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Inside Iowa State, a newspaper for faculty and staff, is published by the Office of University Relations.

July 2, 2004

Research indirect cost figure climbs to 47 percent

by Linda Charles

Iowa State has successfully negotiated a 1 percent increase in indirect costs for sponsored funding awards.

The new rate (47 percent) went into effect July 1, and will generate more than $240,000 in additional funds for the university over each of the next three years, and an estimated $24 million in total indirect costs annually, said James Bloedel, vice provost for research and advanced studies.

The final year of the four-year agreement, the indirect cost rate has been negotiated at 46.5 percent, Bloedel said. (The rate for off-campus projects, in which more than 50 percent of the project is conducted off campus, is 26 percent for the duration of the agreement.)

Tuition, equipment excluded from calculation

Most federal agencies, and many other entities, pay indirect costs on top of the direct costs of the grant award (the direct costs are the operating budget for the project). In calculating indirect costs for an award, certain items from the direct cost budget, such as student tuition and equipment, are excluded.

Indirect costs help cover a multitude of things that enable research and other scholarly activity to be conducted on campus. That includes building and equipment depreciation; interest; operation and maintenance; the library; and general, departmental and sponsored program administration.

Actual research costs higher than rate

"These are real costs," Bloedel said. "The higher the indirect benefit, the better. The actual cost to the university of conducting research is significantly higher than the 47 percent."

The agreement was reached with the U.S. Department of Health and Human Services, the most common agency for institutions to negotiate with, Bloedel said. While other federal government units can negotiate separate indirect costs, most will accept the HHS rate.

A notable exception for Iowa State is the U.S Department of Agriculture, which won't pay the full indirect cost rate, Bloedel said. Among other exceptions are state agencies. Grants from industry and business are expected to cover full indirect costs, although the current policy allows some modification in rates for small exploratory projects or for new Iowa companies.

"The cost of doing research at Iowa State is the same, independent of funding source, so we must emphasize the importance of collecting full indirect costs on all awards," Bloedel said.

Most indirect costs don't affect researcher's award

"In most cases, the indirect cost rate has no impact on the amount of money our researchers receive to actually perform their research," Bloedel said. "Those awards in which indirect costs don't come on top of the direct costs are definitely in the minority."

Summary

The new indirect cost rate will be 47 percent for the next three years, and 46.5 percent for the fourth year. Most federal agencies, and many other entities, pay indirect costs on top of the direct costs of a grant award. Indirect costs help cover a multitude of things that enable research and other scholarly activity to be conducted on campus.

Quote

"The higher the indirect benefit, the better. The actual cost to the university of conducting research is significantly higher than the 47 percent."

James Bloedel