Monday, January 18, 2010

Limits on Indirect Costs for Basis Research

The Defense Appropriations Acts for fiscal years 2008 and 2009 limit payment of indirect costs to 35% of the total cost of a contract, grant, or cooperative agreement for "basic research". If your are a recipient of "basic research" money, you need to have a system in place to ensure that your billings for indirect costs do not exceed 35% of total costs. DCAA has alerted its auditors to be on the lookout for these kinds of contracts. Auditors will be requesting recipients of such awards to demonstrate that their contract briefs identify the limitations. Auditors will also be checking to ensure that recipients have systems in place to monitor charges on an award-by-award basis to ensure the 35% limitation is not exceeded.

According to the Office of Naval Research (ONR), the majority of "basic research" is conducted by educational institutions. However, some "basic research" is also awarded to for-profit companies.

If a contract is subject to the 35% limitiation, it will include a provision similar to the following:

This contract is funded with Fiscal Year 2008 basic research appropriations and is subject tothe reimbursement limit on F&A costs set forth in Section 8115 of the Department of Defense Appropriations Act, 2008 (P.L 110-116). Payment of F&A costs for research with funds obligated by this action may not exceed 35% of the total costs provided under this contract action.

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