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Indirect costs & recovery

The costs of doing research include both direct and indirect costs.

Direct costs are specifically related to a particular project, such as:

  • salaries and benefits
  • supplies
  • equipment
  • research-related travel

Indirect costs of research (ICR), or overhead, are ongoing institutional costs related to research that are not directly attributed to a specific project or activity. This includes:

  • operations and maintenance of research facilities and infrastructure
  • administrative support, including central research, purchasing and financial services
  • regulatory and safety compliance, including human research ethics, animal care and biosafety
  • central academic resources such as library and IT services
  • faculty and departmental services such as machine and electrical shops, shared equipment, etc.

To support these significant operational investments, all sponsored research application budgets must include both direct and indirect costs.

  • no overhead line item is required for Tri-Agency applications
  • if a US funder’s indirect cost policy is to have a negotiated rate with the US, then charge 10% (unless National Institutes of Health (NIH), which is 8%)

ICR recovery rate

The minimum ICR recovery rate for grants, contracts and service agreements is 25% of direct costs (see the Negotiated or Approved Indirect Cost Rates section in UVic’s Indirect Costs of Research Policy – FM5400), except where the sponsor has an explicit policy stating otherwise.

Proposals and applications that do not include the minimum rate – and there is no funding agency policy in place – must be submitted with an Application for Negotiated Indirect Cost Rate (ANIC) form.

How are indirect costs calculated?

The overhead amount is calculated based on the direct cost of research. For example:

A total research budget of $50,000 plus 25% indirect costs:

  • $50,000 x .25 = $12,500 with the total award value being $50,000 x 1.25 = $62,500

Alternately, the total direct cost for a $50,000 award including 25% indirect costs:

  • 50,000/1.25 = $40,000 with the indirect cost being $50,000 - $40,000 = $10,000