EMU Research
Charging Indirect Costs
Indirect Costs
The purpose of the Office of Research Development and Administration Indirect Cost guidelines are to ensure that appropriate overhead costs are charged to sponsored activity at Eastern Michigan University. This document provides guidance regarding the expectation to include indirect costs in budgets for sponsored programs, and the rates that should be used.
Definition
Facilities & Administrative Costs (F&A) on a sponsored project are the costs that are difficult to attribute directly to that project. Examples of F&A costs (sometimes called "indirect costs," "administrative cost " or " overhead") are:
- Depreciation of buildings and equipment
- Utilities
- Internet and technology
- Library and computing services
- Custodial services
- Departmental support
- Accounting
- Research administration
F&A Costs are viewed by the federal Office of Management and Budget as real and legitimate costs that may properly and legally be billed to a funding agency. F&A Costs are negotiated with the Federal Government and vary from one institution to another and are based on such factors as the cost of doing business in a particular geographical area, the institution's infrastructure for research, faculty salary rates, and the like. EMU's organized research rate is negotiated with the US Department of Health and Human Services. Most universities, EMU included, use a portion of their indirect cost recovery as venture capital to build research capacity, thus increasing their external-funding volume.
Practice
ORDA is expected to enforce the University's long-standing practice of seeking maximum allowable indirect cost on all grants and contracts. "Maximum allowable indirect cost," however, does not mean that the organized research rate will be applied to all proposals regardless of other factors. Many funding agencies dictate their own maximum allowable indirect-cost rates, some consider it a negotiated item, and some disallow it altogether. ORDA will accept a reduced F&A Rate if this limitation is a published policy of the funding agency. For agencies that consider this item a negotiated item, the ORDA Director is authorized to negotiate a lower rate for approval by the by division. For profit companies must pay to full research rate for sponsored research to ensure taxpayer supported benefit is not provided to business and industry.
How Is Indirect Cost Redistributed?
Redistribution policies vary widely among institutions. At EMU 40% of all indirect cost recovery goes to the General Fund and 10% to the Office of Research Development and administration. The remaining 50% goes to the division in which the grant or contract originated.
The divisional share may be further subdivided according to divisional policy. Within the Division of Academic Affairs for example indirect costs are distributed as follows: Project Director 10%, Provost's Office 10%, and the Dean and the Project Director's Unit 15% each.
