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Indirect cost rates, restricted and unrestricted, are calculated annually for school districts and area education agencies (AEAs) from data submitted on their certified annual reports (CARs). The unrestricted rate is used when federal funding allows indirect cost recovery and does not include a "supplement, not supplant" clause. The restricted rate is used when the federal funding allows indirect cost recovery and includes a "supplement, not supplant" clause. Indirect cost rates are not used with any state categorical funding unless Iowa Code specifies that indirect cost recovery is allowed.
During the state's plan review, it was suggested the department have an indirect cost rate agreement with each district and AEA. Since the department calculates the rates, the agreement is posted along with the new rates. Following is the agreement that districts agree to and follow when charging indirect costs.
LEA and AEA Indirect Cost Rate Agreement - FY21 for FY23
The plans for calculating the indirect cost rates are negotiated and must be approved by the federal government. Below is the current plan for Iowa school districts and AEAs.
Federal Indirect Cost Rate Plan for Iowa LEAs and AEAs
Indirect cost recovery is a federal concept and does not apply to any non-federal source. One of the most frequent uses of indirect cost is in the nutrition program which uses the unrestricted indirect cost rate. An example of the calculation of maximum indirect cost and the proper account coding for the transfer is below.
Nutrition Programs and Indirect Costs - Calculation and Coding
USDA Guidance on Indirect Cost Rates in USDA Federal Programs
The US Department of Agriculture (USDA) is requiring that states make available additional guidance related to Indirect Cost Rates and permissive/non-permissive uses of Indirect Costs. In Iowa, the Department of Education computes Indirect Cost Rates for public school districts, who then apply those rates locally to various federal and other funds received. The Iowa Department of Education does not support nor does it calculate Indirect Cost Rates for nonpublic schools or RCCI School Food Authorities.
The documents attached are tailored specifically for the type of entity. There is a document for public school districts that addresses primarily appropriate and inappropriate uses of funds captured as Indirect Costs.
There is also a document for nonpublic schools and RCCI School Food Authorities that includes all of the information for public school districts, but also includes guidance on how to submit an Indirect Cost Rate proposal directly to the federal government. There is no requirement that entities capture Indirect Costs, but if an entity intends to do this, there must be an approved Indirect Cost Rate Proposal.
Indirect Cost Guidance - Public