Indirect Cost Rates and the Stimulus Funds

Increased funding from the Indian Health Service and the Bureau of Indian Affairs, together with the inflow of money from the stimulus package, could mean that for the first time in decades, tribal governments may be able to recover the total amount of the costs associated with the administration of federal programs under P.L. 93-638 contracts. 

The Indian Health Service is slated for a 13 percent increase in funding to cover contract support costs and the Bureau of Indian Affairs will receive a significant increase in funding for this item as well. These budget increases and the increased availability of federal funds from the stimulus package, present tribal governments with a tremendous opportunity and challenge.

An inflow of funds from the stimulus bill could expand the funding base for tribes significantly, thereby driving down the indirect cost rate by as much as 30 to 40 percent.  While increased funding is a great development for Indian Country, the consequences of a reduced indirect cost rate could be quite negative unless the additional overhead costs of administering these new programs are taken into consideration.

Each organization should be conducting an analysis as to how much of the stimulus funding is being devoted to construction as opposed to services. As a general rule construction funds carry a reduced amount of overhead burden, because much of the work is contracted out. This might not be the case if the tribe has its own construction company. In that case the indirect costs associated with the project can be high as the general contractor (the tribe) must incur the same overhead as other contractors.

For more information on indirect costs and how the stimulus package may impact your rate, contact Richard Phelps.