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Is the Project On or Off Campus?
Figuring Indirect Costs
Indirect costs are the real costs of University operations which are not readily assignable to a particular project. These indirect costs are determined by federal auditors under the guidelines of OMB Circular A-21. Indirect cost rates are negotiated with the Department of Health and Human Services (DHHS)--the federal audit agency for the University of Michigan. These rates are applicable to all federally sponsored projects and, in accordance with University policy, are also extended to include all other sponsored activities.
Our actual rate agreement with DHHS simply states: If more than 50% of a project is performed off-campus, the off-campus rate will apply to the entire project. Off-campus means the activity is performed in facilities neither owned nor leased by the University, according to James Randolph, senior associate director, DRDA.
To determine whether a project is on campus or off campus, Randolph suggests that the FIRST TEST should be the portion of the direct salary and wages of UM personnel assigned to the project that will be incurred off-campus. (Salary dollars shown as cost sharing should be included in this calculation; costs of subcontractors should not.) If the salaries and benefits incurred off campus is greater than the salaries and benefits incurred on campus, the off-campus rate should be used.
If this split is near 50/50, as a SECOND TEST he suggests considering the distribution of other direct expenses between on and off campus activities. If more than 50% of the total costs will be incurred off campus, then the off-campus rate should be used.
The approved indirect cost rates applicable to all proposed projects are shown in Indirect Cost Rates chart. Full recovery of these costs is expected on all grants or contracts.
[Return to Indirect Cost Rates Chart]