Project Management

Indirect Cost Recovery

Indirect Costs

Many research grants, particularly from federal agencies, recognize the need to pay for both the direct and the indirect costs of research. The principal costs of most university research projects are for salaries and benefits for research assistants, graduate students, and other investigators. Other costs often include items such as laboratory supplies, computer time, and travel directly associated with a research project.

In addition to the grant itself, which is designed to pay for the direct costs, grantors provide funds known as "indirect cost reimbursements" for the cost of providing the underlying support facilities and services that make research possible. These include the costs of accounting and auditing for a grant, providing clerical and administrative support, providing laboratory and office space, centralized computing facilities and other capital equipment, utilities, and other campus infrastructure. Indirect costs, often referred to as "overhead," are generally associated with centralized functions that serve multiple research projects. The indirect cost reimbursements are calculated as a percentage of the dollar value of the research grant itself. Each university in the country negotiates with a federal agency to set a reimbursement percentage that applies to all federal grants at that institution.

As of July 1, 2004 , SVSU will distribute indirect costs in the following manner:

• The general funds will retain 50% of the indirect costs,
• The originating unit will retain 25% of the indirect costs, and
• Sponsored and Academic Programs Support will retain 25% of the indirect costs.

The general fund would apply the 50% indirect costs to the costs such as accounting and auditing for a grant, providing clerical and administrative support, providing laboratory and office space, centralized computing facilities and other capital equipment, utilities, and other campus infrastructure.

The originating units would use the 25% indirect costs as seed money for purposes such as conducting early feasibility studies; preparing proposals for competitive grants and awards; providing carry-over funding to research teams so there is greater continuity from one external grant to another; supporting the work of young researchers pending their ability to attract external funding; paying for capital equipment and space to allow for expansion of an institution's research capabilities; supplementing research budgets with additional funds for the direct costs of conducting research; and providing matching funds required by some federal agencies.

The Office of Sponsored Programs would use the 25% indirect costs for such expenses as providing support for the preparation of proposals for competitive grants and awards; arranging for program officer conferences, securing copies of funded proposals at the principal investigator's request; and holding workshops to develop the abilities of faculty and staff to prepare proposals.

Indirect costs are defined by OMB Circular A–21 which provides principles for determining costs applicable to grants, contracts, and other agreements with educational institutions. A review of the current language is appropriate as there have been significant changes to this Circular. For example, the indirect cost rate has been divided into separate facilities and administrative rate components, with the administrative rate capped at 26%.

See https://www2.ed.gov/about/offices/list/ocfo/intro.html for current principles.