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Reporting indirect contract administration costs

The information on this page aims to clarify what costs make up indirect contract administration costs and what you need to know about reporting them as expenses in your contract-level accountability.

This supersedes all previous information issued by DCJ in relation to reporting management and/or administration costs for annual accountability.

On this page

What are ‘indirect contract administration costs’?

For DCJ purposes, ‘indirect contract administration costs’ are all indirect costs incurred by you in support of delivering the services agreed in the contract with DCJ. These costs include all management, administrative, fixed and variable overhead costs.

Indirect contract administration costs are reported as expenses, separately for each contract you hold with DCJ, as part of your contract-level accountability.

The Australian Charities and Not-for-profits Commission (ACNC) describes administration costs:

... as generally understood to be costs that are not directly incurred by charities in delivering charitable services. The relationship between administrative costs and total costs of running the charity is often expressed as a percentage of the total costs of the charity.

Even though DCJ’s definition of indirect contract administration costs align to the ACNC’s description, it’s important for you to understand how we address these costs in contract-level accountability.

What sort of expenses can be included as indirect contract administration costs?

Include all expenses that aren’t directly connected to providing the services to DCJ clients as agreed in the contract.

Typical examples of indirect contract administration costs are:

  • corporate overheads allocation
  • fees paid to another organisation to perform administrative services such as payroll and auspice
  • rent, shared office space costs and rates
  • utility costs for telephone, water, electricity and gas
  • licensing fees
  • insurance
  • corporate services such as accounting, auditing, technology, marketing, legal, security and motor vehicle costs.

We understand that an indirect cost for one organisation may be a direct cost for another. That’s why your organisation’s indirect contract administration costs must be justifiable and reasonable based on providing the services agreed in the contract.

Has DCJ set a threshold for these costs?

No.

These corporate overheads are a legitimate and necessary business expense, and can vary from organisation to organisation, depending on:

  • the size of the organisation
  • the complexity of running a program
  • the impact in the community, where having more impact may relate to higher administration costs and vice versa.

So, there’s no one-size-fits-all standard ratio or percentage that can be used to measure the reasonableness of the costs associated with managing a contract.

However, your organisation must be able to justify the amount reported.

What are the requirements for reporting these costs?

For expenses to be included in the indirect contract administration costs you report, they must:

  • have been incurred and/or paid by your organisation during the applicable annual accountability reporting period
  • be reasonable, based on the DCJ services agreed in the contract
  • be relevant to providing the services agreed in the contract
  • be justifiable, based on your accounts and records
  • not include any direct costs; this means don’t include operating expenses incurred by your organisation that can be directly attributed to delivering the services and achieving the contract outcomes
  • not have been included as part of any other expense reported for the same contract
  • be apportioned correctly when applied to multiple contracts
  • not have been included in the expenses of any other contract (with DCJ or another funding agency) you’ve reported for the same annual accountability reporting period.

Do indirect contract administration costs need to be itemised?

Under the contract with DCJ, your organisation agreed to keep proper accounts and records of your use of DCJ funds, and to keep them separately to your other accounts and records.

While annual accountability requires indirect contract administration costs to be reported as a total only, your accounts and records are expected to support the figure you’ve reported. DCJ may, at its discretion, require you to provide an itemised breakdown.

Refer to the examples of items that typically would be reported, or download the Income & Expenditure Statement template for a more comprehensive list of examples.

Is it acceptable to charge a flat rate or a percentage?

We understand that it may be difficult to track indirect costs in organisations that hold multiple contracts with DCJ and/or other government agencies.

For this reason, DCJ will accept a certain percentage of the contract funding amount as a means of apportioning indirect contract administration costs for different contracts.

However, the percentage used must be justifiable to actual indirect costs incurred while providing the services agreed in each contract. This percentage of the funding must:

  • be reported as a value in the Indirect contract administration costs field of the contract-level accountability form in the Contracting Portal
  • be reflected in the accompanying income and expenditure statement
  • not form part of any other expenditure reported for the same contract or another contract.

We ask that your organisation regularly reviews the percentage used to ensure it reflects actual costs incurred and it doesn’t result in large variances between the actual and percentage allocated costs.

DCJ may, at its discretion, require further information and justification to determine the validity of the percentage used, and how it was derived.

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Last updated: 22 Oct 2020