25 U.S.C. § 450j-1 : US Code - Section 450J-1: Contract funding and indirect costs

    (a) Amount of funds provided
      (1) The amount of funds provided under the terms of self-
    determination contracts entered into pursuant to this subchapter
    shall not be less than the appropriate Secretary would have
    otherwise provided for the operation of the programs or portions
    thereof for the period covered by the contract, without regard to
    any organizational level within the Department of the Interior or
    the Department of Health and Human Services, as appropriate, at
    which the program, function, service, or activity or portion
    thereof, including supportive administrative functions that are
    otherwise contractable, is operated.
      (2) There shall be added to the amount required by paragraph (1)
    contract support costs which shall consist of an amount for the
    reasonable costs for activities which must be carried on by a
    tribal organization as a contractor to ensure compliance with the
    terms of the contract and prudent management, but which - 
        (A) normally are not carried on by the respective Secretary in
      his direct operation of the program; or
        (B) are provided by the Secretary in support of the contracted
      program from resources other than those under contract.

      (3)(A) The contract support costs that are eligible costs for the
    purposes of receiving funding under this subchapter shall include
    the costs of reimbursing each tribal contractor for reasonable and
    allowable costs of - 
        (i) direct program expenses for the operation of the Federal
      program that is the subject of the contract, and
        (ii) any additional administrative or other expense related to
      the overhead incurred by the tribal contractor in connection with
      the operation of the Federal program, function, service, or
      activity pursuant to the contract,

    except that such funding shall not duplicate any funding provided
    under subsection (a)(1) of this section.
      (B) On an annual basis, during such period as a tribe or tribal
    organization operates a Federal program, function, service, or
    activity pursuant to a contract entered into under this subchapter,
    the tribe or tribal organization shall have the option to negotiate
    with the Secretary the amount of funds that the tribe or tribal
    organization is entitled to receive under such contract pursuant to
    this paragraph.
      (4) For each fiscal year during which a self-determination
    contract is in effect, any savings attributable to the operation of
    a Federal program, function, service, or activity under a self-
    determination contract by a tribe or tribal organization
    (including a cost reimbursement construction contract) shall - 
        (A) be used to provide additional services or benefits under
      the contract; or
        (B) be expended by the tribe or tribal organization in the
      succeeding fiscal year, as provided in section 13a of this title.

      (5) Subject to paragraph (6), during the initial year that a self-
    determination contract is in effect, the amount required to be
    paid under paragraph (2) shall include startup costs consisting of
    the reasonable costs that have been incurred or will be incurred on
    a one-time basis pursuant to the contract necessary - 
        (A) to plan, prepare for, and assume operation of the program,
      function, service, or activity that is the subject of the
      contract; and
        (B) to ensure compliance with the terms of the contract and
      prudent management.

      (6) Costs incurred before the initial year that a self-
    determination contract is in effect may not be included in the
    amount required to be paid under paragraph (2) if the Secretary
    does not receive a written notification of the nature and extent of
    the costs prior to the date on which such costs are incurred.
    (b) Reductions and increases in amount of funds provided
      The amount of funds required by subsection (a) of this section - 
        (1) shall not be reduced to make funding available for contract
      monitoring or administration by the Secretary;
        (2) shall not be reduced by the Secretary in subsequent years
      except pursuant to - 
          (A) a reduction in appropriations from the previous fiscal
        year for the program or function to be contracted;
          (B) a directive in the statement of the managers accompanying
        a conference report on an appropriation bill or continuing
          (C) a tribal authorization;
          (D) a change in the amount of pass-through funds needed under
        a contract; or
          (E) completion of a contracted project, activity, or program;

        (3) shall not be reduced by the Secretary to pay for Federal
      functions, including, but not limited to, Federal pay costs,
      Federal employee retirement benefits, automated data processing,
      contract technical assistance or contract monitoring;
        (4) shall not be reduced by the Secretary to pay for the costs
      of Federal personnel displaced by a self-determination contract;
        (5) may, at the request of the tribal organization, be
      increased by the Secretary if necessary to carry out this
      subchapter or as provided in section 450j(c) of this title.

    Notwithstanding any other provision in this subchapter, the
    provision of funds under this subchapter is subject to the
    availability of appropriations and the Secretary is not required to
    reduce funding for programs, projects, or activities serving a
    tribe to make funds available to another tribe or tribal
    organization under this subchapter.
    (c) Annual reports
      Not later than May 15 of each year, the Secretary shall prepare
    and submit to Congress an annual report on the implementation of
    this subchapter. Such report shall include - 
        (1) an accounting of the total amounts of funds provided for
      each program and the budget activity for direct program costs and
      contract support costs of tribal organizations under self-
        (2) an accounting of any deficiency in funds needed to provide
      required contract support costs to all contractors for the fiscal
      year for which the report is being submitted;
        (3) the indirect cost rate and type of rate for each tribal
      organization that has been negotiated with the appropriate
        (4) the direct cost base and type of base from which the
      indirect cost rate is determined for each tribal organization;
        (5) the indirect cost pool amounts and the types of costs
      included in the indirect cost pool; and
        (6) an accounting of any deficiency in funds needed to maintain
      the preexisting level of services to any Indian tribes affected
      by contracting activities under this subchapter, and a statement
      of the amount of funds needed for transitional purposes to enable
      contractors to convert from a Federal fiscal year accounting
      cycle, as authorized by section 450j(d) of this title.
    (d) Treatment of shortfalls in indirect cost recoveries
      (1) Where a tribal organization's allowable indirect cost
    recoveries are below the level of indirect costs that the tribal
    organizations should have received for any given year pursuant to
    its approved indirect cost rate, and such shortfall is the result
    of lack of full indirect cost funding by any Federal, State, or
    other agency, such shortfall in recoveries shall not form the basis
    for any theoretical over-recovery or other adverse adjustment to
    any future years' indirect cost rate or amount for such tribal
    organization, nor shall any agency seek to collect such shortfall
    from the tribal organization.
      (2) Nothing in this subsection shall be construed to authorize
    the Secretary to fund less than the full amount of need for
    indirect costs associated with a self-determination contract.
    (e) Liability for indebtedness incurred before fiscal year 1992
      Indian tribes and tribal organizations shall not be held liable
    for amounts of indebtedness attributable to theoretical or actual
    under-recoveries or theoretical over-recoveries of indirect costs,
    as defined in Office of Management and Budget Circular A-87,
    incurred for fiscal years prior to fiscal year 1992.
    (f) Limitation on remedies relating to cost disallowances
      Any right of action or other remedy (other than those relating to
    a criminal offense) relating to any disallowance of costs shall be
    barred unless the Secretary has given notice of any such
    disallowance within three hundred and sixty-five days of receiving
    any required annual single agency audit report or, for any period
    covered by law or regulation in force prior to October 19, 1984,
    any other required final audit report. Such notice shall set forth
    the right of appeal and hearing to the board of contract appeals
    pursuant to section 450m-1 of this title. For the purpose of
    determining the 365-day period specified in this paragraph, an
    audit report shall be deemed to have been received on the date of
    actual receipt by the Secretary, if, within 60 days after receiving
    the report, the Secretary does not give notice of a determination
    by the Secretary to reject the single-agency report as insufficient
    due to noncompliance with chapter 75 of title 31 or noncompliance
    with any other applicable law. Nothing in this subsection shall be
    deemed to enlarge the rights of the Secretary with respect to
    section 476 of this title.
    (g) Addition to contract of full amount contractor entitled;
      Upon the approval of a self-determination contract, the Secretary
    shall add to the contract the full amount of funds to which the
    contractor is entitled under subsection (a) of this section,
    subject to adjustments for each subsequent year that such tribe or
    tribal organization administers a Federal program, function,
    service, or activity under such contract.
    (h) Indirect costs for contracts for construction programs
      In calculating the indirect costs associated with a self-
    determination contract for a construction program, the Secretary
    shall take into consideration only those costs associated with the
    administration of the contract and shall not take into
    consideration those moneys actually passed on by the tribal
    organization to construction contractors and subcontractors.
    (i) Indian Health Service and Bureau of Indian Affairs budget
      On an annual basis, the Secretary shall consult with, and solicit
    the participation of, Indian tribes and tribal organizations in the
    development of the budget for the Indian Health Service and the
    Bureau of Indian Affairs (including participation of Indian tribes
    and tribal organizations in formulating annual budget requests that
    the Secretary submits to the President for submission to Congress
    pursuant to section 1105 of title 31).
    (j) Use of funds for matching or cost participation requirements
      Notwithstanding any other provision of law, a tribal organization
    may use funds provided under a self-determination contract to meet
    matching or cost participation requirements under other Federal and
    non-Federal programs.
    (k) Allowable uses of funds without approval of Secretary
      Without intending any limitation, a tribal organization may,
    without the approval of the Secretary, expend funds provided under
    a self-determination contract for the following purposes, to the
    extent that the expenditure of the funds is supportive of a
    contracted program:
        (1) Depreciation and use allowances not otherwise specifically
      prohibited by law, including the depreciation of facilities owned
      by the tribe or tribal organization.
        (2) Publication and printing costs.
        (3) Building, realty, and facilities costs, including rental
      costs or mortgage expenses.
        (4) Automated data processing and similar equipment or
        (5) Costs for capital assets and repairs.
        (6) Management studies.
        (7) Professional services, other than services provided in
      connection with judicial proceedings by or against the United
        (8) Insurance and indemnification, including insurance covering
      the risk of loss of or damage to property used in connection with
      the contract without regard to the ownership of such property.
        (9) Costs incurred to raise funds or contributions from non-
      Federal sources for the purpose of furthering the goals and
      objectives of the self-determination contract.
        (10) Interest expenses paid on capital expenditures such as
      buildings, building renovation, or acquisition or fabrication of
      capital equipment, and interest expenses on loans necessitated
      due to delays by the Secretary in providing funds under a
        (11) Expenses of a governing body of a tribal organization that
      are attributable to the management or operation of programs under
      this subchapter.
        (12) Costs associated with the management of pension funds,
      self-insurance funds, and other funds of the tribal organization
      that provide for participation by the Federal Government.
    (l) Suspension, withholding, or delay in payment of funds
      (1) The Secretary may only suspend, withhold, or delay the
    payment of funds for a period of 30 days beginning on the date the
    Secretary makes a determination under this paragraph to a tribal
    organization under a self-determination contract, if the Secretary
    determines that the tribal organization has failed to substantially
    carry out the contract without good cause. In any such case, the
    Secretary shall provide the tribal organization with reasonable
    advance written notice, technical assistance (subject to available
    resources) to assist the tribal organization, a hearing on the
    record not later than 10 days after the date of such determination
    or such later date as the tribal organization shall approve, and
    promptly release any funds withheld upon subsequent compliance.
      (2) With respect to any hearing or appeal conducted pursuant to
    this subsection, the Secretary shall have the burden of proof to
    establish by clearly demonstrating the validity of the grounds for
    suspending, withholding, or delaying payment of funds.
    (m) Use of program income earned
      The program income earned by a tribal organization in the course
    of carrying out a self-determination contract - 
        (1) shall be used by the tribal organization to further the
      general purposes of the contract; and
        (2) shall not be a basis for reducing the amount of funds
      otherwise obligated to the contract.
    (n) Reduction of administrative or other responsibilities of
      Secretary; use of savings
      To the extent that programs, functions, services, or activities
    carried out by tribal organizations pursuant to contracts entered
    into under this subchapter reduce the administrative or other
    responsibilities of the Secretary with respect to the operation of
    Indian programs and result in savings that have not otherwise been
    included in the amount of contract funds determined under
    subsection (a) of this section, the Secretary shall make such
    savings available for the provision of additional services to
    program beneficiaries, either directly or through contractors, in a
    manner equitable to both direct and contracted programs.
    (o) Rebudgeting by tribal organization
      Notwithstanding any other provision of law (including any
    regulation), a tribal organization that carries out a self-
    determination contract may, with respect to allocations within the
    approved budget of the contract, rebudget to meet contract
    requirements, if such rebudgeting would not have an adverse effect
    on the performance of the contract.