Indirect Cost Rate Audit

Indirect Cost Rate AuditWhat is an indirect costs rate?Indirect costs consist of administrative activities necessary for the general operation of the agency, such as accounting, budgeting, payroll preparation, personnel services, purchasing, and centralized data processing. Direct costs are costs that provide measurable, direct benefits to particular programs. These can include costs that relate directly to instructional programs and also support costs that relate to the peripheral services necessary to maintain the instructional programs. In general terms, an indirect cost rate is the percentage of an organizations indirect costs to its direct costs and is a standardized method of charging individual programs for their share of indirect costs. Why use an indirect cost rate? How does it benefit an organization? General management costs are necessary for any program to exist. For instance, all programs will use the business office at one time or another for services such as contracts, purchasing, payroll checks, and personnel management. Without the benefit of an indirect cost rate, there would be no standard way for each program to contribute its share of the general management costs without spending a lot of staff time having to each activity. An indirect cost rate is an efficient way to recover a share of general management costs from individual programs. We can assist you in the calculation of your indirect cost rate or by auditing your indirect cost rate in accordance with the American Association of State Highway and Transportation Official AASHTO Uniform Audit Guide.

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