CASRAI Dictionary

Tag: indirect costs

  • OMB 2024 Uniform Guidance: $1M Audit, 15% Indirect

    In 2024 the US Office of Management and Budget (OMB) issued a substantial revision to the Uniform Guidance — the government-wide rules at 2 CFR Part 200 that govern how federal grants and cooperative agreements are administered. Two changes drew particular attention in the research-administration community: the Single Audit threshold rose to $1 million, and the de-minimis indirect-cost rate rose to 15 percent. This article describes the revisions at a high level and is a neutral explainer, not accounting or compliance advice.

    What the Uniform Guidance is

    The Uniform Guidance consolidates federal requirements for cost principles, administrative requirements and audit into a single framework that applies across agencies. It governs questions such as which costs are allowable on an award, how indirect costs are recovered, what records recipients must keep, and when an organisation must undergo an audit of its federal spending. For context on how it fits the wider compliance landscape, see our overview of the Uniform Guidance.

    Because the guidance is government-wide, a change to it ripples across every federal funding agency at once, which is why periodic OMB revisions matter so much to universities, hospitals, non-profits and other recipients.

    The Single Audit threshold rises to $1 million

    The Single Audit — sometimes called a Uniform Guidance audit — is the annual audit that a non-federal entity must obtain when it expends federal awards above a defined threshold in a year. The 2024 revision raised that threshold to $1 million in federal expenditure, up from the previous lower figure. Entities spending below the threshold in a given year are not required to obtain a Single Audit for that year, though they remain subject to records and monitoring expectations.

    The practical effect is that some smaller recipients fall below the audit trigger, while larger research institutions — which routinely expend well above $1 million — continue to require a Single Audit. For the mechanics of the audit itself, see our explainer on the Single Audit.

    The de-minimis indirect rate rises to 15 percent

    Indirect costs (also called facilities and administrative, or F&A, costs) are real costs of supporting research — buildings, utilities, administration — that are not attributable to a single project. Organisations may negotiate an indirect-cost rate with the federal government, but those without a negotiated rate may instead elect a de-minimis rate applied to a defined cost base.

    The 2024 revision raised the de-minimis rate to 15 percent, up from the long-standing 10 percent. This gives recipients that have not negotiated a rate — often smaller organisations and some subrecipients — a higher default recovery of indirect costs without the administrative burden of a rate negotiation.

    • Who benefits: recipients and subrecipients without a current negotiated indirect-cost rate.
    • How it applies: as a flat percentage on a defined modified-total-direct-cost base, per the guidance.
    • What it does not change: organisations with negotiated rates continue to use those negotiated rates.

    Other themes in the 2024 revision

    Beyond the two headline numbers, the OMB revision aimed broadly at reducing administrative burden and improving clarity. Reported themes include plainer drafting, raised thresholds in several places to reduce low-value paperwork, and adjustments intended to make the rules easier to apply consistently. The detailed text governs in any specific case, and recipients generally read the revised 2 CFR Part 200 alongside their agency’s implementing guidance.

    Effective dates and applicability

    A practical question for any regulatory revision is when it applies. OMB’s revised guidance carried an effective date in 2024, and agencies implement the government-wide text through their own award terms. In general, the terms and conditions attached to a given federal award determine which version of the rules govern that award, so recipients commonly check the version referenced in their specific agreements rather than assuming the newest text applies retroactively to everything. New awards and new audit periods are the typical points at which the revised figures take practical effect.

    This is why research-administration teams pay attention not only to the headline numbers but to the transition: an institution may have awards under both the prior and revised guidance running concurrently, and applying the correct version to each is part of careful grants management.

    Why government-wide rules carry weight

    It is worth underlining why a single OMB revision commands so much attention. Because the Uniform Guidance is government-wide, the same baseline rules apply whether an institution is funded by a health agency, a science agency, a defence research office or any other federal source. A change to the de-minimis rate or the audit threshold therefore propagates across an institution’s entire federal portfolio at once, rather than agency by agency. That breadth is what makes periodic OMB revisions a planning event for finance and research-administration offices, rather than a narrow technical adjustment affecting only one funding stream.

    What research administrators should take away

    For research-administration teams, the revisions translate into concrete operational questions: whether the higher Single Audit threshold changes an entity’s audit obligation in a given year; whether budgets and subaward terms should reflect the higher de-minimis indirect rate; whether financial systems and chart-of-accounts mappings correctly capture federal expenditures for the Single Audit determination; and whether internal policies, templates and training need updating to match the revised language. Many offices also revisit subrecipient risk assessments and monitoring procedures, since the rules governing pass-through entities are part of the same framework.

    Subrecipient monitoring is one area where both changes intersect, because pass-through entities must apply the rules consistently to those they fund. The higher de-minimis rate in particular often appears in subaward budgeting discussions.

    The two figures are easy to remember — a $1 million Single Audit threshold and a 15 percent de-minimis indirect rate — but the authoritative source is the revised regulation itself at whitehouse.gov/omb and the codified text in 2 CFR Part 200, which institutions consult for definitive application. For neutral background on related grants terminology, see our standards dictionary.

  • Research costing and full economic costing: calculating the true cost of research

    Ask what a research project costs and most people will think of the obvious things: the salaries of the researchers, the equipment, the consumables, the travel. These are real costs, but far from the whole story. Behind every project stands an apparatus that makes it possible — the buildings, the heat and light, the libraries and computing, the finance, HR and research-management staff, the depreciation of shared facilities, the cost of the institution’s very existence. These are no less real for being less visible, and if they are not accounted for the institution is quietly subsidising the research from elsewhere. Working out what research genuinely costs, and how much of it a funder will pay, is the unglamorous but essential discipline of research costing. This article explains how the true cost of research is calculated and recovered, drawing on the funding and finance domain of the CASRAI Dictionary.

    Direct and indirect costs

    The foundational distinction in research costing is between direct and indirect costs. Direct costs are those that can be attributed specifically to a project: the salaries of the people working on it, the equipment bought for it, its consumables and its travel. Indirect costs — often called overheads — are the costs of shared infrastructure and services the project relies on but that cannot be tied to it alone: estates, central administration, IT, libraries, finance and HR, and the general running of the institution. The crucial point is that indirect costs are real costs of doing the research, even though they are shared. A project conducted as if only its direct costs mattered would appear far cheaper than it truly is, and the gap would be made up invisibly by the host institution.

    Full economic costing

    The principle that the entire cost of research — direct and indirect — should be identified is captured in the idea of full economic costing (FEC). Its aim is to reveal what research actually costs to undertake, including a fair share of the institution’s overheads and infrastructure, so that decisions about pricing, funding and sustainability rest on an honest basis. Without it, institutions cannot know whether their research is financially sustainable, and may unknowingly run at a loss on activity that appears, on a narrow view, to be funded. Full economic costing does not by itself determine who pays; it establishes the true figure against which questions of payment can be sensibly considered. It is, in effect, the costing equivalent of telling the truth about the bill.

    TRAC: the UK approach

    In the United Kingdom, the method used to arrive at the full economic cost is TRAC — the Transparent Approach to Costing. TRAC is the standard by which UK universities cost their activities, including research, attributing the relevant share of indirect and estates costs to reach a full economic cost figure, from which the rates used in pricing proposals derive. TRAC matters because it provides a consistent, accepted basis for understanding institutional costs, which underpins negotiations with funders about what they will pay. Its existence means the full cost of UK research is not guesswork or special pleading but the output of an agreed methodology — giving institutions and funders a common, defensible starting point.

    Funders rarely pay the full cost

    Here lies the central tension of research costing: knowing the full economic cost does not mean a funder will pay it. Funder cost policies vary widely in how much of the full cost they cover, and many fund research at less than its full economic cost. The shortfall — between what the research costs and what the funder pays — must be met by the institution from its other income. This has profound consequences: institutions must think carefully about the portfolio of research they undertake and how it is sustained; winning a grant is not the same as the research being fully funded; and the apparently arcane details of funder cost policies bear directly on institutional viability. The recovery of indirect costs in particular is a perennial point of negotiation, because indirect costs are precisely what funders are most often reluctant to pay in full.

    International approaches to indirect costs

    Different systems handle indirect costs in characteristically different ways, and the contrasts are illuminating:

    • In the United States, federal research grants typically apply a negotiated indirect cost rate — facilities and administrative (F&A) costs — agreed between an institution and the government and applied to direct costs.
    • In the European Union’s research framework programmes, indirect costs have commonly been handled through a flat-rate approach, reimbursing overheads as a fixed percentage of eligible direct costs rather than calculating them project by project.
    • In the United Kingdom, the TRAC methodology produces full economic cost figures, with funders such as the research councils contributing a defined proportion of that cost.

    Each model attempts to solve the same problem — how to recognise and recover the genuine but shared costs of research — and each strikes a different balance between accuracy, simplicity and the funder’s willingness to pay. The differences matter for institutions working across multiple funders and jurisdictions, where the same project may be costed and reimbursed quite differently depending on whose rules apply.

    Costing as part of research management

    Research costing is one of the less visible but more consequential parts of research administration. Getting it right protects the financial health of institutions and ensures that difficult conversations about funding rest on accurate figures rather than wishful thinking. For costs to be compared, reported and managed across institutions, funders and systems, the categories involved — direct, indirect, estates, full economic cost, recovery rate — must mean the same thing everywhere. That consistency is what the CASRAI Dictionary provides: a shared vocabulary so that financial information about research is understood identically wherever it is recorded. And because the work behind every funded project is what the costing supports, the contributions involved can be described within the same framework as any other — the CRediT taxonomy and its contribution roles. Research is never free, and someone always pays for the infrastructure that makes it possible; full economic costing is the discipline of being honest about that fact.