About Indirect Costs

Indirect Costs –alternately referred to as "Facilities and Administrative Costs (F&A)" or “overhead”– represent the expenses of doing business that are not readily identified with a particular grant, contract, project function or activity, but are necessary for the general operation of the College and the conduct of activities it performs. Indirect costs are expenditures related to administration, human resources, maintenance, utilities, and other general administrative and business support offices.

Because individual F&A costs cannot be assigned to projects, the College calculates a rate to determine the fair share of F&A costs each project should be charged and negoti­ates this rate with the government.

How Indirect Costs Are Calculated

Indirect costs are calculated by multiplying the agreed-upon Indirect Cost (IDC) Rate by the total sum of eligible direct costs.

For example, if your project’s direct costs (e.g. student wages, supplies, printing costs, etc.) total $10,000, and the sponsor allows indirect costs using an IDC rate of 10%, your overhead would be calculated as: $100,000 x 0.10 = $10,000. The total cost of the project thus would be $110,000 ($100,000 + $10,000).

When calculating indirect costs in a proposal budget, it is important to consider both the indirect cost rate and the indirect cost base.

  • Federal Funding: On federal grants and contracts, indirect costs are calculated using a Modified Total Direct Cost (MTDC) base. This means that certain direct costs cannot be included in the base used to calculate overhead. The most common costs that are excluded from the MTDC are:
    • Equipment and Equipment Fabrications Costing More than $5,000
    • Capitalization Costs
    • Subaward Expenditures in Excess of $25,000
  • Non-Federal Funding: On most non-federal awards that include overhead, indirect costs are calculated on a Total Direct Cost (TDC) basis, meaning that no direct costs are excluded from the base.

Federally Negotiated F&A Rates

Every few years, Emerson College is required to negotiate the Facilities and Administrative (F&A) rates it uses in grants and contracts with the Federal Government. In addition to indirect costs, this also includes the fringe benefits rates that may be used for salaries charged to federal grants and contracts.

Emerson’s current F&A Agreement from the Department of Health and Human Services is for the period of July 1, 2023 through June 30, 2027, or until amended. The revised rates must be used for all federal sponsored project proposals with anticipated start dates of July 1, 2023 or later.

The new rates are as follows:

Indirect Costs/Overhead
From To Rate Location Applicable To
07/01/2023 06/30/2027 56% On campus All programs
07/01/2023 06/30/2027 26% Off campus All programs
07/01/2027 Until amended 56% On campus All programs
07/01/2027 Until amended 26% Off campus All programs


Fringe Benefit Rates

From To Rate Applicable to
07/01/2023 06/30/2027 32% Full-time employees
07/01/2023 06/30/2027 7.65% Part-time employees
07/01/2027 Until amended 32% Full-time employees
07/01/2027 Until amended 7.65% Part-time employees

On-Campus and Off-Campus Rates: The indirect cost rate for federal proposals in support of on-campus activities is 56%. “On-Campus” indicates the general location(s) of the activity that will occur in conducting the project. On-campus locations include space in buildings owned by the College and, in many instances, space in buildings leased by some entity of the College.

The indirect cost rate for federal proposals in support of off-campus activities is 26%. This designation indicates that the preponderance of grant activity will occur in space not owned or leased by the College, and in space that is significant physical distance from the College. Put another way, The off-campus rate applies to projects performed in space that the College does not own and for which the College does not bear a lease cost.

The determination of whether a proposal qualifies to use the off-campus rate is made by the Office of Research and Creative Scholarship, in consultation with the Controller. A principal investigator/applicant cannot unilaterally decide to use the off-campus rate because it is the lower of the two.

Non-Federal F&A Rates

It is the policy of Emerson College to request indirect costs on proposals to non-federal sponsors, whenever permitted. Many foundations specify their own indirect cost rates, and it is the policy of the College to utilize these rates in its proposal budgets. When a non-federal sponsor is silent on F&A, a de minimis rate of 10% should be applied.

To learn more about F&A costs and how they are budgeted and recovered, please review the answers to Frequently Asked Questions (FAQs) below. Further information may be found in the College’s F&A/Overhead Policy, which includes details about the distribution of a portion of recovered F&A revenue to principal investigators on grants with overhead (i.e. “F&A Return Funds”).


What are Facilities and Administrative Costs?

Also referred to as indirect costs, F&A costs are expenses incurred by an organization that cannot be identified readily and specifically with a particular sponsored project but contribute to the ability of the College to conduct sponsored projects. Expenses of maintaining and operating the College’s sponsored project infrastructure include costs related to buildings (labs, offices, training facilities, etc.), utilities (water, electricity, heating, air conditioning, etc.), maintenance (custodial and facilities services, etc.), equipment, libraries, general administration (purchasing, accounting, payroll, human resources, legal services, etc.), departmental administration (deans offices, academic departments, etc.), and sponsored project administration. These costs are considered F&A costs, and sponsoring agencies reimburse organizations for these expenses through an F&A rate.

To what budget items does the F&A rate apply?

All rates are applied to a Modified Total Direct Costs (MTDC) base. The MTDC base includes all direct costs, excluding capital expenditures, equipment with a per-unit cost of $5,000 or more, charges for tuition remission, rental costs of off-campus facilities, scholarships, fellowships, participant support costs, and the portion of each subaward.

Why does the College require project directors to budget for F&A costs?

F&A costs are actual costs that are incurred by the College in administering a sponsored award. Because it is not practical for a project budget to allocate funding for all such costs, the Federal government utilizes a rate model to account for these expenses and to provide a fair and consistent method through which reimbursement can be made. The College requires that sponsored project budgets include F&A costs because facilities and administrative expenses are incurred for each sponsored project, and without funds to cover these costs, the College would not have an infrastructure that could support sponsored projects. It would be unfair to require students to cover these costs through tuition revenue, especially for projects that are not for their direct benefit.

How are the rates determined?

The Federal government outlines specific procedures to be used in determining the rates and requires institutions to provide a proposal and financial data in accordance with these procedures. The government then uses a detailed review process to arrive at approved rates for each organization. The rates are not set by the College and cannot be amended without a new Federal rate agreement.

What does the College do with funds recovered through the F&A rate?

Recovered F&A funds are used to help offset the College’s facilities and administrative expenses.

What if I want to apply to a funding program that limits or prohibits F&A costs?

If a sponsoring agency limits or prohibits the recovery of F&A costs, the College currently accepts these restrictions and subsidizes the F&A costs provided that written documentation (i.e., policy statement or application guidelines) from the sponsoring agency is provided when the proposal is submitted for internal review.

What if I have a current sponsored project award that uses a lower rate?

The revised rates apply only to new awards and do not impact existing awards. Effective immediately, project directors are required to use the new rates for all proposals submitted for internal review.

If you have questions about budgeting for F&A costs, please contact the eric_asetta [at] emerson.edu (Executive Director for the Office of Research and Creative Scholarship) with any questions.