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Home » Research » Office of the Senior Vice President of Research and Economic Development » Indirect Costs
Indirect costs are those that are incurred for common or joint objectives to support a sponsored project. These are general costs associated with facilities, administration, and other shared services that cannot be identified readily and specifically for a particular sponsored project, an instructional activity, or other institutional activities.
The Facilities and Administrative (F&A) rate is the apportionment of indirect cost for each $1 of direct costs expended to deliver a program. Indirect costs are allocated to sponsored projects using the F&A rate and as such are reimbursed to LTU. The terms indirect cost and F&A may be used interchangeably.
Indirect costs are applied using the F&A rate to direct cost under terms of agreement between LTU and the sponsor. For federally funded proposals and federal flow-down from other institutions, the federal negotiated rate must be used applied to a base of Modified Total Direct Cost (defined below). For non-federal funded proposals, the F&A rate and its application to direct costs should be appropriate to support the project’s full cost.
LTU’s current F&A rate was federally negotiated F&A Agreement (effective September 15, 2021) establishes a rate of 49% of Modified Total Direct Costs (MTDC), which excludes cost of equipment over $5,000 with a useful life of more than one year, capital expenditures, facility rent (if applicable), graduate tuition, participant support and subawards/subcontracts for the portion of each agreement over $25,000.
The F&A rate is derived from the computation of pooled indirect cost over the base of direct costs for sponsored projects.
Costs included in the direct cost base are:
Costs included in the F&A indirect cost pool are:
It’s important to note that costs normally considered indirect (listed above) should not be direct-charged to federally funded projects since the indirect rate covers these expenses. Charges for general office supplies, phone service and equipment, books, periodicals and subscriptions, postage, data storage and clerical support, are also costs normally considered indirect. For programs where a lower F&A rate is used, it may be appropriate to direct-charge costs normally considered indirect.
The negotiated F&A rate of 49% of MTDC is required by the government to be used for Federally funded programs unless otherwise specified in the program announcement or limited by statute (2 CFR 200.414(c)).
However…
Federal and other sponsored fellowships for scholar support, travel and conference awards generally do not usually provide F&A support, as such awards require negligible infrastructure-based resources. Education and training programs limit F&A reimbursement, certain other non-research directed programs are limited by governmental statute and LTU’s F&A reimbursement to an organization without a federally negotiated agreement is generally limited to 10%. Foundations and other non-profit sponsors also usually restrict F&A reimbursement. Due to the complexity of F&A rules applied to a myriad of sponsors, requests to accept lower than 49% F&A must be approved by a dean and LTU’s provost before proposal submittal.
Industry Sponsored Projects (ISPs) are categorically excluded from the F&A requirement. These projects support student education, are for-course credit and are non-federally funded. Sponsored Research and Institutional Grants assists with administration of ISPs because research compliance may be involved, effort and expense for research may be appropriate in some circumstances and ISPs are sponsored funds conditioned upon student support.
Waived indirect costs may be considered cost share. Federal sponsors are not permitted to evaluate proposals based on cost share unless it’s explicated listed as an evaluation factor in the funding announcement (2 CFR 200.306). To be considered cost share, federal sponsors must prior-approve the inclusion of the cost share commitment in a proposal. This is done by including a request or requirement in the funding announcement. For non-federal programs, the cost-benefit to LTU for sharing in costs of a sponsored program is a factor for consideration. Because it’s an organizational consideration of cost vs benefit and involves resource expenditure, F&A waivers (indirect cost share) must be approved by a dean and LTU’s provost prior to proposal submittal. If included in a sponsored proposal budget, cost share becomes a commitment requiring accounting and reporting.
F&A reimbursement of LTU costs are calculated monthly and distributed as follows:
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