Written by Justo Torres.
A cognizant agency plays a key oversight role in the administration of federal funding to organizations, particularly in higher education institutions, non-profits and other entities that receive significant government grants. Its primary responsibility is to act as the main liaison between the federal government and the recipient organization, ensuring compliance with federal regulations related to the use of funds, particularly regarding indirect costs. Here at NC State, our cognizant agency is the U.S. Department of Health and Human Services.
Indirect costs—also known as Facilities and Administrative (F&A) costs—are those that cannot be directly attributed to a specific project or grant, such as utilities, administrative support and building maintenance. The cognizant agency is responsible for reviewing and negotiating the organization’s indirect cost rate agreements. This process ensures that these costs are allocated and reimbursed fairly and consistently across federal awards.
The assignment of a cognizant agency is typically based on which federal agency provides the largest amount of direct funding to an organization. For example, if the Department of Health and Human Services (HHS) provides the most funding, it becomes the cognizant agency for that recipient. The agency then takes the lead on auditing indirect costs and helping the recipient establish acceptable cost allocation methods.
Cognizant agencies also work closely with independent auditors and provide technical assistance to organizations in interpreting and applying federal rules. They help ensure adherence to the Uniform Guidance (2 CFR Part 200), which sets forth principles for determining costs applicable to federal grants, contracts and other agreements.
This oversight role helps prevent misuse of federal funds and promotes accountability and transparency. It also reduces the administrative burden on organizations, since they only have to negotiate indirect cost rates with one federal agency rather than multiple departments.
In summary, the cognizant agency acts as a crucial point of coordination and compliance for federally funded organizations. By guiding indirect cost negotiations, overseeing audits and ensuring uniformity in the application of federal regulations, these agencies help maintain the integrity and effectiveness of the federal funding system.
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