Grant Writing Budget and Financial Planning 4 — Questions and Answers
Question 1: What is a 'de minimis' indirect cost rate, and who may use it?
- A 5% rate available only to for-profit entities
- A 10% rate available to organizations that have never had a negotiated indirect cost rate (Correct answer)
- A 15% rate for first-time federal awardees only
- A variable rate set by each federal agency individually
Correct answer: A 10% rate available to organizations that have never had a negotiated indirect cost rate
The de minimis rate of 10% of modified total direct costs (MTDC) may be used indefinitely by any non-federal entity that has never negotiated an indirect cost rate with the federal government.
Question 2: Modified Total Direct Costs (MTDC) typically EXCLUDES which of the following?
- Personnel salaries
- Fringe benefits
- Equipment purchases over $5,000 (Correct answer)
- Domestic travel
Correct answer: Equipment purchases over $5,000
Under the Uniform Guidance, MTDC excludes equipment, capital expenditures, patient care charges, rent, tuition remission, and sub-awards in excess of $25,000 per sub-award.
Question 3: Which of the following best describes 'program income' in the context of a federal grant?
- Funds carried over from a previous grant year
- Gross income earned by the grantee that is directly generated by a federally supported activity (Correct answer)
- Interest earned on the grantee's general operating account
- Matching funds provided by a third-party donor
Correct answer: Gross income earned by the grantee that is directly generated by a federally supported activity
Program income is gross income earned by the grantee as a direct result of grant-supported activities, such as fees charged for services rendered under the grant.
Question 4: An organization's auditor finds that grant funds were used for costs incurred after the grant's period of performance ended. This is an example of:
- An indirect cost allocation error
- A questioned cost or unallowable expenditure (Correct answer)
- A budget modification that requires retroactive approval
- Normal carryover under Uniform Guidance
Correct answer: A questioned cost or unallowable expenditure
Costs incurred outside the approved period of performance are unallowable and become questioned costs, which the grantee must typically repay to the funder.
Question 5: When developing a multi-year grant budget, which approach best accounts for salary increases over time?
- Use the same salary figures for every project year
- Apply an annual escalation factor (e.g., 3%) to salaries in each subsequent year (Correct answer)
- Estimate the highest possible salary in year one for all years
- List salaries as a lump sum without annual breakdown
Correct answer: Apply an annual escalation factor (e.g., 3%) to salaries in each subsequent year
Applying a consistent annual escalation factor reflects expected cost-of-living or merit increases, making the multi-year budget realistic and defensible to reviewers.
Question 6: A grant requires a 1:1 cash match. If the requested grant amount is $150,000, how much must the applicant contribute in matching funds?
- $75,000
- $100,000
- $150,000 (Correct answer)
- $300,000
Correct answer: $150,000
A 1:1 (dollar-for-dollar) cash match means the applicant must contribute an amount equal to the grant award, so $150,000 in matching funds is required.
Question 7: Which budget format presents costs organized by the type of expenditure (salaries, travel, supplies) rather than by project objective?
- Functional budget
- Object-class budget (Correct answer)
- Program budget
- Zero-based budget
Correct answer: Object-class budget
An object-class (or line-item) budget categorizes costs by the nature of the expenditure, such as personnel, travel, and supplies, regardless of which program objective they support.
Grant Writing Budget and Financial Planning 4
What is a 'de minimis' indirect cost rate, and who may use it?