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Virginia Tech United States Department of Agriculture Total Federal Funds Awarded Procedure

Background

With the passage of the 2018 Farm Bill, a new requirement for indirect charged to certain United States Department of Agriculture (USDA) projects was introduced. The indirect costs for the entire award are limited to 30%* total federal funds awarded (TFFA), which means the pass-through entity and each subrecipient may recover no more than the lesser of their negotiated indirect cost rate agreement or 30% TFFA for the total budget. 30% TFFA is mathematically equivalent to 42.857% total direct costs. This statutory language forces the pass-through entity and subrecipient to share one pool of indirect costs across all institutions participating in the project. 

* This procedure is also applicable if USDA limits the total federal funds awarded to a different rate such as 10%.

Summary

When the USDA limits indirect costs to total federal funds awarded (instead of a percentage of direct costs), the existence of subrecipients makes it difficult to equitably allocate indirect using standard budgeting approaches. If Virginia Tech charges indirect on the subrecipient costs, the permitted indirect allocation is quickly taken up by the Virginia Tech budget and is unavailable to the subrecipient. Negotiating with the subrecipients is burdensome and difficult with the limited window before proposal deadlines. In such scenarios, Virginia Tech can only equitably share indirect with subrecipients by NOT charging indirect on the subrecipient costs by excluding their funds from the Virginia Tech indirect base.

Implementation for USDA Proposals with TFFA Requirement

  1. Proposal Preparation when Virginia Tech is the subrecipient entity
    Virginia Tech will prepare its budget using the lesser of the negotiated indirect cost rate agreement or 30% TFFA and will NOT reduce the rate further. 
  2. Proposal Preparation when Virginia Tech  is the pass-through entity and there are no subrecipients
    Virginia Tech  will prepare its budget using the lesser of the negotiated indirect cost rate agreement or 30% TFFA.
  3. Proposal Preparation when Virginia Tech is the pass-through entity 
    • Virginia Tech still has to use the lesser of the negotiated rate (MTDC) or 42.857% TDC AND has to meet the 30% TFFA limit when including the subs indirect. 
    • Virginia Tech will ask each subrecipient to create a budget based on a predetermined total amount that includes both direct and indirect costs.
    • Virginia Tech will allow each subrecipient to budget the lesser of their negotiated indirect cost rate agreement or 30% TFFA for indirect costs. 
    • Virginia Tech will ask each subrecipient to submit their budgets to us well in advance of the proposal deadline. 
      • If Virginia Tech + sub indirect costs combined is at or below 30% TFFA with Virginia Tech using 60% MTDC as the lower indirect cost, then we still take indirect on the sub. 
      • If Virginia Tech has to use the 42.857% TDC to meet the 30% TFFA, then Virginia Tech is taking indirect on everything, including the sub. As long as the 30% TFFA limit is met, it will be fine. 
      •  If the total federal funds awarded is greater than 30% when both Virginia Tech and subaward indirect costs are combined, Virginia Tech will exclude all of the subrecipients’ funds from the indirect base. Unrecovered indirect costs may NOT be used toward required cost-sharing/match.

Unrecovered indirect costs may NOT be used toward required cost-sharing/match.

This approach enables Virginia Tech to:

  • Comply with United States Department of Agriculture National Institute of Food and Agriculture requirements.
  • Create clear parameters for subaward budgets, facilitating both collaborator and Virginia Tech planning.
  • Use one facilities and administrative rate for the Virginia Tech portion of the budget for any given project, simplifying budget preparation, as well as award management and campus reporting.

Procedure Effective Date: May 9, 2024.