6.0 AUS Indirect Cost (IDC) Rate and General Policies Governing IDC Recovery

Facilities and administrative (F&A) rates (also known as indirect cost rates) and fringe benefits rates are established in accordance with the US federal government’s Office of Management and Budget (OMB) Circular A-21, Cost Principles for Higher Education.

These rates are negotiated between AUS and the US Department of Health and Human Services, our cognizant federal agency that oversees the administration of sponsored agreements at AUS.
It is AUS policy to apply full facilities and administrative (or indirect cost) and fringe benefit rates to all externally sponsored projects (grants, contracts, cooperative agreements, subgrants and subcontracts). Applying these rates allows AUS to recover real costs (e.g., facilities, utilities, libraries, administration, student services, etc.) associated with externally funded activity.

6.1 AUS Indirect Cost Rate

AUS’s negotiated indirect cost rate is 27 percent. This rate is applied to the base called modified total direct costs (MTDC), which is defined in OMB Circular A-21 as follows:

“salaries and wages, fringe benefits, materials and supplies, services, travel, and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract (regardless of the period covered by the subgrant or subcontract). Equipment, capital expenditures, charges for patient care and tuition remission, rental costs, scholarships, and fellowships as well as the portion of each subgrant and subcontract in excess of $25,000 shall be excluded from modified total direct costs.”

As specified in this definition, some costs are excluded from total direct costs (TDC) to arrive at the MTDC base to which F&A (indirect cost) rates are applied. OMB Circular A-21 also provides for exclusions of other items of cost where necessary to avoid a serious inequity in the distribution of costs.

Note: It is AUS policy to apply the full indirect cost rate to all externally sponsored projects. All proposals to sponsors must include budget requests for facilities and administrative (indirect) costs and fringe benefits, using the rates negotiated by AUS, unless a reduced rate is approved by the Coordinator of Research on a case-by-case basis.

6.2 Procedures for Requesting Indirect Cost Reductions

The principal investigator is responsible for requesting indirect cost (IDC) reductions.
Requests for indirect cost reductions must be submitted in writing to the Coordinator of Research, through the department chair and the office of the dean, prior to circulation of the final proposal for internal review and processing. The following information should be included in the request:

• Amount of the reduction and reason for the request
• Consequences of accepting or denying the request for IDC reduction

The principal investigator’s requests for reductions in ID Care then submitted by the dean, with the dean’s rationale for approving the request, to the Office of Research.
As a means of determining costs and benefits of requests, the following factors will be considered:

• How the reduction could be justified to other faculty whose projects carry full IDC
• Total cost to AUS of the reduction
• Benefit of the reduction
• Availability of support from other sources
• History and anticipated future support from the sponsor
• Nature of the support (e.g., student stipends, interim support between other projects, support which complements other projects)
• Whether other universities involved in the proposed research have accepted lowered indirect cost recoveries

Note: Indirect cost waivers are not granted when a funding agency or program solicitation allows full indirect cost recovery.

Waivers will also not be granted in cases where the research is sponsored by a profit-making organization, where the research involves any intellectual property requirements on the sponsor’s part or where granting the waiver would appear to establish a precedent for future projects.

Requests for less than 10 percent indirect costs are generally not approved. However, AUS may accept an indirect cost rate lower than 10 percent from a not-for-profit sponsor if (1) this lower rate is published as part of the general policies of the organizations (e.g., in conjunction with the proposal solicitation) and (2) this lower rate is applied uniformly to all award recipients.
Additional questions regarding indirect cost reductions should be directed to the Coordinator of Research.

6.3 Indirect Cost Re-Distribution and Flowback to Academic Schools, Colleges and Departments

AUS central administration re-distributes 50 percent of the indirect costs recovered by external funding back to the budgets of academic units generating these funds.
Funds recovered from indirect costs may be used to enhance academic programs, support graduate students, support student research assistants, support faculty travel to conferences and professional meetings, purchase equipment, books, periodicals, etc. (Use of these discretionary funds is also governed by OMB Circular A-21).
Indirect costs are distributed at AUS as follows:

• 15 percent to the budget of the college/school
• 15 percent to the budget of the department
• 15 percent to the budget of the Office of Research
• 5 percent to the budget of the Office of the Vice Chancellor for Academic Affairs
• 50% to the budget of general operating expenses