On January 26, 1993 Chancellor Ward announced a refinement of the University of Wisconsin-Madison policy on the collection of indirect costs on research awards. This refinement recognized that it was no longer appropriate for the University to accept significant research awards from the for-profit sector without reimbursement for the necessary indirect costs of that research.

The Chancellor also asked that a detailed implementation of this policy be developed. We requested the Principal Investigators Committee, which represents PIs from all Divisions of the University, to recommend the precise way to carry out this revised policy. The Committee conducted a careful review and analysis of our awards from for-profit sponsors. We have accepted the recommendations of that Committee; the Office of Research Services, together with Research Administration-Financial, have followed these guidelines since May of 1993.

The only exception permitted to the general requirement that the full federally-negotiated indirect cost rate be charged to for-profit sponsors is for small awards of $5000 or less. This exemption will be reviewed after we have more experience with its use. We will continue to accept these awards without full indirect costs if the formal stated policy of the sponsor restricts the payment of such costs. In addition, awards providing required matching funds for any awards from the federal or non-profit sectors which carry less than full indirect costs will be accepted at that same reduced rate. For formal clinical trials carried out at UW-Hospitals, the Veterinary School Hospital, or off-campus, indirect costs of 20% of the total direct costs represent full reimbursement.

The preceding Research Administration notice provides a complete description of UW-Madison policies on the collection of indirect costs on extramural awards for research. See especially the Research Administration-Financial Notice 95-1 and it's Table of Indirect Cost Rates. The only changes from Research Administration-Financial Notice 83-3, issued in 1983, are for awards from for-profit sponsors.

We appreciate the support which our extramural sponsors provide for our research mission. At the same time, we recognize that the indirect costs of research are real costs which, if not provided by the sponsor, must be covered by our very limited amount of discretionary funds. Our policies are designed to assure the fairest use of these resources. I ask your cooperation in this effort.