Indirect Costs
Indirect costs, also known as Facilities & Administration (F&A), IDC, or overhead, are expenses for general items and services provided by the University that support sponsored projects but cannot be directly tied to a specific activity.
These costs include but are not limited to:
- Library operations
- Utilities
- Building and equipment depreciation
- Operations and maintenance
- Grant and contract administration
- General administrative support for research
Indirect costs are assessed to recover and reimburse the University for the indirect expenses it incurs when hosting a sponsored project.
Facilities and Administration Rates
UM’s indirect cost rate is negotiated periodically with the U.S. Department of Health and Human Services. Current rates for direct and flow-through federal funding can be found here: Negotiated Indirect Cost Rate Agreement (NICRA). The full indirect cost rate will be applied to all proposals unless limited by the sponsor. Proposals submitted to state agencies must follow the Board of Regents Policy 404 and seek to apply the maximum F&A rate allowed.
When a project uses the University’s federally negotiated indirect cost rates, IDCs are calculated based on Modified Total Direct Costs (MTDC). As defined in our NICRA, “Modified Total Direct Costs” means all direct salaries, wages, applicable fringe benefits, materials and supplies, services, travel, and up to $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. If a Sponsor directs the application of a rate other than UM’s negotiated rate, F&A will be based on “Total Direct Costs” (TDC) for non-federal and MTDC for federal, unless otherwise specified by the sponsor or where other extenuating circumstances exist. Any F&A rate that does not utilize UM’s negotiated rate will require sponsor documentation at the time of proposal preparation.
MTDC - To be used on all federal awards, regardless of the rate required to be used by the sponsor. For non-federal awards that require use of our federally negotiated rates.
TDC - Can only be used when working with non-federal sponsors that do not allow us to use our federally negotiated rates. F&A waivers used on non-federal funding will also use TDC.
If a sponsor requires the use of an indirect cost rate established by a master agreement, the agreement must be attached to the Cayuse record. Ensure that the master agreement applies to the project activities that are being performed.
F&A Rates by Project Type
The F&A rate applied to a project is determined by the project’s activity type and location(s). The major functions of an institution, as defined in Federal Uniform Guidance, include Organized Research, Other Sponsored Activities, Instruction, and Other Institutional Activities. Activity types are defined as follows:
Organized Research
Research and Development
Organized research means all research and development activities of an institution that are separately budgeted and accounted for, including:
Sponsored research refers to research and development activities that are sponsored by federal and nonfederal agencies and organizations. This includes training of individuals in research techniques (research training).
The following are examples of organized research:
- Awards for faculty to support their research activities
- Externally sponsored Career Awards (e.g. from the National Science Foundation, National Institutes of Health, and the Department of Defense) that support a faculty member’s research efforts
- External funding to maintain facilities or equipment, or fund the operation of a center or facility
- External support for the writing and publishing results
- Awards for the support of the research activities of UM students or postdoctoral scholars, e.g. research training
- Sponsored service activities
An organized research rate may be appropriate if you can answer yes to any of the following:
- Is there a systematic investigation, or are there activities including testing and evaluation?
- Will there be a scholarly inquiry, analysis, critical study, testing, hypothesis, or data collection?
- Will the findings be used to contribute to generalizable knowledge (i.e. meant to have an impact on others within the discipline) inside or outside the institution?
- Will the results or outcomes be published, archived, presented, or viewed in some way as relevant beyond the specific participant population?
- Are UM personnel using university facilities, equipment, or other aspects of the university research enterprise to provide a service to an external entity?
Instruction
Instruction means the teaching and training activities of an institution, except for research training. Instruction activities include those offered for credits toward a degree or certificate, or on a non-credit basis, whether through regular academic departments or separate divisions.
- Sponsored instruction and training refers to specific instructional or training activity established by grant, contract, or cooperative agreement. For purposes of the cost principles, this activity may be considered a major function, even though an institution’s accounting treatment may include it in the instruction function.
- Departmental research means research, development, and scholarly activities that are not organized research, and, consequently, are not separately budgeted and accounted for (2 CFR 200 Appendix III Section A.1.a.).
Instruction includes:
- Any project for which the purpose is to instruct any student at any location. Students may be:
- University of Montana students or staff
- Students or teachers in elementary or secondary schools
- Other college or university faculty or staff
- The general public
- Curriculum development projects at any level, including projects which involve evaluation of curriculum or teaching methods. Note that such evaluation may be considered “research” when the main point of activity is data collection, evaluation, and reporting
- Projects which involve University of Montana students in community service activities for which they are receiving academic credit
- General support for the writing of textbooks or reference books, instructional video, or software to be used as instructional materials and not related to a research project
An instruction rate may be appropriate if you can answer yes to any of the following:
- Will the activity support curriculum development not related to a research or sponsored services project?
- Will the activity support teaching or training activities (other than research training)?
- Is the intended audience students enrolled at the university?
Other Sponsored Activities
Other sponsored activities means programs and projects that involve the performance of work other than instruction and organized research (2 CFR 200 Appendix III Section A.1.c.) Other sponsored activities do not use University of Montana research resources, nor are they based on university research activities.
If a project contains any research activities such as data collection, evaluation, and/or reporting, the project must default to using UM’s full Research & Development rate. Projects categorized as an Other Sponsored Activity cannot perform any project activities that collect, analyze, or disseminate information to be used for generalizable knowledge. Generalizable knowledge refers to whether the findings of the project can be applied to populations or situations beyond the studied population. If such activities are present in a project, this project must be categorized as a Research & Development project.
An other sponsored activities rate may be appropriate if you can answer yes to any of the following:
- Is the intended audience the public, who will be receiving or participating in community service, with no university research resources used?
- Is the intended activity a conference whose participants are not students enrolled at University of Montana?
- Is the intended activity travel to a conference (excluding travel related to research)?
State of Montana F&A Rate
For State funded projects, consult with OSP to determine type of activity:
- if research, the F&A rate shall be 25% of the total direct costs;
- if training programs, the F&A rate shall be 8% of total direct costs. Such programs can be instructional (IN) activities (e.g., involving students for credit) or outreach/other (OS) activities involving non-UM students or non-credit.
If funding provided by the State of Montana is federal flow through our full NICRA will still be used.
Off Campus
For activities performed in facilities not owned by the institution or to which rent is directly allocated to the project(s), the off-campus rate will apply. Documentation for the off-site facility will be required at time of proposal preparation in order to use the off-campus rate. All work planned, performed, analyzed, and reported on the project must be done at the off-campus facility to qualify for the off-campus rate. Project activities, such as fieldwork or conferences, are not justification to use the off campus rate.
F&A Waivers
The Vice President for Research and Creative Scholarship (VPRCS) may consider F&A waiver requests. Work with your pre-award member to draft such requests via the F&A Waiver Request section in your Cayuse proposal record. Your proposal development analyst will submit the request to your Dean and the VPRCS.
Approval of such requests is at the sole discretion of the VPRCS who may take into consideration:
- the equity of granting the waiver when the projects of other faculty carry full overhead;
- the total cost to UM;
- the likelihood that an award would be seriously jeopardized without a waiver, and the potential effect of the loss on the faculty member's overall research program;
- the benefit of the waiver to new or junior faculty members or in support of research efforts in new directions which otherwise might not be sufficiently developed to attract typical peer-reviewed awards;
- the effect of a waiver to increase direct costs available for student support.
Waivers should include thorough justification and should be routed to the VPRCS early in the proposal development process.
Cost Sharing/Cost Matching
The University of Montana (UM) strongly discourages cost sharing unless it is required by the sponsor.
Cost sharing, also known as “matching,” refers to the portion of project costs not paid by sponsor funds. According to Uniform Guidance, Section 200.306, voluntary committed cost sharing is not expected in Federal research proposals and cannot be used as a merit review factor. UM policy permits cost sharing only when required by the sponsor as part of eligibility criteria.
Under Federal awards, cost sharing must come from non-Federal sources and comply with applicable regulations. All cost share commitments must be documented in the Cayuse proposal record and approved by the research center director or academic unit dean.
Cost sharing may be met through institutional mechanisms, such as UM’s distribution of F&A recovery to academic deans. These funds are typically used to meet cost sharing requirements through agreements with departmental Chairs and college Deans. In rare cases, a written request may be submitted to the Vice President for Research, detailing amounts already secured from the College or School.
Other acceptable sources of cost sharing include:
- Time and effort
- Institutional funds
- Use of space, if normally rented or leased to the public and a published rate is available
- Unrecovered F&A, if allowed by the sponsor and approved by UM, calculated at the appropriate federally negotiated rate
For example:
- If a project restricts F&A, and the sponsor and UM approve the use of unrecovered F&A, cost share is calculated at the full federal rate minus the assessed F&A, not exceeding the sponsor’s required amount of cost share.
- If a project prohibits F&A, and the sponsor and UM approve, cost share is calculated at the full federal rate, again not exceeding the sponsor’s required amount of cost share.
- Additional sources may include program income, third-party contributions, or other sponsored activity with prior written sponsor approval (note: federal-to-federal cost match is rarely allowed). A letter of commitment is required at the proposal stage for third-party cost share, detailing the contribution to be provided.
- All proposed cost share expenditures must be calculated at a rate appropriate for the activity.