De Minimis Indirect Costs: MTDC Checklist

De minimis indirect costs can help a nonprofit recover shared operating expenses, but the percentage is only half the calculation. Under the revised Uniform Guidance, eligible recipients and subrecipients may elect a rate up to 15% of modified total direct costs, or MTDC. That is not 15% of the grant award, every program expense, or every reimbursement request. Eligibility, the applicable award terms, and the base all matter. 2 CFR 200.414(f)

This guide addresses the practical calculation and transition questions a finance team should resolve before submitting its next claim. It reflects authoritative guidance retrieved on October 26, 2026, not a claim that a new rule was announced today.

Start with the award, not the current percentage

OMB’s 2024 revisions became effective October 1, 2024. Federal agencies could apply them to earlier awards but were not required to do so. A nonprofit with several active awards therefore needs an award-by-award applicability record, rather than one organization-wide assumption that every historical grant now permits the higher rate. OMB final guidance, effective-date statement

Read the signed award, incorporated general terms, amendments, and any pass-through agreement. Record which version of the cost principles applies and whether the agency has issued program-specific restrictions. If documents conflict, ask the responsible grant official for written clarification before changing billing. An internally approved budget cannot amend the federal award.

EPA offers a useful agency-specific illustration. Its RAIN-2025-G01 describes how certain fully funded older assistance agreements can be amended to incorporate the revisions. It also explains that the revisions cannot be applied retroactively to already spent EPA funds. The notice is guidance dated November 12, 2024, despite the number in its name; it is not a new 2026 announcement. Other agencies may implement the transition differently. EPA amendment guidance

Build a short transition worksheet:

Field	Evidence to retain	Question it answers
Award and amendment identifiers	Signed documents and incorporated terms	Which agreement authorizes the charge?
Governing guidance version	Award terms or written agency clarification	Which rate and MTDC definition apply?
Rate election	Dated internal approval and funder correspondence	What rate did the organization choose?
Available indirect budget	Approved budget and revisions	Can the recovery fit within authorized funding?
Calculation start date	Amendment or other applicable authorization	When should the revised treatment begin?

This worksheet is a recommended control, not a federally prescribed form. Keep it simple enough that someone other than its preparer can follow the decision.

Check eligibility for de minimis indirect costs

The current rule allows the election when the recipient or subrecipient does not have a current federal negotiated indirect cost rate, including a provisional rate. It no longer describes eligibility merely as having never negotiated a rate. Conversely, a nonprofit with a current negotiated rate cannot abandon it in favor of the de minimis option simply because the calculation looks easier. 2 CFR 200.414(f)

The organization determines its elected rate within the permitted limit. The rule does not make 15% a mandatory floor. Federal agencies and pass-through entities generally cannot compel a lower rate than the elected rate under this subsection unless federal statute or regulation requires it. The same provision excludes direct federal cost-reimbursement contracts governed by the Federal Acquisition Regulation. Do not treat all government contracts as grants.

Once elected, the de minimis method must be used for all federal awards until the organization chooses to receive a negotiated rate. Apply that consistency requirement alongside the governing terms of older awards; obtain guidance on mixed-version portfolios rather than retroactively replacing their conditions. Document why each award’s billing treatment is appropriate.

The rule says documentation is not required to justify using the de minimis rate. That does not eliminate the need to support the direct expenses, establish which expenses enter MTDC, or explain the arithmetic. A finance director should be able to reproduce the claim without relying on an undocumented spreadsheet override.

Build the MTDC base from classified expenses

The revised MTDC definition includes direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $50,000 of each subaward. It excludes equipment, capital expenditures, patient-care charges, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the amount of each subaward above $50,000. Other exclusions require the stated justification and cognizant-agency approval. 2 CFR 200.1, MTDC definition

The subaward allowance is cumulative for each subaward under the award, regardless of its period of performance. It is not a new $50,000 allowance every month, invoice, budget year, or reporting quarter. Maintain a cumulative subaward tracker linked to the expense ledger so the eligible portion stops increasing when the allowance is exhausted.

Do not exclude all contracted services just because some subaward costs are excluded. First establish whether the relationship is a procurement contract or a subaward. Then apply the correct classification and applicable base definition. Likewise, a description such as “community event” does not tell you whether a payment is participant support; examine its actual purpose and governing terms.

For an older award using an earlier MTDC definition, preserve the corresponding treatment instead of substituting the revised $50,000 allowance automatically. The rate and base must belong to the same authorized calculation framework.

Hypothetical example: a quarterly calculation

Suppose a nonprofit has an award governed by the revised guidance, no current federal negotiated rate, a documented 15% election, and sufficient authorized budget. Its first reporting quarter contains the following allowable direct expenses. This example is illustrative, not a claim that a particular agency approved these costs.

Expense	Direct expense	Amount included in MTDC
Salaries and applicable fringe benefits	$100,000	$100,000
Supplies and qualifying services	$20,000	$20,000
Travel	$5,000	$5,000
One subaward, first costs under this award	$80,000	$50,000
Equipment	$18,000	$0
Rental costs	$12,000	$0
Participant support costs	$15,000	$0
Total	$250,000	$175,000

The indirect charge is $26,250, calculated as $175,000 multiplied by 15%. Multiplying the entire $250,000 direct-expense total by 15% would produce $37,500 and overstate this example’s recovery by $11,250. The exclusions affect the indirect base; they do not, by themselves, mean the excluded direct costs are unallowable.

In the next quarter, an additional $10,000 of expenditures on the same subaward contributes nothing more to this award’s MTDC base because the first $50,000 was already included. If the organization instead enters a genuinely separate subaward, evaluate and track that agreement separately; do not split an existing agreement merely to manufacture another allowance.

Have a second reviewer trace the expense totals to the ledger, confirm the cumulative subaward calculation, and inspect excluded categories before approving reimbursement.

Keep indirect recovery separate from unrestricted cash planning

An increased permitted rate does not increase the total award automatically. More indirect recovery within a fixed award can leave less funding available for direct activities unless the budget is revised appropriately. EPA’s amendment notice explicitly says EPA is not required to add funds because the de minimis ceiling increased and describes approval considerations for proposed budget changes. That is an EPA-specific implementation point, not a promise that every agency follows an identical amendment process. EPA RAIN-2025-G01

Prepare two views before proposing a change: the allowable reimbursement calculation and a forecast of remaining resources for required deliverables. Explain any reduction in direct activity funding to the program director before submitting the request. Do not assume an allowable indirect charge can cover an unrelated shortfall on another restricted grant.

Consistent direct-versus-indirect treatment also prevents duplicate recovery. If an expense is already included in the indirect method, charging that same expense directly as well can create double charging. The de minimis provision expressly prohibits inconsistent or duplicate treatment. 2 CFR 200.414(f)

A useful accounting review maps each affected cost category to its treatment, the fund or award benefiting from it, and the supporting records. The goal is not an unnecessarily complex allocation system; it is a defensible distinction between program expenses and shared operating support.

A monthly review checklist

Use the following recommended checklist alongside the actual award requirements:

• Confirm that the award’s governing terms and amendments have not changed.
• Check that the organization remains eligible for its documented election.
• Reconcile the direct-expense population to the general ledger.
• Separate MTDC exclusions using documented expense classifications.
• Update cumulative eligible costs for each subaward.
• Apply the authorized rate to the correct base, not the award amount.
• Check for duplicate direct and indirect recovery.
• Compare the proposed claim with remaining authorized budget.
• Retain the preparer’s calculation, review approval, and clarification correspondence.

For context on keeping funding sources distinct, read our fund accounting overview. For the broader operational challenge of managing award budgets and reporting periods, see how to track multiple grants. These are background resources; the official sources below govern the federal calculation discussed here.

Educational disclaimer: This article provides general educational information, not legal advice, an audit opinion, or an award-specific allowability determination. Confirm applicable statutes, regulations, agency implementation, and award terms with your grant official and qualified nonprofit accounting adviser before changing cost recovery.

Sources

All sources accessed October 26, 2026. The eCFR API text reflects the October 1, 2024 revision; the live Part 200 version history checked for this article identified that as its latest revision date.

• OMB, Guidance for Federal Financial Assistance, final guidance published April 22, 2024: effective date and treatment of earlier awards.
• eCFR, 2 CFR 200.414, official section text: eligibility, elected rate, consistency, and negotiated-rate provisions.
• eCFR, 2 CFR 200.1, official definitions: MTDC inclusions and exclusions.
• EPA, RAIN-2025-G01: agency-specific amendment process, budget considerations, and prohibition on retroactive application to spent EPA funds.
• eCFR, live Part 200 version history: revision-date verification.