The variety of extramural sponsors supporting our research, public service and fellowship/traineeship activities makes it appropriate to clarify and revise the UW-Madison policies and guidelines on the collection of indirect costs.

1. INDIRECT COSTS (description and rate development)
   

   Indirect costs are real costs that provide reimbursement for actual institutional expenses that support extramural activities, but cannot be directly charged to a grant or contract. The costs result from shared services such as libraries, plant operation and maintenance, utility costs, general, departmental and sponsored projects administrative expenses, and depreciation or use allowance for buildings and equipment.

   Indirect costs for all Federal grants and contracts are computed on the basis of actual costs incurred and regulations from the U.S. Office of Management and budget that define those cost categories that are eligible for reimbursement. A set of indirect cost reimbursement rates is periodically negotiated with the Federal Department of Health and Human Services (DHHS-the cognizant audit agency for the UW-Madison). A signed agreement, that establishes the allowable rates of reimbursement, is entered into between the University and the Government.

2. GIFTS
   

   Extramural funds received by the University that meet all of the following criteria will qualify as "gifts" and are not subject to indirect costs:

   1. Provide general or unrestricted support for broadly defined activities in one or more program areas, such as research, public service, instruction, fellowships/traineeships, etc.;
   2. No detailed fiscal or technical reports are required--either periodic or final. (The principal investigator may provide the donor with a brief statement that the expenditures were in accord with the intent of the gift or a brief summary of the results of the supported activities.);
   3. No patents, copyrights, or other intellectual property rights that result from the gift are claimed by the donor;
   4. No provisions (e.g., delays, advance notice) are imposed by the donor concerning publication or dissemination of data and information derived from the activity;
   5. There is no specific time limit on the expenditure of funds;
   6. The donor’s gift is irrevocable.
   
   

   Extramurally funded activities that do not meet all of these criteria for designation as a gift will be treated as a non-Federal grant or contract, subject to assessment of indirect costs, as provided in this policy.

3. GRANTS AND CONTRACTS
   1. FEDERAL GRANTS AND CONTRACTS
      1. Funds received directly from Federal agencies
         All grant and contract applications to and awards from Federal agencies must include indirect costs at the agreed upon rate as set forth in the University/DHHS Negotiation Agreement, except as provided otherwise by Federal regulations. The faculty and staff are notified of the agreed upon rates by a Research and Sponsored Programs Notice.
         
         
      2. Federal funds not received directly from Federal agency
         Indirect costs on pass-through funds, commonly referred to as non-direct Federal grants and contracts (except those funds passed through other governmental units-see Section IV), must be included at the appropriate Federal rate currently in effect.
      
      
   2. NON-FEDERAL GRANTS AND CONTRACTS
      1. Non-Federal grants and contracts from for-profit entities
         All grant and contract applications to and awards from Non-Federal for-profit entities must include indirect costs at the agreed upon Federal rate as set forth in the University/DHHS Negotiation Agreement, except as provided otherwise by Federal regulations. Awards that do not include the full indirect cost rate will not be accepted.
         
         

         The following exceptions to the collection of full indirect costs will apply:

         1. The Clinical Trial rate will continue at a rate of 20 percent of Total Direct Costs.
            
            
         2. For matching funds for a federal, state or non-profit funded grant or contract, the required rate on the matching funds from a for-profit entity will be limited to the rate approved for the applicable federal, state or non-profit agency.
            
            
         3. Grants and contracts of $5,000 or less will be subject to previously applicable provisions. These requirements are specified in III.B.2. below (Non-Federal Grants and Contracts from Non-Profit Entities).
         
         
      2. Non-Federal grants and contracts from non-profit entitles
         All grant and contract applications to Non-Federal non-profit entities must include indirect costs at the agreed upon Federal rate as set forth in the University/DHHS Negotiation Agreement, except as provided otherwise by Federal regulations. If the sponsoring non-profit agency has a University-approved policy that differs from the Federal rate (as discussed below), the application may include indirect costs at the University-approved rate.
         
         

         If the sponsoring non-profit agency has a policy that it will not pay indirect costs or has an indirect cost rate that is less than the Federal rate, the University will review the policy only upon receipt of a document on agency letterhead certifying the following:

         1. that the policy and rate are published;
         2. that it is an agency-wide policy; and
         3. that the policy is consistently applied by that organization to all of its outside grants and contracts with educational institutions.

         A copy of the agency’s non-profit status as certified by the Internal Revenue Service may also be required.

         Requests for rate exceptions with documented justification must be included with the submission of the original transmittal form. All material must be submitted via the appropriate Dean/Director (for his/her review and approval) to the Chancellor’s designee (Research and Sponsored Programs) for final approval.

         The Research and Sponsored Programs designee will maintain the Non-Federal Indirect Cost Exceptions index of agencies and rates that have been approved and will periodically provide each Dean and Director with a copy of the index so subsequent applications to these organizations will not require further submission of documentation.
         
         
4. GRANTS AND CONTRACTS FROM OTHER GOVERNMENTAL UNITS (i.e., foreign or domestic states, counties, or local municipalities).
   1. WISCONSIN STATE AGENCIES, COUNTIES, OR LOCAL MUNICIPALITIES.
      1. Indirect costs on all new, renewal, and continuing applications to Wisconsin governmental units shall be requested at:
         1. 15 percent of total direct costs or
         2. 8 percent of total direct costs for Wisconsin Dept. of Public Instruction (DPI); Vocational, Technical, and Adult Education (VTAE); and all divisions (except Health and Community Services) of Wisconsin Dept. of Health and Social Services (DHSS).
         
         
      2. The application budget should include both tuition remission and indirect costs, along with a footnote which states, "If funded from state GPR funds or non-Federal funds that do not provide tuition remission and indirect costs, tuition remission and indirect costs should be excluded from the award."
         
         
      3. At the time an award is made, if the Wisconsin governmental unit provides verification that the project will be funded from non-Federal funds that do not provide tuition remission and indirect costs, the award will be accepted without tuition remission and indirect costs.
      
      
   2. OTHER FOREIGN OR DOMESTIC GOVERNMENTAL UNITS (countries, states, counties, or local municipalities).
      1. All grant and contract applications to other governmental units must include indirect costs at the agreed upon Federal rate as set forth in the University/DHHS Negotiation Agreement, except as provided otherwise by Federal regulations.
         
         
      2. At the time of award, if the other governmental unit has a policy that it will not pay indirect costs or will provide indirect costs at a rate less than the Federal rate, the University will review the policy only upon receipt of a document on agency letterhead certifying the following:
         1. that the policy and rate are published;
         2. that it is an agency-wide policy; and
         3. that the policy is consistently applied by that governmental unit to all of its outside grants and contracts with educational institutions.
         
         Requests for rate exceptions with the aforementioned justification must be included with the submission of the original extramural support transmittal form. All materials must be submitted via the appropriate Dean/Director (for his/her review and approval) to the Chancellor’s designee (the Office of Research Services) for final approval.
      
      
   3. Proposals submitted jointly by the University and any of the above governmental units to the Federal Government must include both tuition remission and indirect costs on the University portion of the budget at the Federal rate currently in effect.
      
      

See also the Table of Indirect Cost Rates and the U.W. Madison Graduate School Indirect Costs on Research Awards Memorandum.

Any questions about this notice should be directed to Diane Barrett, Assistant Director at 608-262-0252.