State Grants, Indirect Costs Limits (5536XD) - Administrative Services, Department of

This bill (5536XD) sets a 5% cap on indirect costs charged to state-funded grants, effective July 1, 2026. It directly affects grantees - including nonprofits, local governments, schools, and other organizations receiving state grants - by requiring that all indirect costs (like administrative overhead) combined cannot exceed 5% of the total grant amount. Key provisions mandate separate budgeting of direct and indirect costs, prohibit reclassifying indirect costs as direct costs to bypass the cap, and require grantees to maintain documentation for 10 years. Departments must review budgets for compliance and recover disallowed costs exceeding the cap. The cap does not apply to federal funds with separate indirect cost rules.