Indirect Cost and Fringe Benefit Rates
Definition of the Indirect Cost (Facilities and Administration (F&A) and Fringe Benefit Rate)
In addition to the "direct costs" of conducting a research project salaries, equipment, and travel. There are "indirect costs" involved. Unlike the direct costs, the indirect costs/overheads are the expenditures that cannot be conveniently traced to or identified with any particular cost unit (such as a particular project, facility, function, or activity), and not readily assignable to the cost objectives specifically benefitted. These indirect costs include administrative support and services and the use of the University facilities to carry out the project activities. Indirect costs incorporate a wide range of university costs from administrative salaries to utilities (electricity, water, maintenance, communications)
Most sponsoring agencies recognize the right of universities to recover some of these costs when university personnel and facilities are involved in sponsored research. Typically, US universities engaged in sponsored research negotiate with the US government a standard formula for charging indirect costs. Once a negotiated indirect cost rate (NICRA) has been approved, it should be applied to all of the sponsored programs. AUC's rate has been negotiated with and approved by the US Department of Health and Human Services (DHHS).
For federal sponsors, the current AUC rate for recovering indirect costs and fringe benefits on sponsored programs consists of the following (effective July 1, 2019, until amended):
1. Facilities and Administrative (F&A) Cost Rate
- If the proposal is submitted mainly involves on-campus activities: 55 percent of total direct costs excluding capital expenditures (buildings, individual items of equipment*, alterations, and renovations); sub-awards; rental/maintenance of off-site activities; student tuition remission and student support costs (e.g. student aid, stipends, dependency allowances, scholarships, fellowships).
*Equipment means an article of nonexpendable, tangible personal property having a useful life of more than one year and an acquisition cost of $2,500 or more per unit.
- If the proposal is submitted mainly involves off-campus activities: 27.10 percent of total direct costs excluding capital expenditures (buildings, individual items of equipment, alterations, and renovations); sub-awards; rental/maintenance of off-site activities; student tuition remission and student support costs (student aid, stipends, dependency allowances, scholarships, and fellowships). For all activities performed in facilities not owned by AUC and to which rent is directly allocated to the project(s), the off-campus rate will apply.
Grants or contracts will not be subject to more than one F&A cost rate. If more than 50 percent of a project is performed off-campus, the off-campus rate will apply to the entire project.
2. Fringe Benefits Rate - 20.90 percent of salaries and wages applicable to full-time employees.
The fringe benefits rate includes the following: social insurance health/cultural fund, social security, pension, indemnity, medical insurance, group life insurance, unemployment insurance, clinic services, sabbatical grants, visa/passport/permits, home leave travel, staff scholarships, incentive retirement, end of service and relocation expenses.
For non-federal sponsors, an alternative rate, such as the sponsor's ceiling, may be used; OSP secures the necessary approvals.
How to calculate the indirect cost and fringe benefit rate in a budget?
In developing the budget for a sponsored research project, the direct and indirect costs should be shown separately. Personnel salary costs should also be shown separately from fringe benefit costs. In situations where the sponsor is not covering the full indirect costs, AUC and sponsor cost-shares should be shown separately in the budget. For example, see the sample budget below with full indirect costs recovered from the sponsor, for a proposal that mainly involved on-campus activities.
In this case, fringe benefits are included in the indirect costs category.
|Salaries (excluding Fringe Benefits)||100,000|
|Total Direct Costs (Excluding Equipment) (F&A Calculation Base)||100,000||
|Total Direct Costs||120,000|
|Facilities and Administrative Cost Rate (55 percent of total direct costs - excluding equipment)||55,000||
|Fringe Benefits Rate (20.9 percent of salaries and wages)||20,900||
|Total Indirect Costs||
|Total Project Costs (Total Direct + Total Indirect)||
AUC is entitled to recover indirect costs as shown above. Any un-recovered portion of this indirect cost shall be counted as cost-sharing by AUC subject to prior approval of the Chief Financial Officer (CFO).