Indirect Cost Overview

Indirect costs are typically allocated to a cost object on some basis. In construction, all costs which are required for completion of the installation, but are not directly attributable to the cost object are indirect, such as overhead. In manufacturing, costs not directly assignable to the end product or process are indirect. These may be costs for management, insurance, taxes, or maintenance, for example. Indirect costs are those for activities or services that benefit more than one project. Their precise benefits to a specific project are often difficult or impossible to trace.

• Predetermined – an indirect cost rate, applicable to a specified current or future period, usually the organization’s fiscal year.
• Identify the organization’s total costs regardless of funding source.
• U of I’s web-based retention and advising tool provides an efficient way to guide and support students on their road to graduation.
• Indirect costs include supplies, utilities, office equipment rental, desktop computers and cell phones.

Information about indirect cost recovery for federal assistance under 2 CFR 200 . If a proposal has a scope of work or circumstances that require direct charging of items of expense that are normally considered part of the F&A Pools, a Cost Accounting Standards Exemption Form is required at the time of OSP (pre-award) review. Adequate documentation of the costs that are being treated differently due to unlike circumstances must accompany this form. The final signature on this form is the University of Alaska Controller who is the arbiter of who will and who will not be granted an exemption. Salaries are wages (including vacations, holidays, sick leave, and other excused absences of employees working specifically on objectives of a grant or contract – i.e, direct labor costs). There are two kinds of costs but sometimes it is hard to determine when elements of expense are able to be directly charged to a project and when the costs are contained in the indirect base for the university.

Modified Total Direct Costs (MTDC)

All activities must be included regardless of the source of funds used to pay for them. Until further notice, when https://www.bookstime.com/ preparing proposal budgets for periods starting July 2023, use the FY22 rate as the rate will remain unchanged.

Failure to mention a particular item of cost is not intended to imply that it is either allowable or unallowable; rather, determination as to allowability in each case should be based on the treatment provided for similar or related items of cost. In case of a discrepancy between the provisions of a specific sponsored agreement and the provisions below, the agreement should govern. indirect costs first need to be added together into a cost pool and then allocated out to cost objects pro rata in a fair and proportionate way, typically by dividing up the total shared pool of expenses based on cost drivers, such as usage, revenue generated or physical dimensions. Indirect costs, or overheads, are calculated by adding up all the costs of running a business that go beyond the production of a product or service, after all direct costs have been computed and attributed. If the cost is used as part of the ICRP, then it should not be charged directly to any grants.

What are indirect costs?

Employees who are working on the project or activity clearly meet the direct cost definition. Indirect costs are, but not necessarily, not directly attributable to a cost object.

Examples of indirect costs are accounting and legal expenses, administrative salaries, office expenses, rent, security expenses, telephone expenses, and utilities. Divide the total allowable indirect costs by the distribution base to arrive at the overall indirect cost rate . To calculate the F&A rates, divide the total costs in each of the two indirect cost categories by the distribution base and express the resulting rate as a percentage of the base. In order to recover indirect costs related to Federal awards, most organizations must negotiate an ICR with the Federal agency that provides the preponderance of funding, or Health and Human Services in the case of colleges and universities. NSF is the cognizant agency and negotiates formal negotiated indirect cost rate agreements for ~ 110 organizations.

What is an indirect cost rate?

The Foundation supports organizations whose work advances the Foundation’s mission and the goals of the organization. The Foundation adopts this Indirect Cost Policy in recognition that nonprofit organizations have indirect costs that are not directly attributable to projects or activities being funded by Foundation grants but are necessary to support grant-funded projects or activities. If indirect costs are included in the budget for a non-construction project, the applicant must include documentation to support the indirect cost rate it is using. In most cases, indirect costs are not allowable for EDA construction awards.

• The amount or proportion of unallowable costs included in each year’s rate will be assumed to be the same as the amount or proportion of unallowable costs included in the base year proposal used to establish the rate.
• Instead, indirect costs are needed to operate the business as a whole.
• Submission deadlines vary according to the type of entity, and in some cases, type of indirect cost rate proposal being submitted.
• Overview on the federal costing principles and concepts that inform how universities seek to recover the full costs of research.
• Similarly, a company may not be able to easily assign a utility bill (e.g., electricity, water, waste collection) to a particular cost object (e.g., department) because the utilities were used by the whole building.