Determining a Billing Rate

Procedure is required action to be followed: Procedure is the established way of doing something; a series of actions conducted in a certain order; and/or steps necessary to meet the terms of a grant agreement.

Guidance is supporting information or recommended action: Guidance consists of recommended best practices; helpful context; and/or tools, resources and examples.

Effective Date: 7/01/2025

I. Procedure

Recipients of BWSR grants must follow these procedures when charging staff time to grants. Grant recipients may include allowances or additions consistent with this procedure in the billing rates they use to charge staff time to BWSR grants. Allowances or additions to billing rates inconsistent with the procedure will be disallowed from BWSR grants.

A billing rate is an hourly rate used to charge staff time to BWSR grants. It consists of:

• the employee’s base hourly rate plus the costs of benefits, leave, and 

• facilities and administration (costs necessary to keep a person employed and an office running).

Billing rates should be evaluated annually but may be recalculated more often to reflect changes in costs or employees. Billing rates must be calculated for each employee. Averaging billing rates are not allowed.

Staff time

Staff time expenses include wages, benefits, and leave, which is referred to as the modified base rate.

• Wage is factored as an hourly base rate.

• Benefits include only those paid by the employer and are specific to each employee.

• Hours documented for sick leave, holidays, and vacation must be based on actual, whether used (and documented in time sheets) or accrued. See the FAQ on accrued leave for more information.

Facilities and administration

Facilities and administration costs must be allowable, reasonable, allocable, necessary and consistently applied regardless of the funding source. Longstanding federal grant guidance classifies overhead costs into two broad categories: facilities and administration. As defined in the Code of Federal Regulations (2 Code of Federal Regulations, §200.414), facilities include operations and maintenance costs such as insurance, rent, and utilities. Administration includes general administrative costs such as accounting/finance, clerical support, human resources, and management. Facilities and administration are shared expenses that support general operations not specific to a grant.

Facilities and administration costs can be captured the following ways:

• Option 1. Add 15 percent for facilities and administration costs to the modified base rate for each employee. The modified base rate includes wages, benefits, and leave. Costs in excess of normal facilities costs specific to achieving grant funded outcomes can be charged directly to grants.
• Option 2. Allocate facilities across the organization by dividing the actual costs by the hours worked by all employees and add up to 10 percent of the total workable hours for the organization in a year as general administrative time to the billing rate calculations.

1. Facilities costs must be based on actual costs, as reported in the previous 12 months financial reports.
2. A proportionate share of direct and necessary administrative costs may be charged to BWSR grants. Hours documented as general administrative time must be based on actual (and documented in time sheets). For time tracking methods, see Time and Effort Documentation Guidance and Examples in this manual.

3. Administrative hours included in the billing rate cannot also be charged directly to grants.

4. The definition of administrative staff must be consistent with the organization of the grantee. For example, in some smaller organizations, technical staff may also perform administrative functions. In organizations such as larger cities or counties, the general administrative hours can only come from administrative staff within the department where work on the grant is being done.

• Option 3.  Apply the organization’s federally negotiated indirect cost rate to the staff costs of the program or project funded by BWSR grants. Federal indirect costs rates may be obtained from the cognizant federal agency responsible for reviewing, negotiating, and approving indirect cost proposals.

It is not required that recipients of BWSR grants charge facilities and administration costs to BWSR grants through a billing rate. For facilities and administration costs, calculated the salary, benefits, and leave per employee and develop an indirect cost allocation consistent with these procedures. 

Direct vs indirect

Costs that are necessary to produce the grant outcomes can be charged to a grant in the following ways: 

• If you can associate a cost with a specific grant, you should directly charge it to that grant. If a cost supports more than one grant, you should include it in your billing rate calculations or allocate it consistently across two or more applicable grants. If costs are needed, reasonable, consistently applied, and rationally allocated, grant recipients may still charge all allowable costs to BWSR grants directly.

• If a cost supports many grants or programs, you should use an allocation method which is a systematic approach to distribute resources/costs. Billing rates can be an efficient method for charging costs to BWSR grants. When staff time is directly charged to a grant, the billing rate allocates indirect costs to grants that should bear them. 

Costs direct charged cannot also be included in any billing rate calculation. Whatever you directly charge to the grant must be itemized and documented. If you are unsure of how to charge a cost to a BWSR grant or whether a cost is allowable at all, consult with your Grants Compliance Specialist.

II. Guidance

Two optional spreadsheet templates are provided in this manual to assist grantees in calculating billing rates using Options 1 and 2. . The templates include:

• Option 1: How to Calculate Billing Rates Using MBR + 15 percent
• Option 2: How to Calculate Billing Rates Including Overhead Costs of Facilities and Administration

Correct formulas are built into the templates. A grantee need only input the figures highlighted, and billing rates that recover all allowable costs will result. BWSR may use this template to verify a grantee’s own calculations. The formulas are also described and illustrated with examples below.

Example 1: Option 1

Option 1 adds 15 percent of an employee’s modified base rate to the modified base rate to factor the costs of facilities and administration. 

If an employee’s modified base rate is $25.00/hour, for example, a grantee is allowed to charge a rate of $28.75/hour ($25.00 + $3.75) to BWSR grants. The additional $3.75 per hour accounts for some of the employee’s share of facilities and administration costs.

• The formula for calculating a modified base rate is: (Wages + Benefits / Workable Hours) + (Cost of Leave / Hours Actually Worked)

• The formula for calculating a billing rate using Option 1 is: Billing Rate (allowing for facilities and administration) = Modified Base Rate + (.15 *Modified Base Rate)

Example 2: Option 2

Option 2: 1-9 employees or Option 2: 1-25 employees factors the costs of facilities and administration in the billing rate. This example illustrates a staff of three employees (Table 1): district manager, conservation technician, and administrative assistant. 

Table 1: Sample Employee Wages for Current Year

Table 2: Sample Benefits for Current Year

Table 3: Sample Expenses for Previous 12 Months Financial Reports

The software licenses and field supplies in this example valued at $2,400.00 (Table 3) are specific to a program project and therefore directly charged to the program or project grant they are applicable to and are not included in the billing rate calculation. The total facilities costs included in the calculation are $20,636.51.

Wage is factored as an hourly base rate. To calculate an hourly base rate (Table 4), divide an employee’s annual wages by the workable hours in a year. For each full-time equivalent employee (FTE), workable hours = 2088.

Benefits (Table 2) are specific to each employee. To factor the cost of benefits (Table 5), divide the employer’s portion of the employee’s benefits by the workable hours in a year.

Note that the Legislative Coordinating Commission calculates FTEs based on a denominator of 2,088 workable hours in a year. See Minnesota Statutes 2015, section 3.303, subdivision 10.

Table 4: Calculation of Base Rates

Table 5: Calculation of the Cost of Benefits

To factor the costs of leave, facilities, and administration, a different denominator of “hours actually worked” is used (Table 6). Hours actually worked = workable hours minus paid sick leave, holidays, and vacation or PTO.

Table 6: Calculation of the Workable Hours and Hours Actually Worked

Leave for each employee. To factor the cost of leave (Table 7), multiply the actual number of paid leave hours by the employee’s base rate plus benefits, then divide the total by the hours actually worked by that employee. 

Table 7: Calculation of the Cost of Leave

Facilities and administration are shared expenses. Each employee bears an equal share of the facilities and administration costs. To factor the cost of facilities (Table 3), divide the total cost of facilities for the grantee by the total hours actually worked by all employees of the grantee (Table 8).

Table 8: Calculation of the Cost of Facilities

To factor the cost of administration, up to 10 percent of the total workable hours for the grantee may be added to the billing rate calculation. In the example of three full-time employees, the total workable hours = 6,264, so the administrative hours allowed = 626. These hours are distributed to the administrative staff of the grantee—the district manager and the administrative assistant (Table 9)—and valued at a rate that includes wages, benefits, leave, and the cost for facilities.

To factor the cost of administration, divide the total cost of allowed administration by the total hours actually worked, minus the hours allowed for administration (Table 10).

Table 9: Documented Administration Hours

Table 10: Calculation of the Cost of Administration

These calculations result in the following billing rates (Table 11):

Table 11: Billing Rate Calculations Summarized

History