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6. "Fixed rate" means an indirect cost rate which has the same characteristics as a predetermined <br />rate, except that the difference between the estimated costs and the actual, allowable costs of the <br />period covered by the rate is carried forward as an adjustment to the rate computation of a <br />subsequent period. <br />7. "Provisional rate" means a temporary indirect cost rate applicable to a specified period which <br />is used for funding, interim reimbursement, and reporting indirect costs on Federal awards <br />pending the establishment of a "final" rate for that period. <br />8. "Final rate" means an indirect cost rate applicable to a specified past period which is based on <br />the actual allowable costs of the period. A final audited rate is not subject to adjustment. <br />9. "Base period" for the allocation of indirect costs is the period in which such costs are incurred <br />and accumulated for allocation to activities performed in that period. The base period normally <br />should coincide with the governmental unit's fiscal year, but in any event, shall be so selected as <br />to avoid inequities in the allocation of costs. <br />C. Allocation of Indirect Costs and Determination of Indirect Cost Rates. <br />1. General. <br />a. Where a governmental unit's department or agency has only one major function, or where all <br />its major functions benefit from the indirect costs to approximately the same degree, the <br />allocation of indirect costs and the computation of an indirect cost rate may be accomplished <br />through simplified allocation procedures as described in subsection 2. <br />b. Where a governmental unit's department or agency has several major functions which benefit <br />from its indirect costs in varying degrees, the allocation of indirect costs may require the <br />accumulation of such costs into separate cost groupings which then are allocated individually to <br />benefitted functions by means of a base which best measures the relative degree of benefit. The <br />indirect costs allocated to each function are then distributed to individual awards and other <br />activities included in that function by means of an indirect cost rate(s). <br />c. Specific methods for allocating indirect costs and computing indirect cost rates along with the <br />conditions under which each method should be used are described in subsections 2, 3 and 4. <br />2. Simplified method. <br />a. Where a grantee agency's major functions benefit from its indirect costs to approximately the <br />same degree, the allocation of indirect costs may be accomplished by (1) classifying the grantee <br />agency's total costs for the base period as either direct or indirect, and (2) dividing the total <br />allowable indirect costs (net of applicable credits) by an equitable distribution base. The result of <br />this process is an indirect cost rate which is used to distribute indirect costs to individual Federal <br />awards. The rate should be expressed as the percentage which the total amount of allowable <br />indirect costs bears to the base selected. This method should also be used where a governmental <br />unit's department or agency has only one major function encompassing a number of individual <br />52 <br /> <br />