Indir

General Policy Implementation And Waiver Requests

Page synopsis: This page contains:

A. The MSU policy addressing reimbursement for the indirect costs incurred by MSU in support of research and creative endeavors.

B. A general discussion of the indirect cost rate applicable to various sponsor categories.

C. A description of the waiver process whereby a researcher can request administrative approval for seeking less than the applicable indirect cost from a prospective sponsor.

This page will address the general policy at MSU for the collection of indirect cost for the conduct of a research or creative project. The general policy is that the full indirect cost rate should be included in the budget. This arises from the policy discussed in the Faculty Handbook that states, in part, the following.

“Major Guidelines

The following statement was approved by the Graduate Council on May 15, 1967 and by the Board of Trustees on March 20, 1970.

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9. The University should make a continuous effort to see that its own members are provided with sufficient information on overall cost of research and other financial matters concerning grants and contracts so as to minimize internal misconceptions that arise with regard to justifiable allowances for indirect costs.

10. The entire cost of sponsored research should be carefully determined; if grants or contracts are accepted which do not cover the direct and indirect costs, the institution should itself provide the additional financial support with the full recognition that it is making a contribution to the cost of the work.”

Collection of less than the full amount of indirect costs, for whatever reason, will result in MSU not being reimbursed for the total costs incurred in conducting your project.

In practice, the collection of indirect cost is implemented with the following guidelines.

State of Michigan: The vast majority of the state pays indirect cost at the rate of 20% modified total direct costs (MTDC). Answers to questions or the need to verify the rate can be obtained by the PI or his/her department or college by contacting the person in this section who assists with pre-award matters.

Local government: Same as for the State of Michigan, i.e., 20% MTDC.

Foundations: MSU will generally accept the indirect cost rate a foundation pays provided the Office of Contract and Grant Administration has a copy of the written policy of that foundation. This documentation can consist of, e.g., copy of a policy statement; a letter from the foundation informing MSU of the foundation's general policy; a copy of a grant application package that includes a statement of their policy. However, if the documentation is a letter from an individual of the foundation it must clearly state the foundation's approved general policy that is applied to all grant recipients. The pre-award person in this section can be contacted if there are any questions or need to verify a foundation's rate. If we do not have any documentation it should be provided to this office no later than when the transmittal is processed. Please note that if the indirect cost paid by the foundation is less than MSU’s full rate then the rate that is charged will be applied to total direct costs (TDC).

Non-profits: The same as foundations.

Industry: It is expected that indirect cost will be paid by industrial sponsors that fund specific research or creative projects. A letter or other documentation from the potential industrial sponsor containing their "policy" regarding reimbursing MSU for indirect costs will not be accepted as it is when received from a foundation or other non-profit organization. Please note that if the indirect cost paid by the funding party is less than the full rate due to an approved waiver the rate that will be charged will be applied to total direct costs (TDC).

An established exception to this guideline is when a medical or pharmaceutical company funds a clinical trial to determine or confirm the efficacy of a drug, compare two or more drugs, or to determine the effectiveness of a medical device or implant or equipment. The indirect cost rate used for this exception is to be no less than 15% TDC. The exception is applicable whether the trial involves humans or animals, and regardless if the intended beneficiaries of the drug or medical device, implant, or equipment is to be humans or animals. Please note this 15% TDC rate is not automatic simply because funding is from a medical or pharmaceutical company, but is due to the nature of the project, i.e., "testing" or a clinical trial. Funding from a medical or pharmaceutical company to support a project that is research/creative in nature does not fall within this exception and is thus subject to the full indirect cost rate. There is no need to process a waiver for this exception since this office has been given the authority by the Office of the Asst. VP for Research Support to allow this reduced indirect cost rate provided the nature of the project clearly falls within the criteria of a clinical trial. However, we strongly encourage seeking indirect cost recovery of more than the 15% since any rate higher than the 15% will result in MSU recovering more of its costs associated with the clinical trial. In no case should the indirect cost recovery exceed the current full indirect cost rate.

Please note this 15% indirect cost rate has been extended to feed tests.

This 15% indirect cost rate also can be applied to other forms of testing, provided the nature of the project as outlined in the scope of work for the testing does not result in any research being conducted, no matter what proportion of the total work is research.

Any uncertainties or disagreements regarding the nature of the project will be resolved by the Office of the VP for Research and Graduate Studies.

Unrestricted funding: Unrestricted funding from any source will generally not be subject to indirect cost charges. However, the circumstances involved will be very important in this determination. Use of the term "unrestricted funding" is meant to refer to funding that does not require MSU to provide the funding party with anything in return for the funding, i.e., a quid-pro-quo. Nor should the funding party apply an administrative burden on MSU by such requirements as imposing budget restrictions, financial reporting obligations, or the return of unexpended funds. The PI can contact this section and discuss the circumstances surrounding the funding.

Indirect Cost Waiver Requests

A waiver must be obtained prior to the transmittal being processed by the Office of Contract and Grant Administration. It is advisable that the waiver be processed so that the PI can finalize her/his budget with the proper indirect cost rate prior to forwarding the transmittal for review and approval. A copy of the project proposal and budget should accompany the waiver request in order that the officials who review and consider the request can also review the project and tentative budget.

If the PI must process both the waiver request and the transmittal together then he/she may wish to include two budgets. One budget can include the full indirect cost applicable to the sponsor, with a second budget reflecting project costs with the indirect cost rate if the waiver is approved. The PI also may wish to highlight in the waiver request the impact on the project if the waiver is not approved.

The waiver consists of a memorandum drafted by the PI(s). The memorandum should not only include what is being sought, e.g., reduction of indirect cost from 47% to 30%, but also any support for the request. This support can include documentation from the potential sponsor. The PI should also discuss any benefits MSU will derive by cost sharing on the project (note that if MSU does not recover its full indirect cost applicable to the project the unreimbursed indirect cost will need to be funded by MSU). In short, a cost-benefit justification.

A waiver is required whenever the PI seeks to recover less than the indirect cost rate applicable to that sponsor. For example, a research project budget funded by industry with a rate less than the current rates; sponsored activity with funds from a foundation which pays 15% indirect cost but the PI wishes to recover less than the 15% allowed by the foundation.

The routing of the waiver request for review and recommendations is the following.

1. PI(s) draft the request and sign.

2. To the department (or equivalent) for consideration, recommendation, and signature.

3. To the college (or equivalent) for consideration, recommendation, and signature.

4. To the Office of the VP for Research and Graduate Studies for final determination.

Please contact the pre-award person in this section if you have are any questions regarding indirect cost rates as they apply to the sponsors this section administers.

JFS 28 Nov. 2005