Date: May 08, 2025
To: HCAs/Procurement Directors/Contracting Officers/Financial Assistance and Agreements Officers
From: Director, Office of Acquisition Management
BACKGROUND: Pursuant to 5 U.S.C. 553(a)(2), the Department of Energy (“Department”) is updating its policy with respect to Department financial assistance funding awarded to nonprofit organizations.
Through its financial assistance programs (which include grants and cooperative agreements), the Department funds research, development, and deployment projects and activities in furtherance of its mission consistent with its policies and priorities. A portion of the funding provided pursuant to a Department financial assistance agreement (“Award”) goes to “indirect costs,” sometimes referred to as facilities and administration (“F&A”) costs. Facilities costs can sometimes be comprised of such things as depreciation of buildings, rent, equipment, capital improvements, and other operations and maintenance expenses, while administration costs can include such things as general expenses for administrative salaries and fringe benefits such as insurance and paid time off, accounting, office supplies, payroll, and other general administration costs.
While the Department is aware that many Award recipients use indirect cost payments to effectuate activities funded by the Department’s financial assistance awards, these indirect cost payments are not for funding the Department’s direct project activities. As these funds are entrusted to the Department by the American people, the Department must ensure it is putting funds to appropriate use on financial assistance programs. To improve efficiency and curtail costs where appropriate, the Department seeks to better balance the financial needs of financial assistance award recipients with the Department’s obligation to responsibly manage federal funds.
Accordingly, this policy flash announces the Department’s updated policies, procedures, and general decision-making criteria for establishing standards (and limits) for payment of indirect costs related to financial assistance awarded to nonprofit organizations. When awarding financial assistance to nonprofit organizations these policies, procedures, and criteria are intended to better balance the Department’s dual responsibilities to Award recipients and the American people.
Effective immediately, this guidance only applies to new or conditional Awards with nonprofit organizations. New Awards are considered to be Awards issued under Notices of Funding Opportunity yet to be released. Conditional Awards are awards for prior Notices of Funding Opportunity or Funding Opportunity Announcements where negotiations are not yet complete and/or the Award has not been executed.
ESTABLISHING APPROPRIATE INDIRECT COST REIMBURSEMENT LIMITS:
At present, the indirect cost rate for nonprofit organization Awards is typically negotiated by the Federal agency with the largest dollar value of Federal awards directly funded to the nonprofit organization, see 2 C.F.R. 200, app. IV(C)(2)(a). The Department plans to establish a new policy on the payment of indirect costs under Awards to nonprofit organizations. The Department plans to establish a maximum allowable dollar amount (stated in terms of a percentage of the total project award amount) that it will reimburse for allowable, allocable, and reasonable indirect costs under Awards. The percentage that will be reimbursable is inclusive of total indirect costs and fringe benefit costs.
For the reasons set forth in this memorandum, for New Awards, recipients should continue to utilize their negotiated and approved indirect cost rate(s) in applications for Awards, but the Department will establish a maximum dollar amount that it will reimburse under Awards to nonprofit organizations. The maximum limit of funds to be paid or reimbursed to a new Award recipient as indirect costs will be calculated as a percentage of the total project award amount and will be included in the Award terms as a cap. For nonprofit organization Awards, this maximum percentage is 15 percent (15%).
All New Awards to nonprofit organizations will mandate that the Department will limit the payment or reimbursement of all allowable, allocable, and reasonable indirect costs to a maximum of fifteen percent (15%) of the total project award amount. This policy will better balance the Department’s twin aims of funding meaningful financial assistance programs to stimulate a public purpose, such as improved infrastructure or technology deployment, and upholding its fiduciary Federal Stewardship obligations to the American people.
In circumstances where the Secretary has determined it is necessary and appropriate, the dollar threshold for payment of indirect costs may be modified for Award(s) to nonprofit organizations that are subject to this policy.
Additional information is forthcoming.
For DOE questions concerning this policy flash, please email: DOE_OAPMPolicy@hq.doe.gov