Definition · Plain-language
Indirect costs (F&A)
Indirect costs — also called facilities and administrative (F&A) costs — are the real costs of supporting research that cannot be tied to one specific project.
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Direct versus indirect
A direct cost can be assigned to a specific project with relative ease — a named researcher’s salary, project-specific equipment, or trial supplies. An indirect cost benefits many activities at once and cannot be traced to one award without disproportionate effort: building depreciation, heating and lighting, sponsored-programmes administration, libraries and IT. F&A costs are genuine costs of doing research; they are recovered indirectly precisely because direct assignment is impractical.
The negotiated rate
Institutions establish an F&A rate with a cognisant federal agency, typically expressed as a percentage of modified total direct costs (MTDC). The rate is built from a cost study and negotiated periodically. Applied to a project’s direct cost base, it determines how much overhead the sponsor reimburses. Different rates may apply to on-campus versus off-campus work and to research versus instruction.
The de minimis option
Entities that have never had a negotiated rate may elect the Uniform Guidance de minimis rate rather than negotiate one. The 2024 revisions raised the de minimis rate to 15% of modified total direct costs (up from 10%). This simplifies budgeting for smaller organisations and new recipients, who can charge the flat rate without a formal negotiation, subject to the conditions in 2 CFR 200.
Key facts
At a glance
- Definition: costs not attributable to a single project (F&A)
- Also called: facilities & administrative (F&A) costs, overhead
- Examples: buildings, utilities, libraries, central administration
- Recovery: negotiated indirect cost rate on a direct-cost base
- Base: often modified total direct costs (MTDC)
- De minimis: up to 15% of MTDC (2024 Uniform Guidance)
Common misconceptions
What people often get wrong
Often heard: Indirect costs are profit or padding.
Actually: F&A costs are real costs of supporting research — facilities, utilities, administration — that simply cannot be charged directly to one project.
Often heard: The de minimis indirect rate is 10%.
Actually: The 2024 Uniform Guidance revisions raised the de minimis rate to 15% of modified total direct costs.
Often heard: Every institution uses the same indirect rate.
Actually: Rates are negotiated individually with a cognisant federal agency and vary by institution and by on- versus off-campus activity.
Going deeper
