What is MTDC, and how to calculate indirect costs on a grant budget
Short answer: indirect cost is a percent of a smaller number than your direct costs. Under the U.S. federal Uniform Guidance the base is modified total direct costs (MTDC), which leaves out equipment, tuition remission, participant support, rent, patient care and most of any large subaward. The calculator does it for your budget.
Everything below is arithmetic on invented numbers and the federal definition as of the October 1, 2024 revision of 2 CFR 200. Not grant or accounting advice. Your funder's notice, your negotiated rate agreement and your grants office decide what is allowed.
What is in MTDC
Included: salaries and wages, fringe benefits, materials and supplies, services, travel, and the first $50,000 of each subaward.
Excluded: equipment (a unit costing $10,000 or more), capital expenditures, patient care charges, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the part of each subaward over $50,000.
An organisation with no negotiated rate may charge a de minimis rate of up to 15 percent of MTDC. Foundations and some programs set lower caps or a different base.
A worked budget
Salaries $120,000.00, fringe $33,600.00, supplies $6,000.00, travel $8,000.00, services $12,000.00, other $4,000.00; tuition remission $18,000.00; equipment of $12,500.00 and $4,200.00; two subawards of $80,000.00 and $30,000.00.
The $12,500.00 item is excluded; the $4,200.00 item is under the threshold and stays in the base.
Subaward one contributes $50,000.00 and its $30,000.00 excess is excluded; subaward two ($30,000.00) is fully in.
MTDC is $267,800.00; excluded costs are $60,500.00; total direct costs are $328,300.00.
Indirect at 15 percent is $40,170.00, a total request of $368,470.00. That is an effective 12.2% of direct costs, not 15.
Applying 15 percent to all direct costs by mistake would claim $9,075.00 too much.
Fitting under an award cap
With a $350,000.00 cap the budget above is $18,470.00 over. Total = direct x (1 + rate x base share), and the base share here is 81.6 percent, so direct costs must come down to $311,843.57: cut $16,456.43, leaving $38,156.43 of indirect.
Common mistakes
Applying the rate to total direct costs when the funder specifies MTDC.
Treating the $50,000 subaward limit as one limit for all subawards instead of one per subaward.
Forgetting that a cheaper equipment unit is a supply and stays in the base.
Using a rate above 15 percent without a negotiated rate agreement.
Questions
What is modified total direct costs (MTDC)?
MTDC is the base the indirect rate is applied to under the federal Uniform Guidance: direct salaries, fringe, supplies, services, travel and the first $50,000 of each subaward, minus equipment of $10,000 or more per unit, tuition remission, participant support, rental, patient care and the part of each subaward above $50,000.
How do I calculate indirect costs on a grant budget?
Add the direct costs, remove the excluded ones to get MTDC, then multiply by the rate. On the worked budget, $267,800.00 of MTDC at 15 percent is $40,170.00 of indirect, a $368,470.00 total request.
What do I do when the funder caps the total award?
Divide the cap by one plus the rate times the share of direct costs that is in the base. On the worked budget a $350,000.00 cap allows $311,843.57 of direct costs, so $16,456.43 has to come out.