Indirect cost policy for grants

The TAWANI Foundation and Pritzker Military Foundation are committed to working with grantees as partners, striving to facilitate rather than dictate how these organizations operate.  As part of that commitment, we provide general operating support whenever possible and fund grantees’ true costs when making project, program and challenge grants. We believe that good stewards maximize resources, including grant funding, while building strong partnerships based on trust and honest dialogue. Transparency is key. This policy statement on indirect costs was developed to provide greater clarity for organizations submitting proposal applications and budgets who may be subsequently approved for grant funding.

We recognize that each grant is unique in its purpose, structure and costs, some of which are highly variable. Each grant application is evaluated in the context of our overall grantmaking budget and funding priorities, and through a collaborative process with the grant applicant. As part of our process, we believe that grant applicants are best able to take the lead in determining how to most effectively and efficiently allocate grant dollars to direct and indirect costs. The intent is to sufficiently fund actual costs, not to generate financial surpluses for partners.

Direct costs

Direct costs are expenses required to execute a grant that are directly attributable to a program or project. Project staff salaries, travel expenses, materials, and consultants required to execute the grant are examples of approved direct costs. Costs that would not be incurred if the grant did not exist are generally indicative of direct costs.

Indirect costs

Indirect costs are general overhead and administration expenses that support a grantee’s entire operation and may be shared across an organization. Examples include facilities expense (e.g. rent, utilities, equipment) and support/administrative services (e.g., HR, accounting, legal). Such expenses would be incurred regardless of whether the grant is funded. While these costs may not be directly attributable to a project, they are real and necessary to operate as an organization.

Examples of common Direct vs. Indirect Costs

• Direct costs include those directly attributable and reasonably allocable to execute the specific project, such as salaries, wages and fringe benefits of employees working directly on the project, contracted staff working directly on the project’s purpose, travel expenses directly tied to execution of the project, and supplies and equipment specifically needed for the project. Please note that these costs should be tracked by time keeping and/or an allocation methodology, and can include supportive costs such as legal and accounting when substantiated by time keeping.

• Indirect costs must be reasonably allocable to the project and not included as direct expenses. These include personnel costs related to general administrative support such as executive management (CEO, CFO, etc.) and centralized operational support (Human Resources, IT, legal, etc.), travel not directly tied to project execution, contracted services (audit, accounting, etc.), and equipment costs for items used in connection with centralized operational support.

Indirect Cost Rate

As general guidance, the maximum indirect cost rate allowable by the Foundations is 10% (budgeted indirect costs/budgeted total direct costs). While the indirect cost rate above is a general guidance for all applicants and grantees, the requirements and activities necessary for each project should be considered when determining direct and indirect cost allocation.

Policy by Type of Grantee Organization

– U.S. non-profit (501(c)3) organizations: We will either accept the indirect cost rate presented in a grantee’s application or request additional detail if needed to gain a clearer picture of such costs. A maximum of 10% applies.

– Universities: We will presumptively accept an indirect cost rate of up to 10% of the total grant amount, in accordance with established, published university policy.

– Re-granting organizations: Grantees with re-granting programs should include an indirect cost rate appropriate to the effort required to execute their sub-granting, but no more than 10% of total grant funding.

– Fiscal sponsors: Total indirect costs for grantees and their respective fiscal sponsors may not exceed 10% in total.

We reserve the right to request substantiation of any grantee’s indirect costs.