Nonprofits Benefit from a Congressional Raise
By Marsha Wilson Rappaport
In October 2024, the Federal Government gave nonprofit organizations the long-awaited gift of a raise in the De minimis rate that sets the bar for indirect costs from 10% to 15%. Nonprofit organizations, like much of the nation, have spent years battling the cost of inflation. Many organizations were struggling to pay rising electric bills while worrying about laying off critical staff due to the shortfalls.
The specific part of the Federal Register that explains this raise:
(f) De minimis rate. Recipients and subrecipients that do not have a current Federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 15 percent of modified total direct costs (MTDC). The recipient or subrecipient is authorized to determine the appropriate rate up to this limit. Federal agencies and pass-through entities may not require recipients and subrecipients to use a de minimis rate lower than the negotiated indirect cost rate or the rate elected pursuant to this subsection unless required by Federal statute or regulation. The de minimis rate must not be applied to cost reimbursement contracts issued directly by the Federal Government in accordance with the FAR. Recipients and subrecipients are not required to use the de minimis rate. When applying the de minimis rate, costs must be consistently charged as either direct or indirect costs and may not be double charged or inconsistently charged as both. The de minimis rate does not require documentation to justify its use and may be used indefinitely. Once elected, the recipient or subrecipient must use the de minimis rate for all Federal awards until the recipient or subrecipient chooses to receive a negotiated rate.
On the Ground: How much?
If you have a $250, 000 Grant.
If you haven’t negotiated a higher rate with the government:
Your indirect goes from: $25,000.
To: $37,500.
On the Ground: What About My State – Our Federal Grants Passthrough?
Check with your states grants officer. This information should be available when you apply for the grant. States do have discretion on the amount of Indirect you can receive. For example, in Texas, there are some grants that limit that amount to 3%.
My Wish List: 5% more won’t put a dent in my overhead expenses after years of inflation!
Suggestion: Start with some of the modern “tools of production”. Upgrade your technology and invest in major software like Adobe Pro – a piece of software necessary for modern grant and proposal writing at the state, federal and private foundation level. Also consider some professional training for staff in that technology.
The need for updated technology and technology training has put real pressure on smaller nonprofits. Please note that even on Federal grant applications, the line items for technology have strict limits that have no bearing on the prices of modern technology.
Grim reality: You can’t churn out multiple large grant requests on a $200 Chromebook. You need some RAM – 8 GB or more. Start in the $500 to $600 range.
Can I Cheat On This Cost? Only if you want to invest in computers that flash the symbol that “slowly the circles the drain” and then crash after a couple of years. New software and the internet put real pressure on computer memory resources.
Additional Bad News: Take your time and compare. For example: Did you know that there are some really big sales right now on both laptops and desktops? Surprise!!! That’s because the Pentium Chip – once the gold standard has been discontinued. Be wary of any product that will not be supported at some point.
You need a combination scanner and printer in order to send documents to grantors – Start at the $300 for a machine that can handle the load, if your organization can’t afford a large copier with a contract.
Software: Adobe Pro – multiple licenses. You don’t want to lose a grant because only 1 person in your organization knows how to combine pdf pages! Costs: $25.00 per month per license-$300 per year (taxed vary). Note that Microsoft 365 is the gold standard – you need to plan for that. AND.. invest in a paid copy of some sort of Virus Protection and VPN Software. Check CNET Download for a long list of virus free downloads.
Can I Cheat On This Cost? Nope! I have boxes of old software I bought outright. I got a nasty wakeup call one day when Microsoft 365 highjacked my old copy of Word and updated it. I was locked out of my “paid for” version. Subscriptions are here to stay. You have to plan for those costs in advance.
In short, it is not a big batch of money unless you are getting millions of dollars in support. But this little raise from Congress will help fill in the gaps. Moreover, they actually considered nonprofits and charities for a change!
It’s a WIN-WIN for all of us.
The entire piece of legislation can be found:
Code of Federal Regulations
1. Title 2
2. Subtitle A
3. Chapter II
4. Part 200
5. Subpart E
6. Direct and Indirect Costs
7. § 200.414
https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/subpart-E/subject-group-ECFRd93f2a98b1f6455/section-200.414
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