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.

To ensure compliance, the bill requires departments or establishments to incorporate these provisions into grant solicitations and agreements, review proposed budgets for adherence to the cap, and implement controls to prevent excess payments. The Department of Management is tasked with adopting rules for implementation and providing guidance to promote uniform application. Furthermore, the bill allows for the recovery of disallowed indirect costs through various means and permits departments to set stricter limits on indirect costs if stated in the grant agreement. Federal requirements regarding indirect costs will take precedence when federal moneys are involved.