Indirect costs, also called overhead, are those expenditures incurred in the conduct of research that are not directly attributed to a specific research effort. Such costs include:
- infrastructure and space maintenance;
- support services for research including central research and financial services;
- environmental health and safety resources;
- meeting regulatory certification requirements; and
- providing key resources such as library and computer information services.
The maintenance of and improvements to research infrastructure require ongoing reinvestment on a significant scale. For this reason, research project funding should cover the full costs of the research allowable under University policy. A research project budget must include both indirect and direct costs except where expressly prohibited by the sponsor.
How Indirect Costs (Overhead) Are Calculated
The overhead amount is calculated based on the direct cost of research.
- It can be calculated on the total award amount using the percentage amount stated for the sponsored project. For example, for a total award of $50,000 with 20% indirect costs, the calculation is as follows:
- (50,000 x 0.20) / 1.20 = $8,333.33.
- Or it can be calculated by subtracting the direct costs from the total award. The same example above would be calculated as follows:
- 50,000 – (50,000 / 1.20) = $50,000 - $41,666.67 = $8,333.33.
- Alternatively, it can be calculated as a percentage amount of direct costs. For example, for a project with direct costs of $25,000 and 20% indirect costs, the calculation is as follows:
- (25,000 x 0.20) = $5,000.00. In this case, the total award would be $30,000.
Certain sponsors will only allow indirect costs to be assessed on specific expenditures in the project; i.e., salaries, travel, etc.
The minimum indirect cost recovery rate for research grants, contracts and technical service agreements is 20% of direct costs. This rate mirrors the rate provided from time to time by the Tri-Council, under the Research Support Fund, and is therefore subject to change accordingly. Certain sponsors will permit higher or lower rates for indirect costs. The 20% minimum is the University’s standard rate, but we are guided by what the sponsor allows. Refer to the Application for Indirect Cost Recovery Rates Procedure for current rates. Please contact your Faculty-assigned Research Facilitator if you have questions about the specific ICR rate to use.
How Indirect Costs Are Assessed
- For new budget-based projects (RSBUD), indirect costs will be charged as expenses are incurred.
- For cash-based projects (RSCSH), indirect costs will be assessed as revenue is received, i.e., as a lump sum.
Indirect costs charged to projects will be distributed per the Indirect Costs of Research Procedure with 85% going to the Dean of the Faculty hosting the research and 15% to central administration.
Research Project Financials and Inclusion of Indirect Costs
The Researcher Home Page Project list shows funds available based on the direct cost budget tied to the project. The direct cost budget represents the funds that are available to spend. It shows the awarded budget amount minus the indirect cost portion of the budget.
eTRAC reports are customizable to include or exclude indirect costs. Most reports default to not show indirect costs.
Indirect Costs Reports and Queries for Department Administrators
There is a PeopleSoft nVision report available for each unit receiving indirect costs. To find the report for your unit, go to Main Menu>Reporting Tools>PS/nVision>Define Report Request and search for RSGLVICR in the report Description field. This nVision report includes ICR amounts by source department, by source PI, by source sponsor, and faculty total by fiscal period and allows for detailed drilldowns.
The process to calculate and post ICR runs every day. Query FS_GL_GEN_JRNL_TRANS - Journals for All Accounts can be used to find all ICR transactions based on transfer accounts TC0065 = ICR revenue to Faculty and Central or TD0065 = ICR expense to research project. Journals associated with Indirect Costs will begin with ICR if it has been generated through a PeopleSoft process or ICA if it is journal prepared by RSO. This will bring back results that include the ICR amount charged to a specific research project on a specific day.