Collection of Indirect Costs

Layout for printing
Policy Number:
UW-4011
Old Policy Number:
RSP Notice 98-4
Responsible Office:
Research and Sponsored Programs

University Policy

Rationale/​Purpose:

The following paragraphs will briefly explain what indirect costs are, who audits and approves the rates, and the policy and rate to apply to various types of awards or awards from specific sponsors.

Definitions:
Indirect costs
Real costs that provide reimbursement for actual institutional expenses that support extramural activities but cannot be directly charged to a grant or contract. The costs result from shared services such as libraries, physical plant operation and maintenance, utility costs, general, departmental, and sponsored projects administrative expenses, and depreciation or use allowance for buildings and equipment.

Indirect cost rates for all federal grants and contracts are computed on the basis of actual costs incurred and regulations from the U.S. Office of Management and Budget that define the cost categories that are eligible for reimbursement. Indirect cost reimbursement rates are periodically negotiated with our cognizant federal audit agency, the Department of Health and Human Services (DHHS). A signed agreement, that establishes the allowable rates of reimbursement, is entered into between the university and the government. These federally audited and approved rates are also applied to some categories of nonfederal awards as explained in each section.

Scope:

All faculty and staff who engage in or propose to engage in sponsored projects; all extramural support received by UW–Madison, including all federal and nonfederal grants and contracts.

Policy:

  1. Grants and Contracts - Federal

    1. Funds Received Directly from Federal Agencies

      All grant and contract applications to and awards from Federal agencies must include indirect costs at the agreed upon rate as set forth in the university/DHHS Negotiation Agreement, except as provided otherwise by Federal regulations. The faculty and staff are notified of the agreed upon rates by a Research and Sponsored Programs Notice.

    2. Federal Funds Not Received Directly from Federal Agency

      Indirect costs on pass-through funds, commonly referred to as non-direct Federal grants and contracts (except those funds passed through other governmental units - see the Grants and Contracts - Other Governmental Units section of this policy) must be included at the appropriate Federal rate currently in effect.

  2. Grants and Contracts - Other Governmental Units (e.g., Foreign or Domestic: Countries, States, Counties, Local Municipalities)

    1. Wisconsin State Agencies, Counties, or Local Municipalities

      1. Indirect costs on all new, renewal, and continuing applications to Wisconsin governmental units shall be requested at:
        1. 15% of total direct costs; or
        2. 8% of total direct costs for WI Dept. of Public Instruction; WI Technical College System Board; and all divisions (except Health and Community Services) of WI Dept. of Health and Family Services.
      2. The application budget should include indirect costs, along with a footnote, which states, "If funded from state GPR funds or nonfederal funds that do not provide indirect costs, indirect costs should be excluded from the award."
      3. At the time an award is made, if the Wisconsin governmental unit provides verification that the project will be funded from Nonfederal funds that do not provide indirect costs, the award will be accepted without indirect costs.

    2. Other Foreign or Domestic Governmental Units (Countries, States, Counties, Local Municipalities)

      1. All grant and contract applications to other governmental units must include indirect costs at the agreed upon federal rate as set forth in the university/DHHS negotiation agreement, except as provided otherwise by Federal regulations.
      2. At the time of award, if the other governmental unit has a policy that it will not pay indirect costs or will provide indirect costs at a rate less than the Federal rate, the university will review the policy only upon receipt of sponsor documentation that:
        1. The policy and rate are published;
        2. It is an agency-wide policy; and
        3. The policy is consistently applied by that governmental unit to all of its outside grants and contracts with educational institutions.

      Requests for rate exceptions with the aforementioned justification must be included with the proposal submission.

      All materials must be submitted via the appropriate Dean/Director (for their review and approval), and then to the Director of Research and Sponsored Programs (or designee) for final approval.

    3. Joint Proposals

      Proposals submitted jointly by the university and any of the governmental units in the Grants and Contracts - Other Governmental Units section of this policy to the federal government must include indirect costs on the university portion of the budget at the federal rate currently in effect.

  3. Grants and Contracts - For-Profit Entities

    Restricted Grants and Contracts

    All grant and contract applications to and awards from nonfederal for-profit entities must include indirect costs at the agreed upon federal rate as set forth in the university/DHHS negotiation agreement, except as provided otherwise by federal regulations. Awards that do not include the full indirect cost rate will not be accepted.

    The only exceptions to the collection of full indirect costs are as follows:

    1. The clinical trial rate will continue at a rate of 30 percent of total direct costs.
    2. When a for-profit entity provides a cost share/match for a federal, state, or non-profit funded grant, the indirect costs on the matching funds will be calculated using the same indirect cost rate approved for the grant, unless a higher rate is approved by the sponsor.

    No other exceptions will be considered. All campus units must include full indirect costs at the federal rates as set forth in the university/DHHS rate agreement when preparing budgets for proposals to for-profit entities. Awards from for-profit entities without full indirect cost coverage in compliance with this policy will not be accepted.

  4. Grants and Contracts from Non-Profit Entities

    All grant and contract applications to nonfederal non-profit entities must include indirect costs at the agreed upon federal rate as set forth in the university/DHHS negotiation agreement, except as provided otherwise by federal regulations. If the sponsoring non-profit agency has a university-approved policy that differs from the federal rate (as delineated below), the application may include indirect costs at the university-approved rate.

    If the sponsoring non-profit agency has a policy that it will not pay indirect costs, or has an indirect cost rate that is less than the federal rate, the university will review the policy only upon receipt of sponsor documentation that:

    1. The policy and rate are published;
    2. It is an agency-wide policy; and
    3. The policy is consistently applied by that organization to all of its outside grants and contracts with educational institutions.

    A copy of the agency’s non-profit status as certified by the Internal Revenue Service may also be required.

    Requests for rate exceptions with documented justification must be included with the proposal submission. All material must be submitted via the appropriate Dean/Director (for their review and approval), and then to the Director of Research and Sponsored Programs (or designee) for final approval.

  5. Gifts

    Extramural funds received by the university that meet all of the following criteria will qualify as "gifts" and are not subject to indirect costs:

    1. Provide general or unrestricted support for broadly defined activities in one or more program areas, such as research, public service, instruction, fellowships, traineeships, etc.;
    2. No detailed fiscal or technical reports are required--either periodic or final. The principal investigator may provide the donor with a brief statement that the expenditures were in accord with the intent of the gift or a brief summary of the results of the supported activities;
    3. No patents, copyrights, or other intellectual property rights that result from the gift are claimed by the donor;
    4. No provisions (e.g., delays, advance notice) are imposed by the donor concerning publication or dissemination of data and information derived from the activity;
    5. There is no specific time limit on the expenditure of funds; and
    6. The donor’s gift is irrevocable.

    Extramurally funded activities that do not meet all of these criteria for designation as a gift will be treated as a Nonfederal grant or contract, subject to assessment of indirect costs as provided in this policy.

Related UW–Madison Documents, Web Pages, or Other Resources:

Research and Sponsored Programs - F&A and Fringe Benefit Rates

External References:

Policy Administration

Approval Authority:
Associate Vice Chancellor for Research Administration, Director Research and Sponsored Programs
Policy Manager:
Associate Director, Research Financial Services
Contact:
Policy & Planning Analyst -- Jennifer Rodis, RODIS@RSP.WISC.EDU, (608) 890-2538
Associate Vice Chancellor for Research Administration -- Mark Sweet, MASWEET@RSP.WISC.EDU, (608) 265-9252
Associate Director, Research Financial Services -- Angie Johnson, angie.johnson@rsp.wisc.edu, (608) 890-3147
Effective Date:
06-19-1998
Date Issued:
06-19-1998
Revised Dates:

08-05-2021, 02-22-2023, 10-14-2024, 11-21-2024

Retrieved:
01-12-2025 19:41:40