The rate established by the indirect cost rate agreement is used to determine what?

• A. Salaries charged to the project.
• B. Equipment purchase authorizations.
• C. Travel policy compliance.
• D. Allowable overhead charged to federal programs.

Answer: (D)

Indirect cost rate agreements establish the overhead rate used to allocate indirect costs to federally funded programs. Indirect costs are those general expenses (like facilities, utilities, administrative support) that can’t be tied to a single project. The negotiated rate is applied to direct costs to determine the amount of overhead a federal agency allows to bill to the grant or contract, ensuring consistency and compliance with federal cost principles. This rate does not set equipment purchase authorizations or directly govern travel policy, and while salaries can be part of direct costs or the indirect pool, the rate itself determines the overhead portion charged to federal programs.