Indirect Cost Rate Proposal (ICRP) for
County Agricultural Extension Districts in Iowa
SummaryReport for FY 2012
The indirect cost rate proposal (ICRP) is a defined process and set of Excel worksheets used to analyze the Extension District’s costs based on the year end financial report. Costs are defined as direct or indirect. Direct costs are those identified with a specific program; indirect costs are general and not tied to any one specific program. The indirect cost rateis expressed as a ratio (percent), with the indirect cost base divided by the direct cost base. The ICRP follows the Federal rules set forth in OMB Circular A-87, Cost Principles for State, County and Local Governments, revised 5/10/04. Background information is available at: http://www.extension.iastate.edu/extensionfinance/indirectcosts.htm
The indirect cost rate is unique to each Extension District. A rate of 40% means that for every $1.00 spent on a local program, theExtension District will spend an additional $.40 for indirect, also called “overhead,” costs (building rent, utilities, employee expenses for general activities, shared support services, etc.) to carry out the extension program. If indirect expenses are held constant, as program expenses increase, the indirect cost rate will decrease.
Type of Rate. Extension Districts use thefixed rate with the carry forward procedure. The ICRP is done each year within six months of the fiscal year end. The resultingfixed indirect cost ratecan be used for two years(current FY and following FY). Because it is based on history, the rate is an estimate. In the ICRP analysis, actual indirect costs are compared to the estimated indirect costs, with the difference (positive or negative number) included as a carry forward adjustment. This carry forward procedure adjuststhe next fixedindirect cost rate up or down.
Results for FY 2012. Indirect cost rates for FY12 range from a low of 12.4% to a high of 75.1%, with a statewide average of 35.8% (statewide average of 36.0% in FY11). For comparison, Iowa State University’s indirect cost rates are 50% for on-campus research and 26% off-campus projects. The following table summarizes FY12 rates for 82Extension Districts in Iowa.
Range for / Number ofIndirect Rates / Districts
< 26% / 24
26% to 41.9% / 38
42% to 59.9% / 11
60% and higher / 9
Rate Change. Based on an estimate of the future, the fixed indirect cost rate will change every year. Worksheet 9 compares the actual indirect costs for the fiscal year (FY12) to the estimated indirect using the rate from the previous year (FY11). If indirect costsare estimated too low, the carry forward amount will be a positive number, increasing the fixed indirect cost rate. If indirect costs were estimated too high, the carry forward amount will be negative, and the fixed indirect cost rate will decrease. From FY11 to FY12, the indirect cost rate for fifty (50) Extension Districts changed by less than 15%. The following table summarizes the changes:
Rate changes / Districts< 15% / 50
15% to 29.9% / 21
30% and higher / 11
Analysis of Rate Change. Indirect costrate changes are examined to determine if the ICRP was correctly prepared and if the rate change can be explained. The carry forward procedure cancontribute to an artificially high or low rate. An adjustment comes when the next ICRP is prepared, and the carry forward amount is reversed. Events such as building remodeling (indirect cost), adding a county administrator (indirect cost), adding a multi-county program position (direct cost), and adding a large grant (direct cost) can cause significant changes in the indirect cost rate.
The following are situations from the FY12ICRP that resulted in significant changes in the indirect cost rate from the prior rate.
- Artificially low indirect cost rate in prior year.
Example: An increase in grant expenses in FY11 created artificially low indirect cost rate for FY11. In FY12, the negative carry forward amount from the previous year was reversed. The indirect cost rate increased from 9.1% to 41.8%.
- Reduction in grant expenses.
Example: The Extension District had a significant decrease in direct cost expenses due to grants that ended. The estimated indirect cost was significantly lower than the actual indirect cost. The result was a large positive carry forward amount and an increase in the indirect cost rate from 21.8% in FY11 to 60.3% in FY12.
- Reduction in facilities cost.
Example: The Extension District had remodeling expenses (indirect cost) the previous year (FY11). In FY12, the indirect cost base was reduced by $44K. Indirect costs are estimated using the indirect cost rate from the previous ICRP. The actual indirect costs were significantly lower than the estimated indirect costs. The calculations on Worksheet 9 resulted in a large negative carry forward amount (-$11K) and an artificially lower indirect cost rate. The indirect cost rate decreased from 53.3% in FY11 to 22.4% in FY12.
- Increase in salary/fringe of staff supporting programs.
Example: The Extension District’s indirect cost base remained level from FY11 to FY12. The District increased expenses for staff supporting programs (direct costs). Thus, the indirect cost rate from the previous ICRP, over estimated indirect and resulted in a large negative carry forward amount. The indirect cost rate decreased from 61.7% in FY11 to 27.2% in FY12.
Report to County Extension Councils.
The attached summary is prepared for use with County Extension Councils.
L. Wilson, Grants Manager
03/26/13
Indirect Cost Rate Proposal for County Extension Districts in Iowa
Summary Report
What is the ICRP? The indirect cost rate proposal (ICRP) is a defined process and set of Excel worksheets used to analyze theExtension District’s expenses based on the year end financial report. Direct costs are those identified with a specific program; indirect costs are general and not tied to any one specific program. Calculations on the worksheets result in anindirect cost rate whichcan be used in FY13 and FY14. Background information is available at:
http://www.extension.iastate.edu/extensionfinance/indirectcosts.htm
The indirect cost rate is a ratio, expressed as a percent, and is unique to each Extension District. A rate of 40% means that for every $1.00 spent on a local program, theExtension District will spend an additional $.40 forindirect, also called “overhead,” costs (building rent, utilities, employee expenses for general activities, shared support services, etc.) to carry out the program. If indirect expenses are held constant, as program expenses increase, the indirect cost rate will decrease.
Results for FY 2012. Indirect cost rates calculated inthe FY12 ICRP range from a low of 12.4% to a high of 75.1%, with a statewide average of 35.8% (statewide average of 36.0% in FY11). For comparison, Iowa State University’s indirect cost rates are 50% for on-campus research and 26% for off-campus projects. The following table summarizes FY12 rates for 82 Extension Districts in Iowa.
Range for / Number ofIndirect Rates / Districts
< 26% / 24
26% to 41.9% / 38
42% to 59.9% / 11
60% and higher / 9
TheFY 2012rate for ____(insert)____County Agricultural ExtensionDistrict is ___XX__.
How is the rate used? The ICRP allows the Extension District to charge for indirect costs on federal grants and to use indirect costs as match on federal grants, according to the guidelines of the grant program. Extension Districts with higher rates will seldom if ever charge their fullindirect rate. Eligible indirect costs not charged to the grant can be used as local match. The following table is an example for an indirect cost rate of 40%.
Category GrantMatch Total
Direct costs (salary,
travel, program materials) $10,000 0 $10,000
County Indirect @ 10% 1,000 $1,000
Un-recovered IDC @ 30% $3,000 $3,000
Total cost $11,000 $3,000 $14,000
In this example, the grant award equals $11,000. Of this award amount, the Extension District will recover$1,000 of the indirect costs associated with the project. The remaining indirect costs ($3,000) will be used as match for the grant.