Sneak Preview: FHWA Memo Clarifies Indirect Cost Calculations

September 8, 2017 | By Jerry Ashworth | Post a Comment

xgran_bookshot(The following was excerpted from a recent article in the Federal Grants Management Handbook.) The Department of Transportation’s (DOT) Federal Highway Administration (FHWA) recently issued a guidance memo to the American Association of State Highway Transportation Officials (AASHTO) explaining the pass-through relationship when state DOTs provide FHWA State Planning and Research (SPR) funds to universities, as well as the calculation of indirect cost rates in such cases.

AASHTO is a nonprofit association representing highway and transportation departments nationwide. The memo stems from numerous questions FHWA has received from state DOTs and universities regarding how universities should calculate the indirect cost rate when conducting research for state DOTs using SPR funds. They asked if the SPR funds are considered pass-through awards to the universities and whether this determination affects the overhead/indirect cost rate that state DOTs must pay.

FHWA explained that in this case, the status of SPR funds used to pay for state DOT research conducted by universities is determined by the substance of the relationship, adding that the factors used to determine whether funds are being provided under a pass-through subaward or under a contract are described in the subrecipient and contractor determination provisions in the Office of Management and Budget’s uniform guidance (§200.330).

According to this provision, when state DOTs award — subaward — grant funds to a university to conduct transportation research where the principle purpose is to carry out a public purpose for the benefit of the university and not to acquire property or services for the state DOT (§200.330(a)), the prevailing overhead/indirect cost must be applied if the rate exists (200.331). The approved indirect cost rate would be recorded in the subrecipient grant agreement. This would apply, for example, when a state provides financial support for a university to carry out research at the university’s discretion with limited direction from the state DOT.

(The full version of this story has now been made available to all for a limited time on Thompson’s Grants Compliance Expert site.)

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