U-M’s Facilities & Administrative (F&A) Rates and Indirect Cost (IDC) Policies

F&A and IDC policies

Important Notes on F&A Arrangements: 

• Use the rate relevant to your proposed project’s anticipated funding year. New proposals for federally-supported projects should include the IDC rates listed, and the relevant rate applied to each year for which funding is anticipated.
• Questions about IDC rates should be directed to your school/college/institute/center administration. For FAQs on F&A costs, please see the guidance on the COGR website.
• Our Class Codes and Definitions for Sponsored Awards page lists the definitions of “research,” “instruction,” “other sponsored activity,” and correlates them to the current, approved F&A rate.

Full recovery of indirect costs

Full recovery of indirect costs (IDC or F&A costs) is expected on all grants/contracts whenever possible. Please reference ORSP’s Standard Operating Procedure (SOP) on indirect cost policy and Finance-Sponsored Program’s Policy On Indirect Cost Recovery Excluded (ICRX) Expenditures (U-M Finance). 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).

Indirect cost waivers

IDC Waivers are processed at the level of the school/college/institute/center. Requests for waivers must be submitted and reviewed by the relevant school/college/institute/center’s requirements.

ORSP delegates responsibility for:

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

ORSP will not assess whether the F&A 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 F&A rate, regardless of what rate is used. Please see Standard Operating Procedure (SOP) 200.02: Indirect Cost Recovery.

Nonprofit sponsors

At U-M, all proposals to non-profit sponsors should use the same indirect cost rate used for federal and industry sponsors.

Cost sharing

If the University agrees 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.

Modified total direct costs and total direct costs

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 $5,000 or more and a life expectancy of one year or greater. (Nonexpendable items valued at less than $5,000 or with less than a one-year life expectancy should be budgeted as materials and supplies.) For awards beginning on or after July 1, 2026, the equipment threshold will be $10,000.
2. Capital expenditures.
3. Participant support costs.
4. Charges for patient care.
5. The amount of each subcontract or subgrant exceeding $25,000. For awards beginning on or after July 1, 2026, the exception will be for subcontracts or subgrants exceeding $50,000.
6. Rental costs for off-site facilities.
7. Student tuition remission, scholarships, and fellowships.

TDC: The indirect cost rates for most non-federal projects, not at full indirect cost recovery, are applied to a total direct cost (TDC) base. The rates apply to all direct costs.

Clinical trials

1. For federal and non-profit sponsored clinical trial site activity, use the federally negotiated OSA rate based on modified total direct costs (MTDC).
2. For industry-sponsored clinical trial site activity and related clinical trial support, use a 35% rate based on the total direct costs (TDC) without exclusions.
   • This rate reflects the university’s full indirect support costs for Other Sponsored Activity prior to federal rate negotiation.
   • The 35% rate is applied to all direct costs, which includes participant support costs (such as stipends, travel allowances and subsistence) and patient care expenses. 

Specialized service facilities

The University does not apply or recover a Specialized Service Facility Fee (SSFEIDC) nor a Quality Assurance Fee (QAF) related to animal charges on sponsored projects (funds 20000, 25000). All animal purchase and housing for all external sponsors are 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.

The State of Michigan

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

Calculating space

It is the goal of the University of Michigan to recover full costs of each sponsored project where permitted by the sponsor’s policies. Full costs are those that can reasonably 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 with a high degree of accuracy) and facilities and administrative costs (sometimes called F&A, indirect, or IDC), which are incurred for common or joint objectives and, therefore, cannot be identified readily and specifically with a particular sponsored project).

Federal sponsors

Charging rents (or space or square footage) on federal budgets is not allowed as an indirect/F&A cost per Uniform Guidance.

For sponsored projects supported by the federal government, the Uniform Guidance § 200.413 and 200.414 prescribe the allowability of certain costs and the assignment of those allowable costs as direct or “indirect.” With certain limitations, 2 CFR §200.413 is intended to enable U-M to recover full costs on projects sponsored by federal agencies. 

Periodically, the Department of Health and Human Services (acting on behalf of the federal government) and the University negotiate an agreement setting forth indirect cost rates for three types of sponsored activities: organized research, instruction, and other sponsored activities. The agreement specifies the rates at which the University can recover its indirect costs associated with projects sponsored by all agencies of the federal government. 

Non-federal sponsors

Charging rents (or space or square footage) may be allowable as a direct or indirect cost for non-federal sponsors depending on the sponsor requirements and could be helpful in recovering full costs on a project.

Non-federal sponsors (i.e., private sponsors, whether industry or non-profit) are not bound by the terms of UG monitored costs. Many private sponsors do not reimburse U-M for its indirect costs at the level set forth in the rate agreement with the federal government (noted above).

For a sponsored project that 1) is funded by a non-federal agency (with non-federal funds), and 2) does not include indirect cost recovery at the prevailing federal or industry rates, it is permissible to recover through direct charges, costs that can be attributed to that project, but that otherwise typically are treated as indirect. In all cases, the services or items being charged must be allowable under University policy, must be associated with that specific project, and their costs must be proportionate to the level of their use on that project. Examples include clerical and administrative salaries, space/facilities, routine postage telephone line rental, memberships, subscriptions and local area network expenses.

Space/facilities charge

The opportunity to directly recover space/facilities costs may be possible if the following specifics apply:

• The source of funding is non-federal.
• The charge has explicit approval from the sponsoring agency.
• The charge reflects the amount of space used and is pro-rated for the time period over which the space will be used.
• The charge is based on the current rate per net assignable square foot per year.  
• For example, the rate for FY 2024 was $88.34 per net assignable square foot per year, as defined as “Total facilities costs allocated to research (less libraries) / total research space.”)
• The department will charge the project manually via journal entry (JE) and Sponsored Programs will review and approve it.

Though not a requirement, ORSP encourages that budgets also recover the administrative component (26%) and the library component (1.7%) of the F&A rate.

Important Space Survey Note

If space is charged directly to a sponsor, the percentage of the room devoted to the project being charged must be added as “room use function code 1102” in the annual U-M space survey. This will ensure that the space gets excluded from the research IDC rate.