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Indirect Costs & Rates

Important Notes:

  • Full recovery of indirect costs is expected on all grants/contracts.
  • In early discussions with Private Sponsors, defer indirect cost arrangements to ORSP. 
  • New proposals for federally-supported projects should include the indirect cost rates listed, and the relevant rate applied to each year for which funding is anticipated.
  • Questions about indirect cost rates should be directed to your school/college/institute/center administration.
  • Finance-Sponsored Programs maintains PDFs of the Rate Agreement letters
  • Class Codes for Sponsored Projects provides definitions of "research," "instruction," "other sponsored activity," and "clinical trial site activity."

"Indirect costs" (also known as Facilities & Administrative,  F&A, or IDC) are real costs of University operations that are not readily assignable to a particular project. Indirect cost rates are determined by the Federal government under the Uniform Guidance (formerly A-21). 

All Sponsors* July 1, 2015 - June 30, 2016**

  • Research: on campus: 55.0% | off campus26.0%
  • Instruction: on campus: 54.0% | off campus26.0%
  • Other Sponsored Activity: on campus: 29.0% | off campus26.0%

*This excludes the State of Michigan.

**Keep using these same rates for now. These predetermined rates become provisional after June 30,  2016. They will remain so until the federal government negotiates a new agreement with the University of Michigan. New predetermined rates are likely not to occur until July 1, 2017.  If and when this changes, we will announce it in a RAPid communication (please sign up for RAPid communications if you are not yet subscribed). 

The State of Michigan

Varies widely, depending on the specifics of individual projects. Contact your school/college/institute/center administration for assistance with State of Michigan indirect cost rates.

Non-Profit Sponsors and Full Recovery of Indirect Costs

After a thorough consultation with U-M stakeholders and benchmarking against U-M's peer institutions, ORSP announced in May 2014 a change to the standard indirect cost rate to be used in proposals to foundations and non-profit sponsors.

Effective May 1, 2014, all proposals to non-profit sponsors should use the same indirect cost rate as is used for federal and industry sponsors.

Please also reference our new Standard Operating Procedure (SOP) on indirect cost policy. The University's policy continues to require the full recovery of indirect costs whenever possible. However, when full recovery is not possible, policies and procedures for waiving full recovery of indirect costs will be enforced at the level of U-M's schools, colleges, institutes and centers (as well as the Flint and Dearborn campuses). 

IDC Waivers

 ORSP delegates responsibility for:

  • Establishing criteria for when a sponsor-capped IDC rate will be accepted.
  • Establishing criteria for what constitutes an IDC waiver.
  • Determining how IDC waiver requests should be submitted and reviewed.
  • Determining who is authorized to approve IDC waiver requests.
  • Documenting whether an IDC waiver request has been approved.

Requests for waivers must be submitted and reviewed by the relevant school/college/institute/center's requirements.

ORSP will not assess whether the IDC rate used on a PAF is a waiver; nor will it require documentation that an IDC waiver has been approved. Instead, ORSP will consider approval of the PAF to be evidence of school/college/institute/center approval of the IDC rate, regardless of what rate is used.


If the University offers to cost- share a portion of the direct costs of a project, the indirect costs associated with those direct costs may also be used for cost sharing (with prior approval in the case of federal funds). If the sponsor limits indirect costs, the difference between the full recovery of indirect cost and what is allowed by the sponsor may be shown as a University cost-sharing contribution.

Class Codes

Our page on Class Codes for Sponsored Projects provides definitions of:

  • research
  • instruction
  • other sponsored activity
  • clinical trial site activity

MTDC: The indirect cost rates for federal projects are applied to a modified total direct cost (MTDC) base. The rates apply to all direct costs with the exception of the following:

  1. Equipment with a unit value of $5000 or more and a life expectancy of one year or greater. (Nonexpendable items valued at less than $5000 or with less than a one-year life expectancy should be budgeted as materials and supplies.)
  2. Capital expenditures.
  3. Participant support costs.
  4. Charges for patient care.
  5. The amount of each subcontract or subgrant exceeding $25,000.
  6. Rental costs for off-site facilities.
  7. Student tuition remission, scholarships, and fellowships.

TDC: The indirect cost rates for most non-federal projects are applied to a total direct cost (TDC) base. The rates apply to all direct costs.

Clinical Trials:

  1. For federally-sponsored clinical trial site activity, use the OSA rate based on modified total direct costs (MTDC).
  2. For industry-sponsored clinical trial site activity, use the OSA rate based on the total direct costs (TDC).

Is it an Off-Campus Project?

To determine whether a project qualifies for the off-campus rate, read the off campus definition and hints provided below in the FAQ.

Specialized Service Facilities

The University no longer applies or recovers a Specialized Service Facility Fee (SSFEIDC) or Quality Assurance Fee (QAF) related to animal charges on sponsored projects (funds 20000, 25000). All animal purchase and housing for all external sponsors are now treated as any other supply or service cost with no change to the Indirect Cost Recovery.

The QAF at 20% will be applied to all animal charges on non-sponsored projects (funds 10000, 30000, 40000, 54010) within the Medical School.



First note that:

  • Responsibility for demonstrating that the off-campus rate is appropriate rests with the project team.
  • The approved indirect cost rates applicable to all proposed projects are shown in Indirect Cost Rates chart.
  • Full recovery of these costs is expected on all grants or contracts.
  • Any variance from stated indirect cost rates must be discussed with your School/College/Institute/Center administration in advance of proposal submission.

Following are questions to help you determine the criteria that must be met to determine whether a project is "on campus" or "off-campus." 

Test #1: 

Is the proposed effort of U-M personnel working off-campus (including cost shared effort) greater than the proposed effort of those working on-campus?

 Yes? Use off-campus rate. 

Howeverif Test #1 is not definitive, then apply Test 2:

Test #2: 

Are the total direct costs incurred off-campus greater than those incurred on-campus?

 Yes? Use off-campus rate.

Responsibility for demonstrating that the off-campus rate is appropriate rests with the project team. The approved indirect cost rates applicable to all proposed projects are shown in Indirect Costs & Rates chart.

Full recovery of these costs is expected on all grants or contracts. 

References and Resources

ORSP Standard Operating Procedures (SOPs)


  • If you have any questions about indirect cost rates, contact your school/college/institute/center administration.

 Procedures for applying for IDC Waivers