking the expenditures of a restricted type indirect cost rate.
Subgrantees or direct recipients of non-supplanting grants who are not State and local governments may use an 8% rate applied to a MTDC base. Use of the 8% rate would be in lieu of using the formula at 34 CFR 76.564(a) to determine a restricted rate. That is where the similarity with the 8% indirect cost rate training grant limit ends.
With respect to the 8% indirect cost rate training grant limit, 34 CFR 75.562(c) defines the MTDC base as: "total direct costs less stipends, tuition and related fees, and capital expenditures of $5,000 or more." We recognize a grantee's capitalization policy may be less than the $5,000 threshold. The regulation is silent on the treatment of subawards for two reasons. First, "subgrants" are not allowed under training programs or any other discretionary grant program and "subcontracts" should also be rare.
The prime recipient is expected to account for subcontracts consistently regardless of the type of indirect cost reimbursement provided by the prime award. The accounting treatment a training grant prime recipient (prime uses training type indirect rate) gives to a subcontractor should mirror the accounting treatment the grantee uses for subcontractors when not operating under a training grant (prime uses "regular" type indirect rate). The cost accounting treatment for subcontracts should be consistent.
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FAQ #17:
How do I determine if a grant is "training" for the purpose of limiting indirect cost recovery to 8% of Modified Total Direct Costs (MTDC)? Can a restricted rate be higher than 8% of MTDC? Who determines what the computed base is for a grant?
ANSWER:
Absent a specific "training grant" program list, or specific identification of a Department of Education (ED) program as "training" in the grant application package, a grant applicant or project officer should contact the program sponsor for a dispositive answer regarding the training grant designation.
A restricted rate for non state and local grant recipients can be higher than eight percent of a Modified Total Direct Cost base, if the rate is approved by the cognizant Federal agency and the calculation properly reclassifies "supplanting" type categories of costs from the pool to the base. All the costs that are barred from a restricted type rate by 34 CFR 76.565 should be so reclassified for the purpose of determining a restricted type rate. Before using the calculated restricted rate, the rate must be established as part on the organizations approved indirect cost rate agreement (listed in the indirect rate agreement with an agency of the Federal government).
With respect to who determines the computed base of application for a grant, the cognizant Federal agency should outline the appropriate distribution base for rate application purposes on the official rate agreement. However, both the restricted indirect cost rate computation and training grant 8 percent limit require the use of a modified total direct cost base pursuant to 34 CFR 76.564 (a) and 34 CFR 75.562 (c).

>>> Andrea Comley <xxxxxx@UIDAHO.EDU> 6/7/2007 11:02 AM >>>
We have a situation where our State Department of Education is receiving
financial assistance from US Department of Education and will be providing
part of that financial assistance to our institution.  The State Department
of Education is stating that since the funding is subject to EDGAR 76.564
that we as the subrecipient cannot receive more than the restricted indirect
cost rate of F&A that they receive (the state restricted rate is about 5%
and the Dept of Education rate is 8%).  My understanding as with any federal
flow through is that regardless of what the recipient of the funding
receives, the sub-recipient is entitled to receive their negotiated rate or
the cap set by the agency RFP at a minimum.  In this case we would be
entitled to the 8% and not be bound by the 5% rate the state received.

After much review and discussion, I happened to come across the following
link at the US Dept of Education website:
<http://www.ed.gov/about/offices/list/ocfo/fipao/faq.html>
http://www.ed.gov/about/offices/list/ocfo/fipao/faq.html.  FAQ #10
specifically concerns me as it is indicating that if it is financial
assistance that indeed it can be held to the restricted rate of the
recipient.

Have any of you dealt with this situation?  To what result?

~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Andrea Comley, CRA
Contract Review Officer
University of Idaho
PO Box 443020
Morrill Hall 114
Moscow, ID  83844-3020
(208) 885-6341
Fax: (208) 885-5752

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