Indirect Cost Allocation Policy

I. Scope

This policy guides the allocation of indirect cost funding included in external grants. It applies to all grants that provide indirect cost funding.

II. Policy Statement

As noted in the definitions section, projects sponsored by external granting agencies incur both direct and indirect costs. Whenever allowable, indirect costs must be applied to proposed grant budgets prior to submission. Federal grant proposals will use IWU’s federally negotiated rate as applicable. All other grant proposals will request at least 10% indirect costs whenever allowed by the grantor. Indirect cost funds drawn from a grant are allocated to various university accounts proportional to anticipated actual indirect costs.

III. Reason for the Policy

Indirect cost funds should be allocated to the units supporting a sponsored project so that the project does not unduly burden the units.

IV. Procedures

Indirect costs are allocated with two outcomes in mind - the first is to offset institutional expenses required to support the grant; the second is to promote continued success in grant acquisition and project completion. To accomplish these goals, standard allocation of indirect costs is as follows.

•Office of the Provost (100%)

o Funds sufficient to provide human resource support for the Office of Grants and Sponsored Programs are reserved from all grants providing indirect costs.

o Remaining indirect cost funds are allocated by the Provost to defray expenses incurred by units hosting sponsored programs and to support the research enterprise of the university.

In the budgeting cycle for each fiscal year, and at the initial funding of new grants, the Provost will specify the allocation of indirect funds for each applicable grant in consultation with affected units. For grants with a budget of $500,000 or more in the specified fiscal year, or at the initiation of grants with a total budget of $500,000 or more, the Provost will meet with the appropriate operational unit head and other key personnel, as appropriate, to plan the allocation of indirect costs. General funding priorities are:

Grants office human resources (drawn from all grants with indirect funds)
Facilities (up to 50% of indirect funds remainder after allocation 1)
Business office (up to 25% of indirect funds remainder after allocation 1)
Unit administering the sponsored program (up to 25% of indirect funds remainder after allocation 1)
Other needs specific to particular sponsored programs

If the allocation of indirect costs outlined above does not make sense in the context of a particular grant, the Principal Investigator should propose an appropriate allocation of funds, with explanation. The proposal should be made in writing prior to the internal grant review to the Provost and the CFO. The Provost and the CFO together will determine if indirect costs can be lowered or waived. Indirect costs are accounted in the annual budget of the university. Indirect cost allocations for a given fiscal year are included as budget items through the normal budget development process. Unspent allocations do not carry over.

V. Definitions

Direct Costs

The total cost of a sponsored or special program consists of direct and indirect costs. Direct costs are all costs explicitly identified with delivery of the program. Direct costs are itemized in the program budget. The following list of common direct costs is not exhaustive:

Salaries and wages; fringe benefits; consultants; capital equipment; travel; consumable supplies; computer software; equipment maintenance and repair; printing and publishing; photocopying; telephones; postage; conferences; space lease/rental; subcontracts; insurance; recruitment; remitted tuition; scholarships.

Indirect Costs (also known as Overhead Costs or Facilities and Administrative Costs)

Indirect costs are those incurred by the University to support sponsored or special programs but that cannot be directly traced and charged to a specific program. The following list of common indirect costs is not exhaustive:

Administrative costs including departmental and university staff personnel, operation and maintenance of facilities (utilities, custodial, maintenance, computers, copiers, phone service, etc.), security and safety, financial and accounting services (accounting staff to establish and maintain the grant income and expense accounts and activity; software for tracking grant income and expenditures), procurement services, general maintenance of university equipment, general university and departmental administrative expenses, use of computing resources, costs for administration of the grant including tracking of grant requirements (reports, finances, correspondence with granting agency, negotiation of F&A rate, etc.), costs for assistance in developing, writing and submitting grant proposals, costs for assisting and training grant proposal writers; responsible conduct of research training costs; equipment and facilities use allowance (depreciation); library.

Examples (not exhaustive) of appropriate uses of indirect cost funds:

Examples (not exhaustive) of inappropriate uses of indirect cost funds.

VI. Sanctions

Misappropriation of indirect cost funds bears the same sanctions as misappropriation of any university funds or property. Allocation of indirect costs funds out of accord with this policy is an error correctable through post hoc application of the policy.