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Policy change to VOCA Assistance Guidelines with regard to allowability of indirect costs to conform to 2 C.F.R. Part 200

October 9, 2015

TO:         VOCA Victim Assistance Program Administrators

FROM:   Office for Victims of Crime

The purpose of this message is to announce the Office for Victims of Crime’s (OVC) policy regarding the allowability of indirect costs at the sub-recipient level for the VOCA Victim Assistance Program. For VOCA Victim Assistance Program funding awarded by OVC in Federal Fiscal Year (FY) 2015 and later, OVC will allow indirect costs at the sub-recipient level.

Background

The VOCA Guidelines, issued in 1997, make indirect costs unallowable at the sub-recipient level.1 The new government-wide grant rules (the Uniform Requirements), issued in December 2014, at 2 C.F.R. Part 200, however, allow indirect costs at the sub-recipient level, and restrict the ability of pass-through entities to disallow these costs.2 OVC issues this policy change in order to clarify for VOCA administering agencies how to treat indirect costs at the sub-recipient level for purposes of the VOCA Victim Assistance Program.

Policy on Allowability of Indirect Costs at the Sub-Recipient Level

For VOCA funding awarded by OVC in Federal Fiscal Year (FY) 2015 and later, the provision in the VOCA Victim Assistance Program Guidelines (section IV.E.3.f.) that makes indirect costs unallowable shall not apply. Thus, for FY15 and later, indirect costs at the sub-recipient level are allowable under the VOCA Victim Assistance Program.3

For such funding, a VOCA administering agency must accept a sub-recipient organization’s federally recognized indirect cost rate, or the de minimis rate (if the organization is eligible for such rate and chooses to apply it) set out in 2 C.F.R. 200.414(f). A VOCA administering agency also may (but does not have to) negotiate a rate between it and the sub-recipient organization, where that organization does not already have a federally negotiated rate. See 2 C.F.R. Part 200.

VOCA administering agencies may set reasonable deadlines to facilitate the implementation of this change, and to ensure efficient administration of VOCA funds. Administrators may, but do not have to, allow budget modifications to account for indirect costs where such costs were not budgeted for in advance (e.g., included in the sub-award application that was funded). Administrators may require recipients to provide advance notice to the administering agency of their intent to apply an indirect cost rate, and may disallow indirect costs where such notice is not provided.

The Uniform Requirements do not require VOCA administering agencies to allow indirect costs to be charged against sub-awards (or portions thereof) that are not federally funded.

VOCA administering agencies may not allow sub-recipients to charge indirect costs against a sub-award made with VOCA funding awarded by OVC in FY14 and before.

Questions and Answers on Indirect Rates

Background

The Office for Victims of Crime (OVC) Victim Assistance Grant Program is authorized by the Victims of Crime Act of 1984 (VOCA), at 42 U.S.C. 10603. Pursuant to VOCA, OVC issued the Victim Assistance Grant Program Guidelines in 1997. These Guidelines are currently in effect, though OVC does intend to publish in the near future a final regulation that will update the program rules and supersede the Guidelines.

Separately, on December 19, 2014, the Department of Justice published a rule in 2 C.F.R. Part 2800 adopting and supplementing the new Office of Management and Budget Uniform Administrative Requirements, Cost Principles, and Audit Requirements in 2 C.F.R. Part 200 (the Uniform Requirements). The Uniform Requirements apply to Fiscal Year 2015 and later VOCA Assistance awards from OVC. For funds in FY15 and later, the Uniform Requirements supersede many of the government-wide grant rules, including, among others, 28 C.F.R. Parts 66 (DOJ implementation of government-wide rules for non-profits) and 70 (DOJ implementation of government-wide rules for state/local governments), and 2 C.F.R. Parts 215, 220, 225, and 230.

OVC has received several questions from VOCA administering agencies and the National Association of Victim Assistance Administrators, regarding the Uniform Requirements and how these might change the rules for allowability of indirect costs under VOCA Assistant Grant Program awards. OVC addresses these below:

  1. What effect will the new Uniform Requirements have on the VOCA Guidelines?

    The VOCA Assistance Guidelines will continue to apply in conjunction with the government-wide grant rules, which are now set out in the Uniform Requirements. Where the Uniform Requirements differ from the VOCA Guidelines, the VOCA administering agency may ask OVC for advice on the applicable rules. In general, the requirements of the VOCA Guidelines continue to apply.

  2. What effect will the new Uniform Requirements have on the Guidelines’ prohibition of indirect costs?

    OVC will make a conforming modification to the Guidelines to align with the Uniform Requirements. This conforming modification, like the Uniform Requirements, will apply only to VOCA funds awarded by OVC in FY15 or later.

    The pending VOCA Victim Assistance Grant Program rule, when finalized, will incorporate the change to the VOCA Guidelines with regard to indirect costs, to be consonant with the intent of the Uniform Requirements.

  3. Do VOCA administering agencies have discretion on whether or not to approve the use of indirect costs?

    For VOCA Assistance grant funds subject to the Uniform Requirements (that is, those funds awarded in Federal Fiscal Year 2015 and later), VOCA administering agencies must accept a sub-recipient’s current federally negotiated indirect cost rate or the de minimis rate (as applicable).

    VOCA administering agencies may set reasonable deadlines to facilitate the implementation of this change, and to ensure efficient administration of VOCA funds. Administrators do not have to accept charges for indirect costs where such costs were not budgeted for in advance (e.g., included in the subaward application). Administrators also may require recipients to provide advance notice of their intent to apply an indirect cost rate, and may disallow indirect costs where such notice is not provided. As a practical matter, where a VOCA subrecipient wishes to apply an indirect cost rate against FY15 VOCA funding, but the indirect costs were not approved as part of the budget for that award, the State administering agency does not have to rework the budget, unless it wishes to do so.

    The Uniform Requirements do not require VOCA administering agencies to allow indirect costs to be charged against subawards (or portions thereof) that are not federally funded.

    State administrators may not allow sub-recipients to charge indirect costs against a subaward made with VOCA funding accepted by the state prior to December 26, 2014 (that is, awards in FY14 and before).

  4. Do VOCA administering agencies have the discretion to add special conditions to their subawards to limit what these funds can be used for?

    If the subrecipient already has a negotiated indirect cost rate with the federal government, or is eligible for the de minimis rate, then the VOCA administering agency must allow the subrecipient to apply the applicable rate. A VOCA administering agency may not force or entice a proposed sub-recipient to accept less than the applicable rate. VOCA administering agencies may, but are not required to, negotiate a rate (consistent with the Uniform Requirements) with a proposed subrecipient that asks to do so.

  5. To what extent are VOCA administering agencies responsible for the use of VOCA-funded indirect costs?

    Funds used for indirect costs, like those used for direct costs, are subject monitoring and audit. Typically, such oversight of indirect costs focuses on ensuring that the subrecipient is applying the indirect cost rate correctly to the appropriate cost base.

    Most subrecipient organizations have a rate that is based on modified total direct costs (MTDC). Subrecipient organizations that are eligible under 2 C.F.R. 200.414(f), to apply the de minimis 10% indirect cost rate to their VOCA subaward, must apply that rate only to their modified total direct costs (MTDC) under that subaward. Modified total direct costs is defined in 2 C.F.R. § 200.68:
    • MTDC means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs.
    The preamble to 2 C.F.R. Part 200, which was initially published in the Federal Register on December 26, 2013, indicated that the Office of Management and Budget (OMB) contemplated that there would be no review of a sub-recipient’s actual costs when a sub-recipient elects to use the de minimis rate, and that use of such a rate may lead to over-reimbursement in some cases. See 78 Fed. Reg. 78598. Thus, where a sub-recipient elects to use the de minimis rate, the focus of oversight should be to ensure that the sub-recipient is applying the de minimis rate only to the allowable modified total direct costs (MTDC) under the award. As the de minimis rate was recently added to the government-wide grant rules, additional implementation guidance may be issued by OMB in the future.

  6. Can unrecovered indirect costs be used as match for VOCA subgrants? For example, can a non-profit subgrantee claiming the 10% de minimis indirect costs use all or part of the indirect cost as project match? What if the subgrantee has a federally approved indirect cost rate of 34.82%. Does it matter what cost elements are included as part of the indirect costs?

    Yes, at the discretion of the VOCA administering agency, for VOCA funds awarded by OVC in FY15 or later. The Uniform Requirements, at 2 C.F.R. 200.306(c), provide that—
    • [u]nrecovered indirect costs, including indirect costs on cost sharing or matching may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency. Unrecovered indirect cost means the difference between the amount charged to the Federal award and the amount which could have been charged to the Federal award under the non-Federal entity's approved negotiated indirect cost rate.
    OVC permits VOCA administering agencies to determine whether to accept unrecovered indirect costs as match.

1OVC intends to publish in the near future a final regulation that will update the program rules and supersede the Guidelines.

2For additional information on the requirements in 2 C.F.R. Part 200, and the Department of Justice’s implementation of these requirements, see https://ojp.gov/funding/UniformGuidance.htm.

3Indirect costs at the VOCA administering agency level (i.e., for States and Territories) are already allowable under the VOCA Guidelines, but are limited by the VOCA statute to no more than five percent. This policy notice does not address or change this.

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