Indirect (F&A) Costs Explained

Indirect cost - also known as Facilities and Administrative (F&A) cost or IDC – are real costs of university operations that are not readily assignable to a particular project.  Regarding federal awards, the Office of Management and Budget’s Uniform Guidance defines Indirect cost (F&A) as “those costs incurred for a common or joint purpose benefiting more than one cost objective, and not readily assignable to the cost objectives specifically benefited.  Costs such as the operation and maintenance of buildings, capital depreciation, departmental and central administration which cannot be readily and specifically attributed to any single sponsored project, but which represent the University’s cost for carrying out the activities of the project, are indirect costs.”

Indirect Cost Rates on Sponsored Proposals at UH

UH negotiates its indirect cost (F&A) rates with the Department of Health and Human Services, its cognizant federal agency. The current approved negotiated rate outlines indirect cost (F&A) rates for on-campus research, off-campus research, and other sponsored activities. These rates must be applied to all externally-sponsored projects. For exceptions see the IDC Policy. The rates are charged on a modified total direct cost (MTDC) base which excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each sub-award in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect cost.

Current UH Negotiated F&A Rates

IDC Types and Determination:

Organized Research: This IDC rate applies to all research and development activities that are separately budgeted and accounted for, such as federal and non-federal sponsored research and federally funded clinical trials.

Other Sponsored Activities: This IDC rate is limited in scope and should be applied to projects or programs which are not classified as organized research. This can be for service performed for the benefit of the public. Examples of such programs and projects are health service projects, community service programs, non-credit community education, and conferences.

This IDC rate also applies to research that meets the definition of a clinical trial (i.e., "the controlled, clinical testing in human subjects of investigational new drugs, devices, treatments or diagnostics, or comparisons of approved drugs, devices, treatments or diagnostics, to assess their safety, efficacy, benefits, costs, adverse reactions, and/or outcomes") and for which is not funded with federal funds.

Off Campus: The off-campus rate will apply for all activities: a) Performed in facilities not owned by the institution and where these facility costs are not included in the F&A pools; or b) Where rent is directly allocated/charged to the project(s).

Grants or contracts will not be subject to more than one F&A cost rate. If more than 50% of a project is performed off-campus, the off-campus rate will apply to the entire project.