This bill establishes a uniform limit on indirect costs charged to state-funded grants, setting the maximum allowable indirect costs at five percent of the total grant amount for grants awarded or amended on or after July 1, 2026. It prohibits departments or establishments from approving budgets or reimbursement requests that exceed this limit unless specifically authorized by law. Additionally, grantees are barred from reclassifying indirect costs as direct costs or charging indirect costs on top of direct costs that already include an allocable share of indirect costs. The bill also mandates that grant budgets separately identify indirect and direct costs, and requires grantees to maintain detailed records of indirect costs for at least ten years.

Furthermore, the bill outlines the responsibilities of departments or establishments in ensuring compliance with these provisions, including incorporating the requirements into grant solicitations and agreements, reviewing proposed budgets, and implementing controls to prevent excess payments. The Department of Management is tasked with adopting rules to administer the bill, while its Office of Grants Enterprise Management will provide guidance for uniform application. The bill also allows for the recovery of disallowed indirect costs and permits departments to impose stricter limits on indirect costs if stated in the grant agreement. Federal requirements regarding indirect costs will take precedence when federal moneys are involved.