Sneak Preview: DOE Limits Future Indirect Costs for Most Awards
(The following was excerpted from a recent Thompson Grants Compliance Expert article.) In a move that will dramatically impact the majority of its grant recipients, the Department of Energy (DOE), in a recent notice listing three policy actions, stated that it will limit indirect costs for future awards at a specific rate for different types of entities — 10% for state and local governments, 15% for nonprofit organizations and 15% for for-profit companies. Tribal entities are not affected by these policy actions.
These actions follow an April 11 policy notice whereby DOE said that it is placing a 15% indirect cost limit on research grants awarded after that date to institutions of higher education (IHEs), a move that was also taken by agencies such as the National Institutes of Health and the National Science Foundation. In response, the American Association of Universities, the American Council on Education, the Association of Public and Land-grant Universities and various IHEs filed suit in the U.S. District Court for the District of Massachusetts, requesting that the court halt DOE’s enforcement of the 15% rate cap for research universities, calling the action “flagrantly unlawful.” On April 16, a temporary restraining order (TRO) was issued in the case (see “DOE Announces 15% Cap on Indirect Costs; TRO Issued”).
Now, DOE is establishing indirect cost rate limits for awards to other recipient categories, alleging that doing so ‘‘is projected to save more than $935 million annually for the American taxpayer” based on applying the new policies to federal fiscal year 2024 spending.
Although DOE explains in the notice that it “is aware that many award recipients use indirect cost payments to effectuate activities funded by DOE’s financial assistance awards, these indirect cost payments are not for funding DOE’s direct project activities. As these funds are entrusted to DOE by the American people, DOE must ensure it is putting funds to appropriate use on financial assistance programs. To improve efficiency and curtail costs where appropriate, DOE seeks to better balance the financial needs of financial assistance award recipients with DOE’s obligation to responsibly manage federal funds.”
The policy actions apply to new awards issued under future notices of funding opportunities (NOFOs), and conditional awards under prior NOFOs where negotiations have not been completed or the award has not been executed. The policy changes would not affect current awards with a negotiated indirect cost rate agreement with the agency.
(The full version of this story has now been made available to all for a limited time here.)
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