Frequently Asked Questions (FAQ) on Overhead Compensation Policy for the International Development Assistance Program

1. When does the amended Overhead Compensation Policy come into effect?

The amended policy applies to new contribution agreements entered into with Canadian organizations under the International Development Assistance Program that commence on or after May 15, 2016.

2. Is the amended Overhead Compensation Policy retroactive?

No. The amended Overhead Compensation Policy is not retroactive.

3. What are the major amendments to the Overhead Compensation Policy?

• a. Department name and applicability

  The amended policy reflects the department’s new name and specifies that the Policy is only applicable to funding provided under the department’s International Development Assistance Program.

• b. Funding limit

  The amended policy applies only to contribution agreements equal to or below $20 million. The overhead compensation to be applied to contribution agreements valued at over $20 million will be determined on a case-by-case basis.

• c. Construction costs redefined

  The amended policy redefines construction costs according to the definition used by the United Nations and in trade agreements.

• d. Eligibility of construction costs for the application of the overhead rate

  When the total construction costs exceed 20 percent of the contribution by Global Affairs Canada, the application of the overhead rate to these costs will be negotiated. In other words, the overhead rate applied for all construction costs may be less than the fixed 12 percent rate.

• e. Definition of bulk purchases and eligibility for overhead rate

  The overhead rate will be negotiated on a case-by-case basis for bulk purchases of goods (i.e. items purchased in large quantities) such as material, food and medical supplies. In other words, the overhead compensation rate applied to bulk purchases may be less than the fixed 12 percent rate.

4. Who decides whether or not to charge the full overhead rate to the program/project?

The Department is responsible for determining the amount of eligible compensation on overhead for all projects. However, the organization may opt, for example, to receive a lower compensation to reflect its actual overhead rate.