For sponsored projects supported by the federal government, Office of Management and Budget Circular A-21 (OMB A-21) prescribes the allowance of certain costs and the assignment of those allowable costs as direct or indirect. With certain limitations, OMB A-21 is intended to enable the Institution to recover full costs on projects sponsored by federal agencies.
(OMB A-21 uses the term Facilities and Administrative or F & A Costs to describe what most institutions typically refer to as indirect costs.)
Periodically, the Department of Health and Human Services (acting on behalf of the federal government) and the University negotiate an agreement setting forth indirect cost rates for three types of sponsored activities: organized research, instruction, and other sponsored activities. The agreement specifies the rates at which the Institution can recover its indirect costs associated with projects sponsored by all agencies of the federal government.
Non-federal sponsors are not bound by the terms of OMB A-21 and are not necessarily guided by the principle of full cost recovery for the University. In particular, not-for-profit agencies routinely refuse to reimburse the Institution for its appropriate indirect costs by prescribing indirect cost rates considerably lower than those set forth in the rate agreement with the federal government. In some instances these lower indirect cost rates are linked to a funding agency's operating philosophy of partnering with the Institution in developing new programs. In the majority of cases, however, it is simply an administrative decision on the part of the sponsor not to honor the Institution's established indirect cost rate agreement.
The reduced indirect cost rate for foundations will be accepted if:
- published as part of the general policies of the organization (e.g., in conjunction with the proposed solicitation), and
- applied uniformly to all award recipients.
Contact your OSP representative, if you have any questions concerning the indirect cost guidance.