Last updated: 7 October 2026 · Independent buyer’s guide · We do not sell rankings or coverage.
The de minimis indirect cost rate lets a nonprofit without a negotiated indirect cost rate agreement charge indirect costs to federal awards at up to 15 percent of modified total direct costs (MTDC), with no documentation required to justify the rate. OMB raised the rate from 10 percent and lifted the subaward amount counted in MTDC from $25,000 to $50,000 in revisions to 2 CFR 200 that took effect on 1 October 2024. Tracking it correctly in your accounting system takes three things: an MTDC base that excludes the right accounts, a per-subaward cap, and a repeatable posting by award.
Key takeaways
- Under 2 CFR 200.414(f), you may elect a rate of up to 15 percent of MTDC if you have no current federal negotiated rate, including a provisional rate. Once elected, it applies to all your federal awards.
- MTDC counts salaries, fringe, materials and supplies, services, travel and only the first $50,000 of each subaward. It excludes equipment, rent, participant support and other listed items.
- The hardest piece to automate is the $50,000 subaward cap, because it applies per subaward across the whole award, not per period. Most systems need a split GL account to handle it.
- Blackbaud Financial Edge NXT and MIP Fund Accounting document a rate-times-base indirect cost allocation by project or grant. Sage Intacct and NetSuite need more configuration.
- Aplos places expense allocations in its custom tier, and QuickBooks Online has no automated allocation, so small teams post a monthly journal entry.
What the rule says today
The current text of 2 CFR 200.414(f) (eCFR, up to date as of 5 October 2026) states that recipients and subrecipients “that do not have a current Federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 15 percent of modified total direct costs (MTDC).” You choose the rate up to that limit, and agencies and pass-through entities may not require a lower rate unless a statute or regulation does.
The same paragraph says the rate cannot be applied to cost-reimbursement contracts issued directly under the FAR, and that costs must be charged consistently as either direct or indirect, never both. The rate needs no documentation and may be used indefinitely, but once you elect it you must use it for all federal awards until you negotiate a rate.
The change came from OMB’s Guidance for Federal Financial Assistance (Federal Register, 89 FR 30046, 22 April 2024). OMB raised the rate “from 10 percent to 15 percent” and increased the subaward amount included in MTDC “from $25,000 to $50,000.” The effective date was 1 October 2024. The notice also says agencies may apply the new guidance to awards issued before that date but are not required to, so an older award may still carry 10 percent in its terms.
Under 2 CFR 200.332 (eCFR, 5 October 2026), a pass-through entity must identify the indirect cost rate in each subaward, and it must not require the de minimis rate if you already hold a federally negotiated rate.
What counts in the MTDC base
The definition of MTDC in 2 CFR 200.1 (eCFR, 5 October 2026) is the list your chart of accounts has to reflect. Each direct cost account on a federal award should be tagged as either in the base or excluded from it.
| Included in MTDC | Excluded from MTDC |
|---|---|
| Direct salaries and wages | Equipment and capital expenditures |
| Applicable fringe benefits | Rental costs |
| Materials and supplies | Participant support costs |
| Services | Tuition remission, scholarships and fellowships |
| Travel | Charges for patient care |
| The first $50,000 of each subaward, regardless of its period of performance | The portion of each subaward above $50,000 |
Equipment has its own threshold. The same section defines equipment as tangible property with a useful life of more than one year and a per-unit cost at or above the lower of your capitalization policy or $10,000. If your capitalization threshold is $5,000, a $7,000 server is equipment and drops out of the base. Participant support costs, such as stipends paid to training participants, are a common miss because they often sit in the same accounts as staff costs.
Where organizations go wrong
The most frequent error is charging the same cost twice. If your executive director’s time is in the indirect pool, you cannot also charge part of it directly to a grant. 2 CFR 200.412 (eCFR, 5 October 2026) requires each cost incurred for the same purpose in like circumstances to be treated consistently as direct or indirect, and 200.413(c) says administrative and clerical salaries should normally be indirect unless three conditions are all met.
The second error is using an old worksheet. The Office of Justice Programs Indirect Costs Guide Sheet (no date shown, checked 7 October 2026) applies the 15 percent rate in its example but still includes only “the first $25,000 of each subaward” and lists a $35 million direct federal funding test that does not appear in the current text of 200.414(f). If your worksheet came from a similar source, your base may be understated.
The third error is applying the subaward cap per period. The cap runs across the life of each subaward under the award. A subrecipient paid $20,000 a quarter contributes $20,000, $20,000 and $10,000 to your base in the first three quarters, then nothing after that. A monthly allocation that reads only current-period activity will overstate the base unless the GL separates the capped and uncapped portions.
Setting up the chart of accounts and the base
An indirect cost pool. Code shared administrative costs, such as finance staff, audit fees, general insurance and office rent that is not charged directly, to a management and general department or cost center. You do not compute a rate from this pool under the de minimis method, but keeping it separate makes double charging visible and gives you the figures you would need to negotiate a rate later.
A base flag on direct cost accounts. Either group your expense accounts into an MTDC account group and an excluded account group, or add a dimension or attribute that marks each line. Separate accounts for participant support, equipment and rent charged to grants make the exclusions automatic rather than a review step.
A split for subawards. Create two accounts, for example “Subawards, first $50,000” and “Subawards, over $50,000,” and keep a subrecipient-level report that shows the cumulative amount paid to each one under the award. When a subrecipient crosses $50,000, the next invoice is coded to the excluded account.
With those in place, the monthly posting is a single entry per award: the rate times that month’s MTDC, charged to an indirect cost expense line on the award and credited to an indirect cost recovery account in the management and general department. Your auditor should agree the exact accounts, because presentation in the statement of functional expenses matters.
Illustration: one federal award for one year
Illustration only. The organization and figures below are constructed to show the arithmetic and are not taken from a real award.
A community health nonprofit with no negotiated rate has one federal award and elects the full 15 percent de minimis rate. In the first year it charges the following direct costs: salaries $280,000, fringe $70,000, supplies $15,000, travel $9,000, contracted services $26,000, one piece of equipment $12,000, program space rent $36,000, participant stipends $20,000, Subaward A $120,000 and Subaward B $30,000.
| Line (illustrative) | Total direct cost | In MTDC |
|---|---|---|
| Salaries, fringe, supplies, travel, services | $400,000 | $400,000 |
| Equipment (above $10,000 per unit) | $12,000 | $0 |
| Rent | $36,000 | $0 |
| Participant support | $20,000 | $0 |
| Subaward A | $120,000 | $50,000 |
| Subaward B | $30,000 | $30,000 |
| Total | $618,000 | $480,000 |
Indirect cost recovery is 15 percent of $480,000, or $72,000, so total charges to the award are $690,000. Under the pre-2024 rule, the same costs would have produced an MTDC of $450,000 (with $25,000 counted from each subaward) and recovery of $45,000 at 10 percent. The revised rule adds $27,000, provided the award budget includes it.
In the GL, if March MTDC on the award is $40,000, the March entry charges $6,000 to indirect costs on the award and credits $6,000 to indirect cost recovery in management and general. After Subaward A reaches $50,000 in total, its later invoices go to the excluded subaward account.
How nonprofit accounting systems handle it
Some systems calculate indirect costs as a rate applied to a base on each grant. Others distribute a pool of costs in proportion to a basis, which suits functional expense allocation but needs extra configuration to produce a flat percentage per award.
Blackbaud Financial Edge NXT. Blackbaud’s allocation management page (last modified 21 May 2026) says the product can “calculate reimbursable indirect costs in line with grant guidelines and approved rates.” Blackbaud’s Allocation Management guide for Financial Edge (copyright 2015) describes an indirect cost allocation type where each project carries its own rate, the base comes from an allocation pool of accounts, and an Exclusions tab removes specified transactions from the calculation. That guide calls Allocation Management and Projects and Grants optional modules. Because the guide predates NXT, confirm current packaging with Blackbaud, which does not publish a price.
MIP Fund Accounting (Momentive Software). MIP’s allocation calculation help (no date shown, checked 7 October 2026) lists an Indirect Cost Rate method alongside headcount, labor hours and relative balances. The MIP Classic allocations guide (no date shown) explains that you select the GL accounts that form the base, enter a rate and begin date per recipient code, and can apply an indirect cost limit cap. Allocations Management is a dedicated module (Momentive, 15 December 2021), and we found no published MIP price list.
Sage Intacct. Sage Intacct’s Dynamic allocations (last modified 1 October 2026) pull source balances and distribute them across dimensions such as program or grant, and attach a snapshot of the setup to each posted entry. The setup page (1 October 2026) says you must subscribe to Dynamic Allocations. The allocation definition page (1 October 2026) documents relative account financial and statistical bases and a “Percentage to allocate” field on the source pool. In our reading, a partner can build a 15 percent charge from an MTDC account group, but Sage documents no de minimis template. Sage does not publish Intacct prices; its pricing page asks buyers to request a quote.
Oracle NetSuite. NetSuite’s Expense Allocation feature (no date shown, checked 7 October 2026) creates scheduled allocation journals, and with Statistical Accounts and Dynamic Allocation enabled it weights each schedule by a statistical balance. Producing a rate on an MTDC base therefore needs a statistical account fed from MTDC activity or a custom script.
Aplos. Aplos describes Allocations (no date shown) as “an advanced accounting add-on feature” that splits income or expense across funds or tags. Its pricing page (checked 7 October 2026) lists Income and Expense Allocations only under the Custom plan; Lite ($79), Core ($129) and Advanced ($229 per month, before promotions) would need a manual journal entry.
QuickBooks Online. QuickBooks has no grant-aware allocation engine. Wiss, a CPA and advisory firm, states that “QuickBooks doesn’t track grants natively” and that for shared costs “QuickBooks doesn’t automate this,” so you create recurring journal entries (Wiss, 11 February 2026).
| System | Documented method | MTDC exclusions | What you add |
|---|---|---|---|
| Financial Edge NXT | Indirect cost allocation, rate per project | Account pool plus exclusions tab | Allocation and grants modules; subaward split account |
| MIP Fund Accounting | Indirect Cost Rate method, rate per recipient code | Selected base GL accounts | Allocations Management module; subaward split account |
| Sage Intacct | Dynamic allocations by relative balance | Account groups | Dynamic Allocations subscription; partner configuration |
| NetSuite | Allocation schedules, optionally statistical | Source accounts on schedule | Statistical feed or scripting |
| Aplos | Allocations add-on (Custom plan) | Not documented | Manual entry on standard plans |
| QuickBooks Online | None; recurring journal entries | Spreadsheet | Monthly workbook and review |
None of the vendor documentation we reviewed describes a built-in cap on the first $50,000 of each subaward. Plan to handle that with the split account described above, whichever system you choose. For a wider comparison, see our guide to nonprofit accounting software.
Our independent take
If you hold several federal awards, a system with a documented rate-on-base method, such as Financial Edge NXT or MIP, saves real effort each month and gives auditors a repeatable calculation. Sage Intacct and NetSuite can produce the same result, but it depends on partner configuration, so ask for a demonstration on your own award structure before you sign. For one or two awards, a well-controlled spreadsheet and a monthly journal entry are defensible. In every system, the subaward cap and the participant support exclusion are where we see the most risk, so build those into the chart of accounts rather than relying on a reviewer to catch them.
Three buyer scenarios
A youth services nonprofit with $2 million in revenue and one federal pass-through award. You are on QuickBooks Online and the award is your only federal funding. Keep QuickBooks, add separate accounts for participant support and rent charged to the grant, and post a monthly recovery entry from a reviewed workbook.
A housing nonprofit with $12 million in revenue, six federal awards and four subrecipients. Monthly spreadsheets across six awards and four subaward caps create real error risk. Shortlist systems with a documented indirect cost rate method and ask each vendor to run your illustration through its allocation engine, including a subaward crossing $50,000 mid-year. Our grant management software guide covers tools that sit alongside the GL.
A research nonprofit with $30 million in revenue considering a negotiated rate. If your actual indirect costs run well above 15 percent of MTDC, the de minimis rate leaves money unrecovered. Use your pool data to model a negotiated rate, and make sure your system can hold different rates by award and by date, because a negotiated rate replaces the de minimis rate across all awards.
When you do not need dedicated software for this
You do not need an allocation module if you have one or two federal awards, few or no subawards, and a finance team that reconciles the GL monthly. The calculation is one multiplication on a base you can pull from a report. You do need a written procedure, a consistent account structure and a reviewer who checks the base before the entry posts. Software becomes worth the cost once you manage several awards and subrecipients. For the control side of grant compliance, see our article on financial grant compliance in nonprofit software.
How we researched this
We read the current eCFR text of 2 CFR 200.1, 200.332, 200.412, 200.413 and 200.414 on 7 October 2026 and the April 2024 Federal Register notice that made the changes. We reviewed the top-ranking CPA firm and agency pages for this term, then read vendor help documentation for each system named. Where a vendor did not document a capability or a price, we say so.
Related guides
- Schedule of Expenditures of Federal Awards (SEFA): How to Prepare It From Your Accounting System
- Prepaid Expense Amortization: How to Automate the Schedule in Your Accounting Software
Frequently asked questions
Is the de minimis indirect cost rate 10% or 15%?
It is up to 15 percent of MTDC under the current 2 CFR 200.414(f). The increase from 10 percent took effect on 1 October 2024. An award issued before that date may still state 10 percent if the agency did not apply the new guidance to it, so check your award terms.
Can I use the de minimis rate if my negotiated rate expired?
The rule applies to organizations that do not have a current federal negotiated rate, including a provisional rate. If your agreement has lapsed and no provisional rate is in place, you may be eligible, but confirm with your cognizant agency, because 200.414 also allows a one-time extension of a current rate for up to four years.
Do I have to charge the full 15 percent?
No. The regulation lets you choose any rate up to 15 percent, and you are not required to use the de minimis rate at all. Agencies and pass-through entities may not force a lower rate on you unless a statute or regulation requires it.
Does the $50,000 subaward limit reset each year?
No. MTDC includes up to the first $50,000 of each subaward regardless of the subaward’s period of performance under the award. After a subaward reaches $50,000 in total, further payments to that subrecipient under the same award are excluded from the base.
Can QuickBooks calculate indirect costs automatically?
Not natively. QuickBooks Online tracks awards with classes or projects, but the indirect cost charge is usually calculated in a spreadsheet and posted as a recurring or monthly journal entry.
Sources
Every rule, figure and product capability in this article traces to one of these. Dates are those shown on each page, or the date we checked it where no date is shown.
- eCFR, 2 CFR 200.414 Indirect costs, up to date as of 5 October 2026. ecfr.gov
- eCFR, 2 CFR 200.1 Definitions (MTDC, equipment, participant support costs), up to date as of 5 October 2026. ecfr.gov
- eCFR, 2 CFR 200.332 Requirements for pass-through entities, up to date as of 5 October 2026. ecfr.gov
- eCFR, 2 CFR 200.412 and 200.413 Classification of costs and direct costs, up to date as of 5 October 2026. ecfr.gov
- OMB, Guidance for Federal Financial Assistance, 89 FR 30046, 22 April 2024, effective 1 October 2024. federalregister.gov
- Office of Justice Programs, Indirect Costs Guide Sheet, no date shown, checked 7 October 2026. ojp.gov
- Blackbaud, Improve accuracy and compliance with allocation management, 21 May 2026 (vendor). blackbaud.com
- Blackbaud, Financial Edge Allocation Management guide, copyright 2015 (vendor). help.blackbaud.com
- MIP Fund Accounting, New Calculation (allocations help), no date shown, checked 7 October 2026 (vendor). documentation.mip.com
- MIP Classic, Allocations guide, no date shown, checked 7 October 2026 (vendor). documentation.mip.com
- Momentive Software, Accounting allocations, 15 December 2021 (vendor). momentivesoftware.com
- Sage Intacct, Dynamic allocations overview and setup, last modified 1 October 2026 (vendor). intacct.com
- Sage Intacct, Create an allocation definition, last modified 1 October 2026 (vendor). intacct.com
- Sage, Sage Intacct pricing page, no date shown, checked 7 October 2026 (vendor). sage.com
- Oracle NetSuite, Expense Allocation Overview, no date shown, checked 7 October 2026 (vendor). docs.oracle.com
- Aplos, Allocations help article, no date shown, and pricing page, checked 7 October 2026 (vendor). help.aplos.com and aplos.com
- Wiss, QuickBooks for Nonprofits: Setup and Best Practices, 11 February 2026 (CPA and advisory firm). wiss.com