Chapter 8-400

Indirect Cost Rates in Proposals and Awards

8-400 Indirect Cost Rates in Project Budgets

Contracts and Grants Offices are responsible for ensuring the use of the appropriate indirect cost rate in sponsored projects at the time of proposal and when an award is made. Unless an indirect cost exception has been approved or the Verified Sponsor Policy (VSP) (see 8-530.4 for more information on VSP) has been applied, the appropriate indirect cost rate for an award is the federally-negotiated rate or a UC Rate, as applicable. The campus Extramural Funds Office should not set up an account for an award at less than the applicable full indirect cost rate without an approved exception (see 8-500).

8-410 Changes in Rates

Generally speaking, the indirect cost rates used for any given project should not change for the life of the award. Per 2 CFR § 200, Appendix III.C.7 , the federally-negotiated rate agreement in effect at the time the award is made, remains in effect for the funded period of that award. Typically the same applies to non-federal awards.

However, there are times that a new federally-negotiated rate agreement is executed between when a proposal is submitted and when the award is issued. If in the new agreement the indirect cost rates increase, then additional funds to cover the increases should be requested from the sponsor as allowed by the sponsor’s policy. Generally, uncommitted or unused direct cost funds will be used to cover indirect cost deficits at the end of the funded budget period, if permitted by the terms of the award.

If in the new agreement the indirect cost rate decreases and results in an anticipated indirect cost surplus at the end of a project, available funds may be transferred to direct cost categories, if permitted by the terms of the award.

8-420 Awards Transferred to a UC Campus

When an award is transferred to a UC campus (regardless of whether the award is coming from an outside institution or another UC campus) and the awarded indirect cost rate is less than the appropriate campus indirect cost rate, the campus should request additional funds from the sponsor to cover the indirect cost recovery deficit. If the sponsor is unable to provide additional indirect cost recovery, then the campus should request an indirect cost rate exception. The National Science Foundation's cost sharing policy prohibits a campus from reducing indirect cost rate below its federally-negotiated rate; therefore, indirect cost exceptions are not allowed for transferred NSF awards. For any renewals of that award or continuations for which a new budget is submitted, the current approved rate(s) shall apply.

8-430 Moves from Off-Campus to On-Campus

When a project located off-campus is awarded an off-campus indirect cost rate and moves on-campus during the period of performance (or vice versa), the campus should rebudget any funds budgeted for direct cost of leased space as indirect costs. If the leased space rebudgeting is not sufficient to cover the full indirect cost recovery, the campus may need to request additional funds from the sponsor. If the sponsor does not award additional funds, the campus should further reallocate direct costs to achieve full indirect cost recovery.