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Grant Writing Workshop

Indirect Cost

Indirect costs are based on a negotiated rate, with a designated federal agency, for services provided by the institution in support of research. These services are described in common terms; as rental of space, utilities, library, computer resources, and administrative services, which are not itemized by the institution as charges normally directly paid by academic units.

The indirect costs rates are applied to the Modified Total Direct (MTD) which is defined as: The sum of all expenditures budgeted as direct costs, including: salaries and wages, fringe benefits, materials and supplies, services, travel, alterations or renovations to facilties, and subgrants or subcontracts up to $25,000; less the following: equipment, capital expenditures, charges for patient care, tuition remissions, rental costs (for facilties), scholarships and fellowships, and the portion of each subgrant and subcontract in excess $25,000.

If the funding agency does not allow indirect costs. The amount you would have asked for from the agency can usually be included as "cost share."


What Makes up the Indirect Cost

There are six functional categories of indirect costs identified in OMB Circular A21 that make up the total rate. The percentages shown below are approximately the rates used for IU on-campus research.

Physical Plant (building and equipment depreciation, interest, operation & maintenance) - 22.3%
Library - 1.7%
General Administration - 9%
Departmental Administration - 13%
Sponsored Project Administration - 4%
Student Services (appears only in instruction rate) - 0%