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Re: Subcontract Indirect Cost Rate Louis Guin 29 Oct 1996 19:10 EST

Charlie, I respectfully disagree with you. Discounting the indirect cost
rate has nothing to do with the actual cost that has to be recognized as
part of the MTDC base for the calculation of the indirect cost rate. You
would be in non-compliance with the cost consistency requirements if you did
what you are recommending below.
Specifically, CAS 502, A-21 and your Rate Negotiation Agreement will dictate
how much you must include in the MTDC base for each subcontract, the norm is
up to the first 25K in expenditures over the life of the subcontract,
regardless of much your actual indirect cost is.

However, you may be able to schedule the activities of that particular
subcontract so that its related expense would be about $7,500 for a fiscal
year that you would use as the "base" year for your indirect cost rate
proposal. This approach is OK so long as the $7,500 is a component of the
first $25,000 of such subcontract. The fact that you recovered 50% (your
current negotiated rate) of $7,500 or 15% (your discounted rate) of $7,500
in indirect cost reimbursement is immaterial. Louis.

>At 11:42 AM 10/29/96 -0500, Charlie wrote:
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>Can I suggest an alternative to the method you have inherited.  the current
>method of charging only 15% of the full $25,000 will recover $3,750 of your
>indirect cost, and you have waived, lost, given away, relinquished,
>abandoned,forsaken the remainder.  OK, so I am a little AR about losing
>cost reimbursement. They are, after all, REAL COSTS. If the goal of your
>institution is to lessen the burden of the indirect cost to your PIs then you
>may want to charge your full rate but to only a portion of the $25,000.
>using the same $3,750 recovery you are currently receiving, and assuming your
>MTDC indirect cost rate is 50%, you would charge your 50% rate to only
$7,500 of
>your subcontract.  this would allow you to reduce or exclude the remainder of
>the sub-contract expense from your MTDC base when you are doing the next
>indirect cost proposal.  by doing this you would not dilute your current
>indirect cost rate.  This alternative can keep all parties happy.
>if you have any questions call me at my Chicago office 312-240-3429.
>charlie tardivo
>Subject: Subcontract Indirect Cost Rate
>From:    Research Administration Discussion Group  <resadm-
>Date:    10/26/96  12:44 PM
>We at the Desert Research Institute (part of the Univ. &
>Community College System of Nevada) are considering
>changing our current subcontracting overhead rate policy.
>Currently we charge 15% up to the Federal max as
>prescribed by A-21.  This is a lower rate than our
>negotiated Federal o/h rate.  This was established years
>ago by our VPF&A.
>I would like as much input as possible on the method or
>percent (%) other universities/colleges/research
>non-profits are using for charging overhead to subcontracts
>(where we are the prime).  I would like as many responses as
>possible in order to summarize what practices (or
>percents) are used across the country.  If you are using
>your full overhead rate up to $25K as prescribed in
>A-21, let me know that too.
>If anyone is interested in the results, let me know and
>I'll send the summary to you.
>Thank you in advance for you input.  I need this
>information by the end of the week.
>John Case
>Assistant Vice Pres. & Controller
>Desert Research Institute, Reno Nevada
>(702) 673-7396
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Louis Guin, PhD
Assistant Vice President
Office of Financial Analysis
University of Southern California
Univ Gardens Bldg Suite 107, Los Angeles CA 90089-8002
(P) 213 743-2454
(F) 213 748-0871