Indirect costs represent a joint calculation by Clark University and the Department of Health and Human Services (DHHS), our cognizant agency, of the expenses incurred by the university to administer research, educational, training, and other sponsored programs.
Because these represent “pooled” or average costs, it is difficult to find an exact correspondence between the administrative expenses of a project, and the actual charges applied to it. It would be difficult, for example, to identify campus security costs, or library operating expenses associated with the life of a particular project.
Because indirect costs necessarily reflect an averaging of administrative expenses, some projects will cost the University more in overhead than will be received in reimbursement from supporting agencies; conversely, other projects will receive more for indirect costs, than they will actually require.
It is imperative that appropriate administrative overhead rates be applied to proposed projects. Income lost due to under-recovery of indirect costs can never be recaptured. This, in turn, undercuts the University’s efforts to maintain and improve support services for sponsored projects.
When budgeting indirect costs for grants, it is useful to remember that projects are NOT rejected on the basis of these expenses. Applying negotiated rates to federal projects is not only appropriate, but expected. If the technical aspects of a proposal are well-received, agencies will negotiate budget reductions, if they consider the request to be excessive. IT SHOULD BE NOTED HERE THAT THE PRINCIPAL INVESTIGATOR OR PROJECT DIRECTOR IS NOT AUTHORIZED TO NEGOTIATE INDIRECT COSTS RECOVERY ON BEHALF OF CLARK WITH SPONSORING ORANIZATIONS, PUBLIC OR PRIVATE. This is the responsibility of OSPR personnel.
Clark University’s indirect cost rates are comprised of three major categories: Facility-related costs, service-related costs, and administrative costs.
Facility-related costs are comprised of the following:
- Building Depreciation – Clark, like many other institutions, calculates annual depreciation expenses as part of its indirect costs in an effort to associate the cost of facilities with the users of those facilities.
- Equipment Depreciation – Since federally-funded activities benefit from the use of Clark-funded equipment, depreciation on this contribution is calculated annually on all items valued over $5,000 that have been purchased with non-federal monies.
- Interest Expenses – Some Clark facilities have been constructed with funds provided through the issuance of debt. The cost of this debt is the interest portion of annual debt service payments made to our creditors. Occupants of facilities, which were debt financed, including federally-funded research projects, are assessed their share of this interest expense.
- Operations and Maintenance – These costs include the expenses incurred, usually Physical Plant department for the administration, supervision, operation, preservation, and protection of the University’s physical facilities. Examples of this category of costs include custodial services, repair and maintenance, grounds care, energy expenses, maintenance supplies, campus security and property management.
The service-related component of indirect costs is comprised of one item:
- Library – This includes the total operating costs of the University library for books and library materials.
The third part of indirect costs is comprised of three administrative pools:
- General Administration – This covers the costs of operations of executive and administrative offices such as human resources, general accounting, payroll, purchasing, legal counsel, and the Office of the President.
- Department Administration – This expense includes administrative and supporting services that benefit departmental activities such as dean’s office, academic department heads, and departmental support services. No more than twenty percent of salary can be charged to department administration.
- Sponsored Programs Administration – The activities in this pool exist primarily to administer and service sponsored projects. This includes expenses associated with the Office of Sponsored Programs and Research, Grant Accounting, and other costs related to health and safety issues of research.
The “rulebook” governing indirect costs is the Office of Management and Budget’s (OMB) Circular A-21, “The Federal Cost Principles Applicable to Educational Institutions.” While universities individually negotiate their indirect cost rates with their particular cognizant agency, A-21 specifies the basis for determining those costs.