The University of Wisconsin-Madison
Research and Sponsored Programs
Notice 98-4
June 19, 1998


TO: Deans, Directors, and Department Chairpersons and Secretaries 
(for distribution to all Faculty)
FROM: William J. Vance, Assistant Dean
SUBJECT: Collection of Indirect Costs 

In previous Research and Sponsored Programs Notices you have been apprised of UW-Madison’s policies and guidelines on the collection of indirect costs. The purpose of this Notice is to republish the "collection of indirect cost" policy and to add a new section covering "Unrestricted Grants". The following paragraphs will briefly explain what indirect costs are, who audits and approves the rates, and the policy and rate to apply to various types of awards or awards from specific sponsors. The attached table can be used as an easy reference guide.

I. INDIRECT COSTS - DESCRIPTION AND RATE DEVELOPMENT

Indirect costs are real costs that provide reimbursement for actual institutional expenses that support extramural activities but cannot be directly charged to a grant or contract. The costs result from shared services such as libraries, physical plant operation and maintenance, utility costs, general, departmental and sponsored projects administrative expenses, and depreciation or use allowance for buildings and equipment.

Indirect cost rates for all Federal grants and contracts are computed on the basis of actual costs incurred and regulations from the U.S. Office of Management and Budget that define the cost categories that are eligible for reimbursement. Indirect cost reimbursement rates are periodically negotiated with our cognizant Federal audit agency, the Department of Health and Human Services (DHHS). A signed agreement, that establishes the allowable rates of reimbursement, is entered into between the University and the Government. These Federally audited and approved rates are also applied to some categories of Nonfederal awards as explained in each section.

II. GRANTS AND CONTRACTS - FEDERAL

III. GRANTS AND CONTRACTS - NONFEDERAL All grant and contract applications to and awards from Nonfederal for-profit entities must include indirect costs at the agreed upon Federal rate as set forth in the University/DHHS Negotiation Agreement, except as provided otherwise by Federal regulations. Awards that do not include the full indirect cost rate will not be accepted.             The following exceptions to the collection of full indirect costs will apply:
 
2.  For matching funds for a federal, state or non-profit funded grant or contract, the required rate on the matching funds from a for-profit entity will be limited to the rate approved for the applicable Federal, State or non-profit agency.  3. Grants and contracts of $5,000 or less will be subject to previously applicable provisions. These requirements are specified in III.B. below (Nonfederal Grants and Contracts from Non-Profit Entities).   B.     Nonfederal grants and contracts from non-profit entitles:  
All grant and contract applications to Nonfederal non-profit entities must include indirect costs at the agreed upon Federal rate as set forth in the University/DHHS Negotiation Agreement, except as provided otherwise by Federal regulations. If the sponsoring non-profit agency has a University-approved policy that differs from the Federal rate (as discussed below), the application may include indirect costs at the University-approved rate.  If the sponsoring non-profit agency has a policy that it will not pay indirect costs, or has an indirect cost rate that is less than the Federal rate, the University will review the policy only upon receipt of a document on sponsor letterhead certifying:
  1. That the policy and rate are published;

2. That it is an agency-wide policy; and

3. That the policy is consistently applied by that organization to all of its outside grants and contracts with educational institutions.


A copy of the agency’s non-profit status as certified by the Internal Revenue Service may also be required.

Requests for rate exceptions with documented justification must be included with the submission of the original transmittal form. All material must be submitted via the appropriate Dean/Director (for his/her review and approval) to the Director of Research and Sponsored Programs for final approval.

Research and Sponsored Programs maintains a Nonfederal Indirect Cost Exceptions index of sponsors and rates that are approved. The current list is available on the RSP Web site at http://www.rsp.wisc.edu/rates/fnaexcept.cfm.

IV. GIFTS
Extramural funds received by the University that meet all of the following criteria will qualify as "gifts" and are not subject to indirect costs:


V. UNRESTRICTED GRANTS

VI. GRANTS AND CONTRACTS - FROM OTHER GOVERNMENTAL UNITS (i.e., foreign or domestic, states, counties, or local municipalities). a. 15% of total direct costs; or
b. 8% of total direct costs for WI Dept. of Public Instruction; WI Technical College System Board; and all divisions (except Health and Community Services) of WI Dept. of Health and Family Services.
2.    The application budget should include indirect costs, along with a footnote, which states, "If funded from state GPR funds or Nonfederal funds that do not provide indirect costs, indirect costs should be excluded from the award."   3.    At the time an award is made, if the Wisconsin governmental unit provides verification that the project will be funded from Nonfederal funds that do not provide indirect costs, the award will be accepted without indirect costs.   B.    Other Foreign or Domestic Governmental Units (countries, states, counties, or local municipalities:  
1.    All grant and contract applications to other governmental units must include indirect costs at the agreed upon Federal rate as set forth in the University/DHHS Negotiation Agreement, except as provided otherwise by Federal regulations.   2.    At the time of award, if the other governmental unit has a policy that it will not pay indirect costs or will provide indirect costs at a rate less than the Federal rate, the University will review the policy only upon receipt of a document on agency letterhead certifying the following:  
a. That the policy and rate are published;
b. That it is an agency-wide policy; and
c. That the policy is consistently applied by that governmental unit to all of its outside grants and contracts with educational institutions.  Requests for rate exceptions with the aforementioned justification must be included with the submission of the original extramural support transmittal form. All materials must be submitted via the appropriate Dean/Director (for his/her review and approval) to the Director of Research and Sponsored Programs for final approval.  
C.    Proposals submitted jointly by the University and any of the above governmental units to the Federal Government must include indirect costs on the University portion of the budget at the Federal rate currently in effect.
Any questions about this notice should be directed to Diane Barrett 608-262-0252.

xc: School/College Research Administrators
 

See the RSP website for current rates:  http://www.rsp.wisc.edu/rates


Links and contact names/number have been updated on: August 24, 2005
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