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Senate
File
2386
-
Introduced
SENATE
FILE
2386
BY
COMMITTEE
ON
STATE
GOVERNMENT
(SUCCESSOR
TO
SSB
3074)
(COMPANION
TO
HF
2304
BY
COMMITTEE
ON
STATE
GOVERNMENT)
A
BILL
FOR
An
Act
relating
to
indirect
costs
charged
to
state-funded
1
grants,
and
including
applicability
provisions.
2
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
3
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S.F.
2386
Section
1.
NEW
SECTION
.
8.13
Uniform
limit
on
indirect
1
costs
charged
to
state-funded
grants.
2
1.
Purpose.
The
purpose
of
this
section
is
to
establish
3
a
uniform
statewide
limit
on
indirect
costs
charged
to
4
state-funded
grants
to
ensure
that
public
moneys
are
directed
5
primarily
to
program
services
and
deliverables,
to
promote
6
transparency,
and
to
provide
consistent
administration
across
7
departments
and
establishments.
8
2.
Definitions.
As
used
in
this
section,
unless
the
context
9
otherwise
requires:
10
a.
“Direct
cost”
means
a
cost
that
can
be
identified
with
11
or
directly
assigned
to
a
particular
final
cost
objective,
12
program,
project,
or
activity
with
a
high
degree
of
accuracy.
13
“Direct
cost”
includes
but
is
not
limited
to
salaries
and
14
wages
of
personnel
working
on
the
program,
associated
fringe
15
benefits,
program
supplies
and
materials,
program-specific
16
equipment,
program-required
participant
insurance,
travel
17
necessary
for
program
objectives,
program-required
participant
18
support
costs,
and
programmatic
subawards.
19
b.
“Grant”
means
a
state-funded
monetary
award
provided
20
by
a
department
or
establishment
for
the
purpose
of
carrying
21
out
a
public
program,
project,
or
service,
whether
provided
22
through
contract,
grant
agreement,
cooperative
agreement,
or
23
other
funding
instrument.
“Grant”
does
not
include
a
loan,
24
tax
expenditure,
or
procurement
contract
for
goods
or
routine
25
services
purchased
for
the
state’s
direct
use.
26
c.
“Grantee”
means
a
recipient
of
a
grant,
including
but
not
27
limited
to
a
nonprofit
organization,
local
government,
tribal
28
government,
public
or
private
institution
of
higher
education,
29
or
for-profit
entity.
30
d.
“Indirect
cost”
means
a
cost
that
is
incurred
for
31
a
common
or
joint
objective
and
cannot
be
identified
with
32
a
particular
final
cost
objective,
program,
project,
or
33
activity
without
disproportionate
effort.
“Indirect
cost”
34
includes
but
is
not
limited
to
the
allocable
portion
of
35
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2386
general
administration
and
general
expenses
such
as
executive
1
management,
accounting,
auditing,
budgeting,
human
resources,
2
procurement,
payroll,
insurance,
utilities
for
general
3
administrative
space,
depreciation
or
use
allowances
on
4
buildings
and
equipment
used
for
general
administration,
5
facility
operation
and
maintenance
for
general
administrative
6
space,
and
information
technology
services
supporting
general
7
administrative
functions.
8
e.
“Total
grant
amount”
means
the
total
dollar
amount
of
9
state
moneys
obligated
to
the
grantee
under
a
grant,
as
stated
10
in
the
fully
executed
grant
or
funding
agreement,
inclusive
of
11
all
budget
categories
and
any
amendments.
12
3.
Indirect
cost
cap.
13
a.
The
aggregate
amount
of
all
indirect
costs
charged
to
a
14
grant
shall
not
exceed
five
percent
of
the
total
grant
amount.
15
b.
A
department
or
establishment
shall
not
approve
a
16
budget
or
reimbursement
request
that
would
cause
a
grantee’s
17
cumulative
indirect
costs
to
exceed
five
percent
of
the
total
18
grant
amount.
19
c.
A
grantee
shall
not
do
any
of
the
following:
20
(1)
Reclassify
an
indirect
cost
as
a
direct
cost
for
the
21
purpose
of
circumventing
the
cap
imposed
under
this
subsection.
22
(2)
Charge
an
indirect
cost
on
top
of
a
direct
cost
that
23
includes
an
allocable
share
of
indirect
costs.
24
d.
A
department
or
establishment
shall
not
waive
the
cap
25
imposed
under
this
subsection
unless
expressly
authorized
by
26
law
that
references
and
exempts
the
grant
from
this
subsection.
27
4.
Budgeting
and
documentation.
28
a.
Each
grant
budget
must
separately
identify
indirect
29
costs
and
direct
costs.
The
budget
narrative
must
describe
the
30
basis
for
the
grantee’s
indirect
cost
calculation
and
certify
31
compliance
with
the
cap
imposed
under
this
section.
32
b.
A
grantee
shall
maintain
records
sufficient
to
33
substantiate
all
indirect
costs
charged
to
a
grant,
including
34
the
methodology
used
to
allocate
indirect
costs
across
funding
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sources,
and
shall
retain
the
records
for
at
least
ten
years
1
after
final
payment
or
closeout,
or
longer
if
required
by
the
2
grant
agreement.
3
c.
If
a
grantee
allocates
indirect
costs
across
multiple
4
funding
sources,
the
allocation
methodology
must
be
reasonable,
5
consistently
applied,
and
compliant
with
generally
accepted
6
cost
allocation
principles.
The
grantee
shall
document
7
the
methodology
and
make
it
available
to
the
department
or
8
establishment
awarding
the
grant
upon
request.
9
5.
Administration
and
oversight.
10
a.
A
department
or
establishment
shall
incorporate
the
11
requirements
of
this
section
into
each
grant
solicitation
and
12
agreement.
13
b.
A
department
or
establishment
shall
review
a
proposed
14
grant
budget
for
compliance
with
this
section
prior
to
awarding
15
the
grant
and
shall
monitor
indirect
costs
charged
during
the
16
grant
period.
17
c.
A
department
or
establishment
shall
implement
controls
18
to
prevent
payment
of
indirect
costs
in
excess
of
the
cap
19
imposed
under
this
section,
including
rejection
or
adjustment
20
of
an
invoice
or
reimbursement
request
that
would
exceed
the
21
allowable
maximum.
22
d.
The
department
of
management
shall
adopt
rules
pursuant
23
to
chapter
17A
to
implement
and
administer
this
section.
The
24
office
of
grants
enterprise
management
of
the
department
of
25
management
shall
issue
implementation
guidance,
including
26
standardized
definitions,
examples,
and
sample
budget
27
templates,
to
promote
uniform
application
of
this
section.
28
6.
Remedies.
29
a.
Indirect
costs
charged
in
excess
of
the
cap
imposed
under
30
this
section
are
disallowed.
31
b.
A
department
or
establishment
shall
recover
any
amounts
32
paid
for
disallowed
indirect
costs
through
offsets
against
33
future
payments
under
the
grant,
repayment
by
the
grantee,
or
34
other
means
provided
in
the
grant
agreement
and
applicable
law.
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2386
c.
As
a
condition
of
continued
funding,
a
department
or
1
establishment
may
require
a
grantee
that
exceeds
the
cap
2
imposed
under
this
section
to
implement
a
corrective
action
3
plan
and
revised
allocation
methodology
to
ensure
future
4
compliance.
5
7.
Lower
cap
authorized.
A
department
or
establishment
may
6
adopt
a
stricter
limit
on
indirect
costs
than
established
in
7
this
section
for
particular
grants
if
authorized
by
law
or
if
8
necessary
or
desirable
based
on
funding
conditions,
provided
9
such
limit
is
stated
in
the
grant
solicitation
and
agreement.
10
8.
Federal
moneys.
To
the
extent
a
grant
includes
federal
11
moneys
that
contain
explicit
requirements
concerning
indirect
12
costs,
the
federal
requirement
applies
to
the
portion
of
the
13
grant
funded
with
federal
moneys.
14
Sec.
2.
APPLICABILITY.
This
Act
applies
to
grants
15
awarded
or
amended
on
or
after
July
1,
2026.
A
department
or
16
establishment,
as
defined
in
section
8.2,
shall,
to
the
extent
17
practicable,
modify
an
existing
grant
upon
amendment
to
conform
18
to
this
Act.
19
EXPLANATION
20
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
21
the
explanation’s
substance
by
the
members
of
the
general
assembly.
22
This
bill
provides
that
indirect
costs,
as
defined
in
the
23
bill,
charged
to
a
state-funded
grant
awarded
or
amended
on
24
or
after
July
1,
2026,
must
not
exceed
5
percent
of
the
total
25
grant
amount
and
prohibits
a
department
or
establishment
from
26
approving
a
budget
or
reimbursement
request
that
would
exceed
27
that
limit
unless
expressly
authorized
by
law.
A
grantee
is
28
prohibited
from
reclassifying
an
indirect
cost
as
a
direct
cost
29
and
from
charging
an
indirect
cost
on
top
of
a
direct
cost
that
30
includes
an
allocable
share
of
indirect
costs.
For
purposes
of
31
Code
chapter
8,
a
department
or
establishment
is
an
executive
32
department,
commission,
board,
institution,
bureau,
office,
33
or
other
agency
of
state
government,
that
uses,
expends,
or
34
receives
any
government
funds,
excluding
the
courts
and
the
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2386
general
assembly.
1
A
grant
budget
must
list
indirect
costs
and
direct
costs
2
separately
and
a
budget
narrative
must
explain
the
basis
for
3
the
indirect
cost
calculation.
A
grantee
must
maintain
records
4
related
to
indirect
costs
for
a
minimum
of
10
years.
An
5
allocation
method
that
allocates
indirect
costs
across
multiple
6
funding
sources
must
be
reasonable,
consistent,
and
compliant
7
with
generally
accepted
cost
allocation
principles.
The
8
methodology
must
be
documented
and
provided
to
the
department
9
or
establishment
upon
request.
10
The
bill
requires
a
department
or
establishment
to
11
incorporate
the
provisions
of
the
bill
into
each
grant
12
solicitation
and
agreement,
ensure
grant
budgets
are
compliant,
13
and
implement
controls
to
prevent
payment
of
indirect
costs
in
14
excess
of
the
cap.
The
department
of
management
(DOM)
must
15
adopt
rules
to
implement
the
bill
and
DOM’s
office
of
grants
16
enterprise
management
must
issue
implementation
guidance
to
17
promote
uniform
application
of
the
bill.
18
The
bill
requires
a
department
or
establishment
to
recover
19
amounts
paid
for
disallowed
indirect
costs
through
offsets
20
against
future
payments
under
the
grant,
repayment
by
the
21
grantee,
or
other
means
provided
in
the
grant
agreement
and
22
applicable
law.
A
department
or
establishment
may
require
a
23
grantee
that
exceeds
the
cap
to
implement
a
corrective
action
24
plan
and
revised
allocation
methodology.
25
The
bill
authorizes
a
department
or
establishment
to
adopt
26
a
lower
cap
on
indirect
costs
under
certain
circumstances
if
27
the
cap
is
stated
in
the
grant
solicitation
and
agreement.
The
28
bill’s
provisions
do
not
supplant
federal
requirements
for
29
federal
moneys
included
in
a
grant.
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