Indirect Cost (IDC) Recovery

Indirect Costs (IDC), also known as Facilities and Administrative (F+A) Costs, are the real costs associated with University operations that cannot be allocated to a specific project. These include: (1) departmental administration costs, (2) plant operations and maintenance costs, (3) space related costs (utilities, depreciation), (4) network costs (hardware, software, personnel services and other related costs to enable University personnel to share software or data, or communicate with other individuals electronically), and (5) College seed funding.

U-M IDC rates are set by the government every couple of years, and vary according to the project type. IDC rates can be found on the ORSP website, and should be included in all sponsored project budgets. Any variations to these rates must receive prior approval from the Associate Dean for Research + Creative Practice.

Included within the IDC rate is an adjusted expenditure tax (21.4%) that U-M units are required to pay the Provost’s Office on all expenditures. This includes all research expenditures, and as a result, the current College practice is to aim to recover a minimum of 21.4% IDC on all externally funded research, in order to offset these costs that would otherwise be borne by the College.

Some sponsoring agencies may refuse to fund IDC recovery at the rates outlined by the University. In such cases, the College will consider approving some categories of direct costs to meet this 21.4% threshold. This amount may include at least 5% total direct costs (TDC) for administrative support, and the balance provided in student support. Grants and sponsored support at or below $10,000 are excluded from this requirement, and the IDC can be waived by the Associate Dean for Research + Creative Practice. Beginning in 2018, the College made a strategic commitment to waive IDC for foundation-sponsored projects where content aligns with the College’s DEI Strategic Plan, and the foundation refuses to fund IDC recovery.

All exceptions to the minimum IDC rate must be approved in advance by the Associate Dean for Research + Creative Practice and may involve discussions or negotiations with the external sponsoring agency. Where the financial implications of waiving the IDC rate requirement are significant, consultation with the Dean may be required prior to approval. If you are uncertain about IDC policies, please contact the R+CP Team to discuss. If you wish to request a reduction in IDC rate, please fill out the indirect cost waiver request form and include the approval notice with your proposal package.

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