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Purpose

This policy outlines the University’s approach to recovering indirect costs, also known as Facilities and Administrative (F&A) costs, from sponsored projects and defines the circumstances under which exceptions or waivers may be granted.

Indirect costs are real and necessary expenses incurred by the University to support research, instruction, and other sponsored activities. These costs include, but are not limited to: Utilities, Facility maintenance and Research administration services Because these expenses are incurred for common or shared objectives, they cannot always be directly attributed to a specific project.

The University negotiates its indirect cost rate every four years with the U.S. Department of Health and Human Services (DHHS) Cost Allocation Services.

• Indirect costs are calculated by applying the negotiated indirect cost rate to the Modified Total Direct Costs (MTDC) of each sponsored project.
• In accordance with federal regulations, these negotiated rates are legally binding.

Recovering indirect costs is essential to maintaining the University’s research infrastructure. Funds generated through indirect cost recovery are reinvested in areas such as: Research core facilities, Renovation and maintenance of research space, Faculty start-up packages, and Research administrative staff support

All sponsored projects must charge the full, applicable DHHS-negotiated indirect cost rate, regardless of the sponsor type.

This requirement applies to proposals submitted to:

• Federal and state government agencies
• Private companies and industry groups
• Foundations and non-profit organizations
• Any other external sponsor

Exceptions

1.  Non-Profit and Governmental Sponsors
The University may grant an exception when a non-profit sponsor or governmental agency has an explicit, published policy or statute that limits indirect cost recovery.

• A copy of the sponsor’s published policy or statute must be included in the proposal materials submitted to the Office of Sponsored Projects (OSP).
• The reduced indirect cost rate will be applied to total direct costs, unless the sponsor specifies otherwise.

Important Note:
Any limitation on indirect cost recovery must be applied consistently by the sponsor to all recipients. Behind-the-scenes negotiations by university employees with sponsoring agencies regarding indirect costs are strictly prohibited and not binding on the University.

2.  For-Profit Sponsors (including clinical trial projects)
For-profit sponsors are always charged the full, applicable indirect rate for the project activity. Subsidizing a for-profit project with university resources constitutes an improper use of public funds for private benefit and is strictly prohibited.

1. Waivers are granted only under exceptional circumstances, where the programmatic benefit to the University is compelling and outweighs the institutional benefit of full cost recovery.
2. Waivers will not be approved for the following reasons:
   • To increase the perceived competitiveness of a proposal.
   • Because the sponsor has capped the total award amount.

• All waiver requests must be approved by the Director of the Office of Sponsored Projects (OSP) before the proposal is submitted.
• Waiver requests must comply with the University’s five-day proposal submission policy.
• Waivers will not be considered after an award has been accepted by the University.