My experience with DHHS (our coignizant audit agency) is that on
applications, they expect the prime institution to "approve" the indirect
cost rate of any subs, who do not have one at the time of the application.
They do not expect you to do a full scale cost report,stepdown,and audit
of the sub, but rather to establish a rate that is reasonable and has some
basis in fact.

In your case, I would think it okay to review and use the non-fed rate
proposals prepared by the two subs, as long as you rule they are
reasonable.

After these subs become recipients of federal funds they may have an
opportunity to get a report reviewed by the regional office.

Don Schmigel
Children's Research Institute
Washington, D.C.

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