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TEA Correspondence

A Microsoft Word version of this letter is available for download and PRINTING.

 

Immediate Action Available

To All TEA Grantees

Subject:           Indirect Costs on Texas Education Agency State-Funded Grants

Date:               October 3, 2008

Effective immediately, all Texas Education Agency (TEA) grantees are permitted to claim indirect costs on current and future TEA state-funded grants. This action is pursuant to the provisions in the Uniform Grants Management Standards (UGMS), Governor’s Office of Budget and Planning. The following conditions apply:

  • Grantees must have a current approved federal indirect cost rate in order to claim indirect costs on state-funded grants. TEA approves and maintains the federal indirect cost rate for public school districts, regional education service centers (ESCs), and open enrollment charter schools operated by a nonprofit organization (where the charter school does not already have a rate from their parent organization). All other grantees (i.e., nonprofit organizations and colleges/universities) must submit a copy of their restricted federal indirect cost rate approved by their cognizant agency to the TEA Division of Discretionary Grants, if not already on file by TEA.
  • Grantees must use their approved restricted federal indirect cost rate, or 15%, whichever is less, as the indirect cost rate for state-funded grants. Indirect costs will be calculated in the same manner as for federal grants (i.e., the same costs must be excluded from the direct costs prior to calculating indirect costs). Attached are revised instructions for calculating indirect costs. These instructions supercede the SAS instructions for calculating indirect costs for all current grants and future grants.
  • If indirect costs are claimed, they are part of the total grant award amount. They are not in addition to the grant award amount.
  • Grantees may not claim indirect costs for any state-funded grants that have already ended (i.e., where the ending date of the grant is prior to October 3, 2008). Indirect costs may be claimed for all current state-funded grants and for any grants that have a beginning date of October 3, 2008, or after.
  • Indirect costs do not need to be budgeted in any SAS (Standard Application System) in order to claim indirect costs. Do not submit an amendment to TEA solely for the purpose of budgeting indirect costs.  The amendment will be returned to the grantee without processing. Grantees will budget and track charges to indirect costs at the local level to ensure the grant is not over-expended.
  • Grantees may or may not be able to enter indirect cost into the state funded eGrant applications depending on the configuration. As stated in the previous bullet, indirect costs do not need to be budgeted in the SAS in order to claim indirect costs. If, at a later time, the grantee amends an eGrant application to include other amended items and wants to budget indirect costs as well in the same amendment, and the eGrants system does not permit the grantee to budget indirect costs in the appropriate line on the Budget Summary, then the grantee must budget and track indirect costs at the local level.  
  • Any charges by grantees to indirect costs will be reported in Expenditure Reporting (ER) as part of cumulative expenditures for Formula grants, and by class/object code for Discretionary Grants.

If you have any questions about charging indirect costs to state-funded grants, please contact staff in the Division of Formula Funding at 512-463-8525 or in the Division of Discretionary Grants at 512-463-9269.

Sincerely,

 

Earin M. Martin, Ed.D.
Chief Grants Administrator

Attachment


Revised Instructions for Calculating Indirect Costs for TEA Grants                        10-03-08

Indirect Costs

Quick Tips

  • You must have a federal indirect cost rate in order to charge indirect costs to a federal grant or to a state grant.
  • You are not required to budget indirect costs in the grant application in order to charge indirect costs to the grant.
  • If indirect costs are claimed, they are part of the total grant award amount. They are not in addition to the grant award amount.
  • All applicants other than school districts, ESCs, and open enrollment charter schools that have an approved rate from TEA, must submit a copy of their indirect cost rate agreement specifying the approved rate for the current period to TEA along with the application. Indirect costs will not be permitted in the absence of a copy of this agreement. 
  • Costs included in the calculation of the indirect cost rate (i.e., as specified in your organization’s indirect cost plan) may not be charged as direct costs to a grant.
  • Unless otherwise indicated for individual programs, you may charge federally funded programs for ‘indirect costs’ incurred by using the ‘restricted indirect cost rate’ or 8%, whichever is less. You may charge state-funded programs for indirect costs by using the ‘restricted indirect cost rate’, or 15%, whichever is less.
  • Indirect costs are part of administrative costs. If administrative costs are limited to a certain percentage for a particular program, for example 5%, then the total direct administrative costs, plus indirect costs, cannot exceed 5%.
  • ‘Indirect cost’ is not an allowed expense for state-funded programs except as specified in the instructions.

To Calculate Indirect Costs

Step 1
School Districts, Education Service Centers, and Charter Schools Operated by an LEA
Compute the amount of ‘indirect cost’ to be claimed by deducting the following ‘cost exclusions’ from ‘total direct costs’: 
Subgrants (6290)
Debt Service (6500)
Capital Outlay (6600)
Building Purchase, Construction, or Improvements (6620). 

Colleges/Universities and Charter Schools Operated by a College/University
Calculate the modified total direct cost base by deducting:  
Tuition remission (6100)
Rental or Lease of Buildings, Space in Buildings, or Land (6269)
Scholarships and Fellowships (6200)
Portion of each subcontract in excess of $25,000 (6219)
Subgrants (6290), regardless of dollar amounts
Debt Service (6500)
Capital Outlay (6600)
Building Purchase, Construction, or Improvements (6620)

Nonprofit Organizations and Charter Schools Operated by a Nonprofit Organization
Calculate the modified total direct cost base by deducting:  
Rental or Lease of Buildings, Space in Buildings, or Land (6269)
Scholarships and Fellowships (6200) (Not allowable for Federal grants)
Portion of each subcontract in excess of $25,000 (6219)
Subgrants (6290), regardless of dollar amounts
Debt Service (6500)
Capital Outlay (6600)
Building Purchase, Construction, or Improvements (6620)

Step 2
For federally funded grants regardless of who the grantee is, multiply the modified total direct costs by 8% or the restricted indirect cost rate approved by your cognizant agency, whichever is lessDrop the cents.  Do not round up.  If administrative costs are limited to a certain percentage, the total direct and indirect costs cannot exceed the specified percentage.

For state-funded grants regardless of who the grantee is, multiply the modified total direct costs by 15% or the restricted indirect cost rate approved by your cognizant agency, whichever is lessDrop the cents.  Do not round up.  If administrative costs are limited to a certain percentage, the total direct and indirect costs cannot exceed the specified percentage.

For state-funded grants for universities (i.e., limited to special projects awarded by TEA), multiply this amount by 15%, or the approved restricted federal indirect cost rate, whichever is less.  Drop the cents.  Do not round up.

Other types of entities are not authorized to claim indirect costs on state-funded grants.

Step 3
The maximum allowable is the total direct cost minus exclusions multiplied by the grantee’s approved restricted indirect cost rate or the rate specified in Step 2, whichever is less. The grantee may enter, in the appropriate field on the form Schedule #5—Budget Summary, an amount not to exceed the maximum allowable.
Indirect costs may be claimed based upon actual expenditures declared on mid-year or final expenditure reports (whether or not indirect costs were budgeted in the original application or amendment).  The amount spent on indirect costs is part of the total amount awarded and not in addition to the total amount awarded.


Texas Education Agency
Costs That Must Be Excluded from the Indirect Cost Calculation

Items of Cost

School districts, ESCs, and open enrollment charter schools operated by a governmental entity
(OMB Circular A-87)

Nonprofit Organizations,
including open enrollment charter schools operated by a nonprofit organization
(OMB Circular A-122)

Educational Institutions
i.e., institutions of higher education including open enrollment charter schools operated by a college/university
(OMB Circular A-21)

6100—Payroll
      Exclude: Tuition Remission

Not applicable

Not applicable

X

6200—Professional and Contracted Services
      Exclude:

 

 

 

      Rental or lease of buildings, space in buildings, or land

 

X

X

      Scholarships and Fellowships

 

X
(Unallowable for
Federal Grants)

X

      The portion of each subcontract in excess of $25,000

 

X

X

      Subgrants, regardless of dollar amounts

X

X

X

6500—Debt Service
All costs in this category must be excluded prior to calculating indirect costs

X

X

X

6600—Capital Outlay
All costs in this category must be excluded prior to calculating indirect costs

X

X

X

6620—Building Purchase, Construction, or Improvements
All costs in this category must be excluded prior to calculating indirect costs

X

X

X

 

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