MTC Indirect Cost Allocation Plan (ICAP) Rate

Indirect costs are those costs which are not easily identifiable with one specific program or project, but are necessary to the operation of the program.

What are Indirect Costs?

Indirect costs are those costs which are not easily identifiable with one specific program or project, but are necessary to the operation of the program. Indirect costs cannot be easily attributed to one activity or funding source, and the costs benefit more than one activity or project. The costs are shared amongst programs and projects.

Typical examples include the cost of operations and general administrative functions, as well as shared costs such as rent, utilities, postage, printing, and other expenses that benefit all programs.

How is an Indirect Cost Allocation Plan (ICAP) Rate Determined?

Annually, the Metropolitan Transportation Commission (MTC) prepares and presents an indirect cost allocation plan (ICAP) rate proposal to the Federal Transportation Agency (FTA). This serves as a reminder and clarification of the role of a cognizant agency with respect to the review of Indirect Cost Allocation Plan/Indirect Cost Rate Proposals (ICAP/ICRPs) and approval of indirect cost rates. A cognizant agency is defined as the Federal agency with the largest dollar value of direct Federal awards with a governmental unit or component, as appropriate. The cost proposals are prepared according to the requirements specified in 2 Code of Federal Regulations (CFR) Part 200 - UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS.

The negotiated indirect cost rates for the MTC for the last five fiscal years are included under additional resources.

Title 2 Code of Federal Regulations (CFR) 200 Appendix VII D. 1. B

A governmental department or agency (local agency) is required to submit their ICAP/ICRP to their cognizant agency if the local agency receives more than $35 million in direct federal funding. If the local agency receives $35 million or less in direct federal funding, submission of their ICAP/ICRP is at the discretion of their cognizant agency. In other words, cognizant agencies may approve ICAP/ICRPs without receiving the proposals. In these instances, local agencies are still required to prepare and maintain their proposals.

If a local agency only receives federal funds that are passed-through Caltrans, then Caltrans is responsible for negotiating and monitoring the local agency’s indirect costs as the pass-through entity. As a result, Caltrans takes on the role of a cognizant agency, but it is not a cognizant agency. In these instances, Caltrans will be reviewing and approving the local agency’s ICAP/ICRP. Therefore, the Federal Highway Administration (FHWA) is MTC’s cognizant agency and through a Stewardship and Oversight agreement with FHWA, Caltrans takes on the role of cognizant agency but FHWA is the cognizant agency.

Title 2 CFR 200 Appendix VII E

Indirect rates approved by the cognizant agency are to be accepted by all entities unless limited or prohibited by statute. If the only federal funds received by a local agency are passed-through Caltrans, then rates approved by Caltrans can be accepted by all entities. Other federal agencies may accept rates reviewed by Caltrans or they may choose to review themselves.

Title 2 CFR 200 Appendix V F. 1. And 2 CFR 200.513

Once identified, the cognizant agency will maintain the cognizant agency role for five years as follows: FY 2018-19; FY 2023-24; and every fifth year afterwards.

Caltrans Local Assistance Procedures Manual Chapter 5.3

Any local agency seeking reimbursement of indirect costs must receive approval for the local agency’s ICAP/ICRP for the applicable fiscal years prior to billing Caltrans any indirect costs.

If a local agency has an ICAP/ICRP approved by a federal cognizant agency, the local agency must provide Caltrans their ICAP/ICRP approval every fiscal year.

How are Indirect Costs Applied?

MTC applies indirect costs to projects through the negotiated indirect cost rate as a method to recover the “full cost” of the project, capturing both direct and indirect costs. Direct costs are the costs directly identifiable to individual projects. Indirect costs are assigned to projects as a percentage of direct costs. For example, if the indirect cost rate is 50 percent, and $1,000 of direct cost are incurred on a project, an indirect cost of $500 (50 percent of $1,000) would be assigned for a total cost of $1,500.

Have a Question on our Indirect Cost?

Additional questions regarding MTC’s negotiated indirect cost rate should be directed to the staff contact below.

Staff Contact

Tarek Radwan, Assistant Director, Operational Accounting
Mail: Metropolitan Transportation Commission, 375 Beale Street, Suite 800, San Francisco, CA

Additional Resources