The Department of Elementary and Secondary Education (DESE) Audit & Compliance Unit negotiates and approves restricted indirect cost rate applications submitted by Non -LEA Grant Recipients. Non-LEAs that do not currently have an approved FY22 rate from DESE must follow the Non-LEA application process documented below to obtain an approved restricted indirect cost rate for FY22 grant awards.
Indirect costs are those organizational wide costs not readily identified with a specific project or organizational activity but incurred for the joint benefit of both projects and other activities.
There are two types of indirect cost rates: unrestricted and restricted.
Unrestricted indirect cost rates include all organization wide indirect costs and are applied to grants that do not have the "supplement not supplant" statutory requirement. These grants are referred to as unrestricted grants.
Restricted indirect cost rates are applied to grants that have the "supplement not supplant" statutory requirement. The majority of DESE grants have this statutory requirement which prohibits the use of DESE grant funds supplanting local and state funds. These grants are referred to as "restricted rate" grants because grantees must use a specific "restricted rate formula" to determine what indirect cost rate may be used for reimbursement of indirect costs. The formula essentially "restricts" what the grantee may allocate to the indirect cost pool. To determine the restricted rate, the indirect costs that are considered "supplanting" type costs must be reclassified to the total direct cost base. Examples of these "supplanting" type costs are indirect costs such as executive leadership, rent, depreciation, and indirect costs that are not organization wide. This results in a much lower rate for the recovery of indirect costs. The intention of restricted rate grants is that the funds be used to improve existing programs by providing supplemental funds for the betterment of the program instructional services provided and not to supplant state and local funds used for the non-instructional operation costs of the organization.
The maximum restricted indirect cost rate allowed under this statutory requirement and for all grants issued by the Massachusetts Department of Elementary and Secondary Education is 8%. The federal regulations for restricted indirect cost rates can be found in the Education Department General Administrative Regulations 34 CFR Part 76.563-569.
When developing your budget for DESE grants, it is important to take into consideration that indirect costs are considered an administrative expense. Therefore, if your grant has an administrative cost limitation, you must include the indirect cost expenses recovered by the grant as part of that administrative cost limitation. For example, Perkins or Adult Education grants have a 5% administrative cost limitation. This limitation is nonnegotiable for Perkins grants but may be negotiated on an individual basis for Adult Education grants. If you are applying for an indirect rate to recover indirect costs on either one of these grants you must take into consideration the indirect costs as part of this administration cost limitation.
For Non-LEA's that do not have an approved negotiated indirect cost rate from a Federal cognizant agency, DESE has been granted authority to negotiate your annual restricted indirect cost rates to be applied to grants issued by DESE. For Cities and towns, DESE will assign the same rate as their Local Educational Agency if a Federal Negotiated Indirect Cost Rate Agreement is not provided.
The Massachusetts Department of Elementary and Secondary Education has been granted authority to assign annual restricted indirect cost rates to be applied to grants issued by the Department. This authority has been delegated by the U.S. Department of Education. This procedure is for all entities except Local Educational Agencies (LEAs) and other municipalities. Cities and towns will be assigned the same rate as their Local Educational Agency. The procedures for LEA's are based on their annual End of Year Report.
All Non-LEA Grant Recipients that have a separately, approved, negotiated rate with the Federal Government must submit to DESE's Audit and Compliance Unit:
These documents must be emailed to Audit.Compliance@doe.mass.edu . Please make sure the subject line in the email states "FY22 ICR Application".
As stated above, the maximum restricted indirect cost rate allowed for grants issued by the Massachusetts Department of Elementary and Secondary Education is 8%. This rate may then be adjusted downward by the Department based on specific requirements of the grant(s) being applied for. An adjusted rate will only be deemed appropriate for grants issued by the Department and should not be construed as an adjusted rate for grants from any other state agency or funding sources.
All Non-LEA grant recipients that intend to recover indirect costs and do not have a separately, approved, negotiated rate with the Federal Government must submit to DESE's Audit and Compliance Unit:
These documents must be emailed to the Department of Elementary and Secondary Education, Audit & Compliance at Audit.Compliance@doe.mass.edu . Please indicate FY22 ICR Application in Subject line.
Expenditure data contained on the IRS Form 990 will be used to determine your organizations eligibility towards the 8% maximum rate. Additional information may be required. This rate may then be adjusted downward by the Department based on specific requirements of the grant(s) being applied for. An adjusted rate will only be deemed appropriate for grants issued by the Department and should not be construed as an adjusted rate for grants from any other funding sources.
The approved restricted indirect cost rates will apply to both state and federal funding and are subject to an annual application process and review by the Massachusetts Department of Elementary and Secondary Education. A separate application will be published and required each year.
The Audit & Compliance Unit will review the application and notify you of your approved restricted rate and the approved rates will be posted on the DESE website, which will be updated weekly. If you have any questions, please contact Jeffrey Benbenek at 781-338-6518 or email Jeffrey.benbenek@mass.gov .
We have extended the use of the IRS Form 990 method for FY22 however this method will be phased out for FY23 and DESE will require all Non-LEA's without a Federal negotiated rate to submit a proposal packet. This proposal packet will require your organization to perform multiple steps including identifying direct and indirect costs, submitting allocation schedules, and submitting indirect cost rate calculations based on audited financial statements to support the amounts used for the calculations. Please be assured that we will have multiple trainings for this new method beginning in early January 2022 and we will provide guidance material including the proposal packet along with examples to ensure the transition is smooth.)
Last Updated: September 3, 2021
Massachusetts Department of Elementary and Secondary Education 135 Santilli Highway, Everett, MA 02149
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