Indirect Cost Rates

Indirect Cost Guidance

It is the goal of Vanderbilt University Medical Center to recover the full cost of each sponsored project, when permitted by the established policies of the funding agency. Full costs are defined as those costs that reasonably can be associated with and allocated to a particular project. They include costs that are generally treated as direct (costs that can be readily and specifically identified with a particular sponsored project relatively easily and with a high degree of accuracy) and indirect (costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project). 

For sponsored projects supported by the federal government, the Office of Management and Budget Uniform Guidance prescribes the allowance of certain costs and the assignment of those allowable costs as direct or indirect. With certain limitations, OMB Uniform Guidance is intended to enable the institution to recover the full cost of projects sponsored by federal agencies. Please note that OMB Uniform Guidance uses the term "Facilities and Administrative Costs" or "F&A Costs" to describe what most institutions typically refer to as indirect costs. 

Periodically, the Department of Health and Human Services negotiates an agreement with VUMC on behalf of the federal government that sets forth indirect cost rates for three types of sponsored activities: 

  1. Organized research
  2. Instruction
  3. Other sponsored activities

The agreement specifies the rates at which the institution can recover indirect costs associated with all projects sponsored by the federal government agencies. 

Non-federal sponsors are not bound by the terms of OMB Uniform Guidance and are not necessarily guided by the principle of full-cost recovery for VUMC. In particular, non-profit organizations routinely reject prescribed indirect cost rates, even when considerably lower than those set forth in the rate agreement with the federal government. In some instances these lower indirect cost rates are linked to a funding agency's operating philosophy of partnering with an institution to develop new programs. In the majority of cases, however, it is simply an administrative decision on the part of the sponsor. 

Reduced indirect cost rates for foundations will be accepted if: 

  • Those reduced rates are published as part of the general policies of the organization (i.e. in conjunction with the proposal solicitation)
  • The reduced rates uniformly are applied to all award recipients

If the foundation does not have a published indirect cost policy, full indirects of the modified total direct costs (MTDC) are recommended. 15% of total direct costs should be the minimum. 

Contact your OSP representative if you have any questions concerning indirect costs.