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Cost Allocation Plan and Indirect Cost Rate Preparation Services

Understanding the Need for Cost Allocation Plan and Indirect Cost Rate Preparation Services

State, Local, Tribal and Nonprofit organizations share the same challenge: how to assign organization-wide shared costs (indirect costs) to the final product line or service received. Indirect costs are those not readily identified with a specific project or organizational activity but incurred for the joint benefit of both projects and other activities. Indirect costs can often average around 30-40% for government entities. Allocating indirect cost can become burdensome since it is not a one-size-fits-all calculation nor strategy, and organizations are already spread thin when it comes to staffing and resources.

Many organizations find it difficult to prioritize calculating and allocating indirect costs. Consequently, taxpayer dollars from the General Fund must cover the unrecognized overhead cost to support programs funded by grant dollars. Indirect cost allocation plays a critical role in an organization’s fiscal health, which is why our Government and Public Sector Advisory team provides full cost allocation and 2 CFR Part 200-compliant cost allocation plans, indirect cost rate calculation and negotiation, and cost recovery.

We have a strategically built a team of professionals and subject matter experts with experience working within the government and non-profit industries. This provides a unique perspective of walking in your shoes and understanding first-hand the challenges you face and how to cater our solutions to help you overcome them.

Indirect Cost and Cost Allocation Plan services include:

  • Full Cost Allocation Plan
  • 2 CFR Part 200 Cost Plan
  • Indirect Cost Rate Proposals
  • Indirect Cost Rate Proposal Negotiation
  • Indirect Cost Recovery

Cherry Bekaert’s Indirect Cost Recovery and Cost Allocation Plan Services Can Help To:

Create an updated cost allocation plan

According to the Government Finance Officers Association, the cost of tracking every individual indirect costs far outweigh the benefits. Therein lies the criticality of being able to develop a plan that estimates the allocation of indirect costs to programs and, ultimately, provides the full cost. Updated plans are important to so that new cost centers, new funds, changes in grant requirements, etc. are taken account.

Navigate the complexities of establishing a Negotiated Indirect Cost Rate Agreement (NICRA)

OMB Guidelines have changed over the past several years, resulting in a lack of awareness of current allowability of indirect costs. Additionally, many organizations are too busy obligating the State and Local Fiscal Recovery Funds provided by the American Rescue Plan Act, leaving little time to comprehend their indirect cost being incurred by those programs, much less to obtain a NICRA to claim indirect cost associated with ARPA programs implemented.

Understand your organization’s true cost of services

There is a common concern and hesitation toward claiming indirect cost against programs, with a perception that funding will be taken away from the program. Indirect cost is inevitable, whether it is recognized at the program level or not. Awareness and knowledge of the true cost of services (direct cost + indirect cost) will put you on track to program sustainability and fiscal health.

Make informed budget and strategic planning decisions

When looking only at direct costs incurred within an organization, a large piece of the pie is missing, therefore misleading budgets and strategic planning.

Maintain transparency

Transparency and accountability in government are among many focuses of government leaders. Governments are successfully increasing civic engagement and support through demonstrating transparency and accountability. However, when there is a lack of awareness of indirect cost and a resulting general fund subsidy that covers that cost, taxpayer dollars are being spent on programs outside of the public purview.

Maximize grant funding through indirect cost recovery

By obtaining a Negotiated Indirect Cost Rate Agreement (NICRA), organizations can apply that rate to federal funding received over the past two years. Often, due to a lack of resources or timing challenges, not all awards can be spent, leaving valuable funding (revenue) on the table. Cherry Bekaert can help you leverage your NICRA to drawdown unexpended funds which can be brought into your general fund with no restrictions. These funds can then be used towards innovation such as new systems, workforce upskilling and training, new projects, and more.

FAQ: Cost Allocation and Indirect Cost Rates

Looking for answers to your indirect cost questions? Check out our comprehensive guide covering cost allocation plans, NICRAs, cognizant agencies and more.

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Nicolie Lettini

Nicolie Lettini

Advisory Services

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Denise Lippuner

Denise Lippuner

Government & Public Sector Advisory Services

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Aurpon Bhattacharya

Aurpon Bhattacharya

Government & Public Sector Advisory

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