Chapter 8-100

General Policy

8-100 Indirect Costs

Facilities and administrative (F&A) costs are the indirect costs of conducting research, instruction, or other sponsored activities that cannot be easily attributed to a specific sponsored project. When seeking the reimbursement of indirect costs on a sponsored project, the University is recovering for costs already spent to support these activities.

8-110 General Policy on Indirect Costs

University Regulation No. 4 (Revised), found in the University of California Academic Personnel Manual as “Special Services to Individuals and Organizations” provides that:

For all tests and investigations made for agencies outside the University, a charge shall be made sufficient to cover all expenses, both direct and indirect. (APM-020)

Additionally, the Regental policy on full recovery of indirect costs is stated in Regents Standing Order 100.4(m), Duties of the President of the University. These policies establish the principle of full cost recovery for work or services performed with extramural funds.

Full cost recovery includes all Direct Costs and Indirect Costs. Direct Costs are defined as costs that can be readily and specifically identified with benefiting a particular program or project. Indirect Costs for U.S. institutions of higher education, described as “Facilities & Administrative (F&A) costs” in the Code of Federal Regulations (CFR), are specifically defined in part in 2 CFR § 200.56 as:

Indirect (F&A) costs means those costs incurred for a common or joint purpose benefiting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved.

8-120 Duties of Principal Investigators and Administrators to Seek Full Cost Recovery

Full cost recovery is necessary to support the University’s physical and administrative capacity to perform research. When indirect costs are not fully recovered, maintaining the University’s research capabilities and infrastructure is compromised. All sponsored agreements should share the burden of the cost of research.

To restate, from APM-020, “a charge [to the extramural sponsor] shall be made sufficient to cover all expenses, both direct and indirect” (emphasis added). As such, Principal Investigators and Administrators have a duty to ensure that sponsored projects are performed on a full cost recovery basis. Principal Investigators and Administrators are obligated to seek full recovery of indirect costs from all sponsors when applying for an extramural award.

8-130 Duties of the President

The President is authorized to negotiate and approve all indirect cost rates, per Regents’ Standing Order 100.4(m), Duties of the President of the University. The Standing Order calls for the President to negotiate toward full recovery of indirect costs. This authority includes the power to approve exceptions to the approved indirect costs rates determined under the provisions found in the Uniform Guidance, 2 CFR § 200. University practice accepts the use of indirect cost rates negotiated with the University’s cognizant federal audit agency as meeting the requirement to obtain full recovery.

The above Presidential authority has been delegated to the Executive Vice President–Chief Financial Officer (DA-2592). Some campuses develop their indirect cost rate proposals and negotiate the rates prior to submitting either the proposal or the final agreement to the EVP-CFO for signature.

Only the authority to approve exceptions to negotiated indirect cost rates has been further delegated to the Vice President–Research and Graduate Studies and the Chancellors. See 8-510 for additional discussion of further delegated authority to approve exceptions to negotiated indirect cost rates.

8-140 Duties of the Regents’ Committee on Finance

Only the Regents’ Committee on Finance, has approval authority for accepting the fixed payment (lump sum payment) the University receives in lieu of indirect costs under the Department of Energy (DOE) contract for the operation of the Lawrence Berkeley National Laboratory.

Regents’ Bylaw 12.3(g) Committee on Finance authorizes The Regents’ Committee on Finance to:

Consider and approve the setting or amending of fixed payment in lieu of indirect costs applicable to contracts for management and operation of the major United States Department of Energy Laboratories.

Pursuant to this Bylaw, the fixed amount negotiated with DOE for the University’s management and operation of DOE Laboratories must be submitted to The Regents’ Committee on Finance for review and approval.