As of May 15, 2016, the Policy has been updated. Please refer to the revised Policy if you are an applicant or have signed an agreement after May 15, 2016.
Overhead Compensation Policy for CIDA's Contribution Agreements (Revised February 1, 2008)
Effective starting February 1, 2008.
- 1 Policy Objective
- 2 Policy Statements
- 3 Application
- 4 Definitions
- 5 Policy Requirements
- 6 Stakeholder Responsibilities
- 7 References
- 8 Monitoring
- 9 Information Requests
- Appendix I: Definitions
- Appendix II: Eligibility Criteria for Volunteers
- Appendix III: Application of the 12% Fixed Overhead Rate
1. Policy Objective
It is recognized that indirect/overhead costs are a necessary part of an organization's operations, and that the organization will be compensated for some of this overhead as part of the Canadian International Development Agency (CIDA) contribution agreement.
The objective of this policy is to inform Canadian organizations on how CIDA will contribute toward their indirect/overhead costs when they enter into a contribution agreement with CIDA. The policy provides direction to determine which costs are eligible for compensation. It aims to ensure uniformity of application in order to be fair to all organizations.
2. Policy Statements
It is CIDA's policy to provide a contribution toward an organization's indirect/overhead costs only for the period covered by their contribution agreement with CIDA.
This policy is applicable once CIDA has agreed on which costs it is willing to contribute toward under a specific contribution agreement.
3.1 Effective Date
This policy is effective starting February 1, 2008.
This policy applies to:
- all new contribution agreements that commence on or after February 1, 2008; and
- active contribution agreements that commenced on or after April 1, 2007-at the request of the organization. An amendment will be signed and the policy will take effect on the date of the amendment.
This policy will be reviewed five years after the implementation date, and periodically thereafter.
This policy details CIDA's policy regarding the compensation of indirect/overhead costs incurred by Canadian organizations carrying out development assistance projects subject to a contribution agreement with CIDA.
This policy applies to all CIDA contribution agreements with Canadian organizations, except those specific CIDA programs that do not allow for the compensation of indirect/overhead costs (see CIDA programs exempt from the Overhead Compensation Policy for CIDA's Contribution Agreements ).
This policy does not apply to Canadian provincial, territorial, and municipal governments, including their institutions, organizations, and agencies, or to Government of Canada departments and crown corporations.
Definitions to be used for the interpretation of this policy can be found in Appendix I.
5. Policy Requirements
5.1 Overhead Rate
This contribution is based on:
- a fixed overhead rate of 12% ,applicable on CIDA's contribution toward the direct program/project costs eligible for the application of the overhead rate; and
- a fixed overhead rate of 12% ,applicable on a deemed in-kind value of $200 per working day per Canadian volunteer sent overseas (notwithstanding the organization's estimated value) for purposes directly related to the program/project. The organization must keep auditable records to substantiate that Canadian volunteers were sent overseas and to show the duration of time spent working on the program/project.
Examples of application and eligibility criteria for volunteers can be found in Appendix II and Appendix III.
5.2 Indirect/Overhead Costs Covered by the 12% Overhead Rate
The 12% overhead rate is an allowance to cover the organization's indirect/overhead costs of their office(s) in Canada. These types of expenses cannot be claimed as direct program/project costs in the contribution agreement. Examples of such indirect costs are:
- Advertising and promotion (non-program/project specific)
- Bank charges (non-program/project specific)
- Board activities
- Business development activities
- Capital taxes
- Communication - excluding long distance calls that are related to the execution of the program/project
- Computer maintenance expenses
- Financing costs such as interest expenses and costs to obtain irrevocable letters of credit
- General staff training
- Insurance (e.g. office, board of directors, liability)
- Internal or external audits of the organization
- Memberships and subscriptions
- Office supplies and equipment
- Organization restructuring costs
- Professional fees relating to the administration of the organization (e.g. legal, accounting, etc.),
- Proposal preparation activities
- Rent and utilities
- Repairs and maintenance expenses
- Review and negotiation of agreements
- Salaries and fringe benefits relating to the administration of the organization
- Staff recruitment
- Strategic planning activities
- Travel (non-program/project specific)
- Workstations, including computers
- Other indirect/overhead type of expenditures relating to the organization's office(s) in Canada
5.3 Direct Program/Project Costs
The overhead rate is applied against eligible direct program/project costs. The overhead compensation is paid to the organization on the same timing basis as the other costs covered by the contribution agreement.
5.3.1. Eligible Direct Program/Project Costs for the Application of the Overhead Rate
- Program/project salaries actually paid by the organization to their personnel (Canadian, local, or in any other country as accepted by CIDA) and related fringe benefits allowed under the agreement.
- Consultants/subcontractors fees.
- Program/project travel, accommodation, per diem, and incidentals (actuals not to exceed Treasury Board's Travel Directive and Special Travel Authorities ).
- Overseas costs deemed by CIDA to be required for the execution of the program/project (e.g. rent, leasehold improvements, utilities, office expenses, office computer, general maintenance).
- Bank transfer fees related to the execution of the program/project.
- Costs associated with program/project reporting and production of reading material (e.g. reproduction, translation).
- Long distance communications, mail, and courier costs related to the execution of the program/project.
- Technical assistance and meeting costs specifically related to the execution of the program/project, except those relating to flow through (see definition in Appendix I).
- Procurement of goods specifically required for the execution of the program/project (excluding those disallowed under 5.3.2 below) and related shipping costs (e.g. packaging, containers, freight, freight insurance).
- Construction costs (i.e. material, equipment, and construction-related labour) whereby the organization is assuming, under the terms of the contribution agreement, the performance risk of construction, and where the total of the construction costs is normally less than 20% of CIDA's contribution to the project.
- Benefits and allowable expenses for personnel on a long-term field assignment and personnel on a short-term relocation, not exceeding those stipulated in CIDA's Technical Assistance Handbook.
- Costs allowed under the manual entitled Management of Students and Trainees in Canada (excluding those disallowed under 5.3.2 below).
- Any other direct costs that are necessary to implement the program/project that are auditable and not listed under section 5.2 or disallowed under 5.3.2 below. Prior written approval must be obtained from CIDA's project management for the cost to be eligible.
5.3.2. Ineligible Direct Program/Project Costs for the Application of the Overhead Rate
- Flow-through funds (see the definition in Appendix I).
- Purchases for the execution of the program/project:
- Bulk purchases of goods purchased in large quantities with one or more transactions to purchase the same goods, such as food and medical supplies, and transferred directly to the beneficiary for their use with no further work required by the organization other than shipping the goods; and
- Large capital expenditures/leases of machinery and medical equipment directly related to the execution of the program/project whereby each item costs $100,000 or more.
- Construction costs (i.e. material, equipment, and construction-related labour):
- for which the organization has administrative and financial management responsibility, but is not assuming, under the terms of the contribution agreement, the performance risk of construction;
- where the organization is assuming, under the terms of the contribution agreement, the performance risk of construction and the total of construction costs exceeds 20% of CIDA's contribution to the project.
- Any other costs that have been substantiated by the organization and deemed by CIDA in the contribution agreement to be a direct cost ineligible for the application of the overhead rate.
6. Stakeholder Responsibilities
6.1 Financial Policy and Advice Section, Finance Division, HRCSB
- Provide policy interpretation.
- Make recommendations to CIDA officers as to the treatment of costs that are not specifically mentioned in this policy.
- Update the policy and guidelines.
6.2 Project Management
- Ensure that the program/project budget conforms to the Overhead Compensation Policy.
- Ensure that payments are made in accordance with the terms and conditions of a contribution agreement.
- Inform the organization of all decisions taken regarding the Overhead Compensation Policy.
6.3 Contract Officer
- Ensure that the contribution agreement is in accordance with the Overhead Compensation Policy.
The Overhead Compensation Policy includes references to the following documents:
- Treasury Board's Travel Directive;
- Treasury Board's Special Travel Authorities;
- CIDA's manuals for the executing agency entitled:
- M anagement of Students and Trainees in Canada; and
- Technical Assistance Handbook (previously known as Management of Overseas Personnel: Manual for the Executing Agency).
The policy may be assessed and evaluated as part of a formal internal audit carried out by the Internal Audit function of the Agency.
The Financial Compliance Unit, Finance Division, will monitor the implementation of this policy in the context of the regular audits it carries out.
The calculations relating to the overhead rate application should be properly documented by both the organization and CIDA personnel.
9. Information Requests
Any request for clarification or interpretation should be made to CIDA's Project Management.
Appendix I: Definitions
Assuming performance risk: Assuming performance risk means that the organization is responsible for the ultimate results/outcomes and if those results/outcomes are not achieved the organization has the financial obligation to rectify the situation. CIDA will not reimburse the costs of rectifying the situation nor will CIDA reimburse the initial costs if the situation is not rectified. The organization's responsibility regarding performance risk would be clearly stated in the contribution agreement.
Canadian organization: An organiztion is considered Canadian if it is incorporated in Canada.
Canadian volunteer: A Canadian citizen holder, landed immigrant or permanent resident who meets the eligibility criteria for volunteers establish in appendix II.
Direct program/project costs: Direct program/project costs are those costs, which are actually disbursed and are directly related and considered a necessary expenditure in executing the program/project.
Flow-through funds: Flow-through funds are defined by CIDA as monies included in the contribution agreement exclusively for providing an administrative mechanism to transfer funds, and for which the organization under the contribution agreement with CIDA has administrative and financial management responsibility, but is not obliged to assume the performance risk.
Indirect/overhead costs: Indirect costs are those costs that cannot be obviously traced to a specific program/project. This means all indirect costs associated with the organization's Canadian office(s).
Organization: In this context, the term "organizations" is taken to mean incorporated Canadian for-profit and not-for-profit organizations, partnerships, sole-proprietor businesses, universities, colleges and hospitals.
Appendix II: Eligibility Criteria for Volunteers
To be eligible for the overhead compensation, the following criteria must be met:
- Volunteer is a Canadian citizen, landed immigrant, or permanent resident in Canada;
- Volunteer is sent overseas;
- Volunteer does not receive any remuneration (e.g. salary, honorarium) from the organization who has entered into the contribution agreement with CIDA;
- Volunteer services are essential to the program/project's success, and his/her services are eligible under the program/project's terms and conditions, and would otherwise be hired/contracted and paid for to achieve project results;
- Use of volunteers is supported by a commitment from the organization and clearly indicated in the contribution agreement; and
- Volunteer services must be identifiable, verifiable, and auditable during and after the program/project period. These are examples of acceptable auditable records:
- List of volunteers working on the program/project;
- Original airline ticket and travel agent invoice supporting expense claimed and indicating fare taken;
- Boarding pass and/or corroborating information (expense report, airport tax receipts, and hotel bills) indicating that a trip was taken;
- Original receipts and invoices for hotels or other expenditures to prove that the volunteer was working on the project during the time claimed;
- Signed and approved timesheets indicating program/project, location, and time claimed per project per day.
Appendix III: Application of the 12% Fixed Overhead Rate
|Direct Program/Project Costs Eligible for Application of the Overhead Rate||CIDA's Contribution||Organization's Contribution||Program/Project Total|
|Personnel in Canada and on a short-term assignment in the field (4 consecutive months or less)||$610,000||$610,000|
|Canadian personnel on a long-term assignment in the field (12 consecutive months or more)||$250,000||$250,000|
|Locally engaged personnel||$600,000||$600,000|
|Canadian volunteers sent overseas (25 volunteers x 100 working days)||$875,000||$875,000|
|Travel, accommodation, per diem, and incidentals-according to Treasury Board's Travel Directive and Special Travel Authorities||$420,000||$420,000|
|Office rent, expenses, and security in the field||$313,300||$313,300|
|Communication costs (long distance calls related to the execution of the program/project)||$110,000||$110,000|
|Education and training||$641,450||$267,907||$909,357|
|Subtotal - Direct Program/Project Costs Eligible for the Application of the Overhead Rate||$3,069,750||$1,142,907||$4,212,657|
|Overhead Compensation on Eligible Direct Program/Project Costs ($3,069,750 @ 12%)||$368,370||$368,370|
|Overhead Compensation on In-Kind Value of Canadian Volunteers |
((25 vol. x 100 working days x $200) @ 12%)
|Direct Program/Project Costs Ineligible for the Application of the Overhead Rate |
CIDA Programs Exempt from the "Overhead Compensation Policy for CIDA's Contribution Agreements with Canadian Organizations"
Canadian Partnership Branch
- International Youth Internship Program
- Conference and Events Secretariat
- Date Modified: