What is an indirect cost rate used for in grant administration?

• A. A rate used to determine project personnel salaries
• B. A rate used to classify revenue sources
• C. A rate used to allocate overhead costs to programs and reimburse a portion of indirect costs under grants
• D. A rate used to set procurement thresholds

Answer: (C)

Indirect cost rate is the mechanism used to allocate overhead costs to programs and to reimburse a portion of those indirect costs under grants. It accounts for shared expenses that support the organization as a whole but can’t be tied to a single project, such as facilities, utilities, administrative support, and IT. By applying this rate to a direct cost base (like salaries and other direct project costs), grants help cover a portion of the organization’s indirect costs, ensuring funding supports both the specific project and the infrastructure that enables it. The rate is typically negotiated with the sponsor and promotes consistency and fairness across programs. It’s not used to set direct salaries, classify revenue sources, or determine procurement thresholds.