IDC Policy

Facilities and Administrative (Indirect Cost) Rates

What are Facilities and Administration (F&A)/indirect costs?

Facilities and Administrative (F&A) costs, also known as indirect costs or overhead, represent project expenses that cannot be easily identified with any specific sponsored project’s scope, but are incurred for common or joint objectives related to all sponsored projects at UC Santa Cruz. For example, it would not be feasible to calculate and charge every sponsored project an exact amount for space and utilities used or the amount of staff time associated with processing payroll for project employees. Instead, the university negotiates F&A rates with the U.S. Department of Health & Human Services, the cognizant federal agency overseeing the administration of sponsored agreements at UC Santa Cruz. These negotiated rates are applied, as appropriate, to sponsored projects awarded to the university. Please note: Under Uniform Guidance (§200.414 (c)1), the negotiated rates must be accepted by all federal awarding agencies, unless a different rate is required by federal statute or regulation or approved by a federal awarding agency head or delegate.

Different rate types

UC Santa Cruz’s negotiated rate agreements include three different kinds of F&A rates, as defined by Uniform Guidance Appendix III to Part 200: Organized Research, Instruction, and Other Sponsored Activity.

Organized Research means all research and development activities of an institution that are separately budgeted and accounted for. It includes:

(1) Sponsored research: all research and development activities that are sponsored by federal and non-federal agencies and organizations. This includes activities involving the training of individuals in research techniques (commonly called research training) where such activities utilize the same facilities as other research and development activities and where such activities are not included in the instruction function.

(2) University research: all research and development activities that are separately budgeted and accounted for by the institution under an internal application of institutional funds. University research, for purposes of this document, must be combined with sponsored research under the function of organized research.

Instruction means the teaching and training activities of an institution. Except for research training described above, this term includes all teaching and training activities, whether they are offered for credits toward a degree or certificate or on a non-credit basis, and whether they are offered through regular academic departments or separate divisions, such as a summer school division or an extension division. This rate category includes Sponsored instruction and Training, which means specific instructional or training activity established by grant, contract, or cooperative agreement. 

Other sponsored activities are programs and projects financed by federal and non-federal agencies and organizations which involve the performance of work other than instruction and organized research. Examples of such programs and projects are health service projects and community service programs. However, when any of these activities are undertaken by the institution without outside support, they may be classified as other institutional activities.

On-campus vs. off-campus F&A rate

F&A (indirect cost) rates are applicable to all externally-sponsored projects (grants, contracts, cooperative agreements, and subgrants/subcontracts) funded by federal, state, or private sponsors. The application of these rates allows UC Santa Cruz to recover certain costs (e.g. facilities, utilities, libraries, administration, student services, etc.) associated with externally-funded training and research activity.

The on-campus F&A rate is the primary rate that UC Santa Cruz applies to externally-sponsored projects. The on-campus rate is used when the sponsor allows UC Santa Cruz to recover its full negotiated rate (i.e., most government and corporate funders), most or all of the work is being conducted on UC Santa Cruz academic lands or facilities, and/or the work is using UC Santa Cruz resources. 

The off-campus F&A rate is used when most or all of the project’s activity is conducted throughout the project period at facilities not owned or leased by the university. If leased space and leased costs are directly charged to the project, the off-campus rate must be used. Donated space in an individual’s private residence cannot be used as off campus facilities without approval from campus Real Estate Services.

If the project is conducted partially on and partially off campus, the university will determine which rate to use based on where 75% or more of the work takes place. The university will look at a combination of factors in making this determination: Santa Cruz personnel effort and/or salary costs; whether the amount of time project activities continuously take place off campus is significant (e.g., longer than one quarter); and the extent to which university systems, resources, facilities, personnel, and students are being used throughout the project.

Both on-campus and off-campus rates may be used for a given project under certain circumstances. Contact your Proposal Administrator for additional guidance.

If a sponsor’s IDC policy does not allow UC Santa Cruz to recover its full rate, a waiver may be requested from the Vice Chancellor for Research or designee (see below).

Application of Facilities & Administrative rates using Modified Total Direct Costs or Total Direct Costs

MTDC vs. TDC base

Modified Total Direct Costs (MTDC), as defined in Uniform Guidance, means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs.

Total Direct Costs (TDC) represent all allocable project costs that are directly charged to an award (excluding IDC).

For federally-sponsored projects

The MTDC base shall be used when a federal sponsor's published F&A rate is less than the current full ONR-negotiated rate, but does not specify a base. The TDC base shall be used when a federal sponsor prescribes use of the TDC base.

For Non-federally-sponsored projects

The TDC base shall be used when a non-federal sponsor's published F&A rate is less than the current full DHHS-negotiated rate.

Exceptions to standard Indirect Cost recovery

 

UC Santa Cruz typically grants Indirect Cost (IDC) waivers on proposals to individual non-profit agencies with established, publicly-available IDC policies that allow an IDC rate that is less than UC Santa Cruz’s federally negotiated campus rates. These waivers are handled by OSP without additional input from the principal investigator (PI).

Some sponsors do not publicize their IDC policy, or may not have a formally established policy. Before developing a project budget for such sponsors, OSP will need to obtain written guidance on the sponsor’s IDC policy from an authorized representative of the sponsor. This written documentation must:

  1. Be provided by an authorized representative of the sponsor on sponsor letterhead or via direct email from the sponsor representative to OSP.
  2. Include the specific IDC rate and base. (For example, 15% of total direct costs (TDC).) If the sponsor provides a suggested IDC range (such as 12% to 15%) the highest percentage will be applied.

If the sponsor cannot provide either a formal written policy governing IDC or an acceptable written explanation of their IDC policy, the University’s appropriate federally negotiated IDC rate will be applied. If the PI has a compelling reason for asking that the campus’ federally negotiated rate be waived or reduced, the PI will need to request the exception as a Campus IDC Waiver. UCSC’s de minimis waived rate for sponsors who do not have an established rate is 10% MTDC.

IDC waivers generally will not be considered for foreign government entities or for-profit entities. Under certain circumstances, an exception based on sponsor policy from a for­-profit corporation or a foreign government may be considered for a legitimate, general university community service, scholars’, or fellowship program sponsored by a for-­profit corporation. The criteria for considering an exception for such a program would include: (1) the corporation has published an announcement calling for proposals under which grants would be awarded; (2) exceptions to university policies for the subject program, such as intellectual property language, are carefully considered and justified, specifically in light of the indirect cost rate exception, and approved by the appropriate university authority; and (3) the announcement does not require a specific deliverable to the corporation other than technical/final and financial reports. Such a program would have to be clearly distinguishable from research contracts which state anticipated outcomes in specific areas of corporate interest solicited by the corporation. UCSC considers these to be Campus IDC waivers and the PI will need to submit a formal request as detailed below.  

Campus IDC waiver

In rare cases, an exception to UC Policy in IDC recovery may be considered by the Vice Chancellor of Research (or designee) when the sponsoring entity does not have a documented policy or is a for-profit entity. If a sponsor has a documented policy for a rate that is lower than UC Santa Cruz’s negotiated rates, an exception for a lower rate cannot be requested. In order for an exception to be considered, the PI must submit a formal request, clearly justifying the exception based on one of the following criteria:

  • Small seed grant or other award ($30,000 or less) which may attract future awards.
  • Proposed scope contributes to vital community relations, student services, or divisional/campus priorities.
  • Proposed scope includes contributions of equipment, building renovation funds, or other in-kind support from the sponsor.

Requests made under these circumstances must be submitted at least two weeks prior to the desired proposal submission date. Proposal budgets based on these requests will not be submitted by OSP until the required campus approvals have been received.

Request a campus IDC waiver

 


UCOP approval required

UCSC delegation to approve exceptions to UC IDC recovery policy does not include projects funded by federal or California state agencies.

Federal programs which require a reduced IDC rate must meet Uniform Guidance requirements and have OMB approval. In these cases, OSP will work with UCOP to document the approved rate, and no formal request is required from the PI.

California state agencies are subject to the rates established under the California Model Agreement (CMA) between The University of California, California State Universities, and the California Department of General Services. Special approval is required in order to submit any proposals which deviate from the CMA.

Where the sponsor is a State of California agency or a federal agency and the campus is unable to justify reduction of indirect costs through a sponsor policy, a Special Approval exception must be reviewed by OR and then routed to UCOP for approval prior to  any proposal submission. UCSC must provide UCOP with the following documentation: 

  • Rationale that addresses the exceptional nature of the situation to justify the reduction of indirect cost recovery.
  • Description of the restriction (both the rate and base).
  • Documentation of the restriction from the sponsor (such as a policy document, agency website, solicitation).
  • If the sponsor asserts that there is a statutory or regulatory reason for the limitation of indirect cost recovery, provide links, citations, or other documentation of such limitation.

The PI will need to submit an Indirect Cost Exception request providing the above documentation as well as the justification as required for a Campus IDC waiver (see above). Please contact your Proposal Administrator for assistance with initiating a Campus Determination request. Requests made under these circumstances must be submitted at least one month prior to the desired proposal submission date. If approved by the Vice Chancellor of Research (or designee), OSP will prepare and submit a request to UCOP. Proposal budgets based on these requests will not be submitted by OSP until the required internal and UCOP approvals have been received.