Direct & Indirect Costs

The University of Chicago’s Facilities and Administrative (F&A) cost rate agreement with the federal government provides that the F&A (frequently referred to as “indirect”) cost rates indicated in the Agreement be used in proposals submitted to federal funding agencies. Only the appropriate rates, established in the negotiated F & A Rate Agreement, should be shown/used in budgets.

Indirect costs are costs that are not directly identifiable to a specific sponsored project (e.g., costs for general operations such as utilities, building operations, library services, purchasing, administrative offices, etc.) but are associated with the cost of doing research and/or training.

Federal indirect costs are calculated against a Modified Total Direct Cost (MTDC) base. The MTDC base includes salaries and wages, fringe benefits, materials and supplies, consultants, services, travel, animal costs (purchases, perdiems, lab work)subgrants and subcontracts up to the first $25,000 of each subaward or subcontract.

Specifically excluded from the MTDC base are equipment, capital expenditures, charges for patient care, tuition remission, rental costs of off-site facilities, scholarships and fellowships, Physical Sciences Division Central Shop charges, and the portion of each subgrant and subcontract in excess of $25,000 (e.g. $5,000 would be excluded from the direct cost base in a subcontract of $30,000).

Total Direct Costs

Indirect cost charges are applied to all items when using this base. There are no exclusions. The total direct cost base is used for grants and contracts from non-federal funding organizations. There are different rates for different non-federal agencies. See below for the most current and appropriate non-federal indirect cost rates.

Non-Federal Indirect Cost Rates

On October 28, 1987, the Provost of the University and the Vice President for Research and Argonne National Laboratory published a memorandum which described and explained University indirect costs rates for non-federal grants and contracts.

It is the policy of the University to request full funding of indirect costs on all grant and contract proposals. The non-federal indirect cost rates are as follows:

  • For-profit sponsors funding basic research (including animal studies), instruction, or other sponsored activities: 40% total direct costs
  • For-profit sponsors funding clinical testing (human studies) of drugs or devices (See Clinical Trials): 25% total direct costs (Effective March 1, 2003)
  • Not-for-profit sponsors: 20% total direct costs
  • Not-for-profit sponsors with published rates: Sponsor’s published rate

For not-for-profit sponsors, in the absence of a published indirect cost policy (email notification alone is not acceptable), the University adds to the proposed budget a line item of administrative costs (or overhead costs) at 20% total direct costs with the following explanation noted with the budget:

“In the absence of written policies regarding administrative costs and in accordance with University of Chicago policy, administrative costs of 20% of total direct costs have been included. If the (foundation/association/organization) has a published policy regarding provision of administrative costs, we request that notification of that policy be made a part of the award notice.”