UMW Receives First-Ever Federal Indirect Cost Rate Agreement!

With assistance provided by the firm of McAllister & Quinn, UMW successfully filed the necessary documentation required to be awarded a “facilities and administrative cost rate.” The agreed rate, sometimes referred to as the F & A rate or the indirect cost rate, is 36% and it may be applied to all eligible proposals for federal grants, contracts, or other agreements. The approved period for the agreement is March 1, 2015 through June 30, 2019.

Indirect costs are those costs not readily identifiable with a particular budget line in the grant proposal but are necessary in order for the grant or contract to be effectively administered. Examples of indirect costs include the salary and related expenses of individuals working in accounting, HR, purchasing, grants management, the cost of facilities and utilities used by the grant activities, and so forth. Without such assistance and resources, the grant project could not operate effectively.

Indirect costs are calculated as a lump sum amount based on a percentage of the “direct costs” of the grant proposal. So, a $100,000 research project could claim (under UMW’s agreement) $36,000 in addition to cover overhead, administrative support, accounting services (to file reimbursements and financial reports), and so forth.

UMW’s agreement uses “modified direct costs” as the basis for calculating the amount of allowable indirect costs. Salaries and wages, applicable fringe benefits, materials and supplies, travel, and the first $25,000 of any subawards that are proposed in the grant would be the basis for determining the amount of indirect costs that could be claimed. Equipment, scholarships, and tuition remission are examples of costs that would have to be excluded from any indirect cost calculation.

Without the negotiated agreement, UMW was limited to the maximum “de minimis” rate federal agencies apply. NEH and NSF grants, for example, now limit indirect costs to 10% of modified direct costs if the institution does not have a federally negotiated rate. Some agencies are even more restrictive.

The fact that UMW has a rate of 36% does not mean that this amount must always be fully applied as an indirect cost. Some grants have a maximum amount and it might be advisable to claim a lower indirect cost amount in order to stay under the grant amount ceiling. Another way of looking at it is that the rate agreement authorizes UMW to claim up to 36% in indirect costs. For good reasons, UMW might decide to claim a smaller indirect amount. Talk with John Morello as you build the budget in preparation for any proposal undergoing internal review and pre-approval before it is submitted to the granting entity.

Leave a Reply