New indirect cost rates have now been formally established for the University of Wisconsin-Madison. The rates are for the period July 1, 1996 through June 30, 2000 and are as follows:

These rates were audited by the Department of Health and Human Services, Division of Cost Allocation and established in a Rate Agreement dated July 1, 1996. This date is important because it is required on many Federal grant applications forms.

When preparing extramural budgets, please remember that under MTDC (Modified Total Direct Costs) the applicable indirect cost rate is applied against all budget items except equipment, alteration and renovations, subagreement costs in excess of $25,000.00, equipment and space rental costs, patient care costs, and tuition remission recovery costs.

Due to the number of active programs and pending applications which include previously negotiated indirect cost rates, a transition from the old to new indirect cost rates will be administered as follows:

1. The 43% rate currently in effect on all active awards will be continued for the balance of that funded period. In addition, applications or other requests submitted to obtain release of precommitted support under non-competing continuations or incrementally funded projects, previously awarded to the University, may continue to use the 43% rate.
   
   
2. If the 43% rate was included in an application submitted prior to the receipt of this memo, and is awarded with an indirect cost rate of 43%, the award will be accepted at 43% by the University for the life of that non-competing segment. If the indirect cost rate on the award is increased to 44% without the sponsor providing the additional funding, the rate will be held at 43%.
   
   
3. New and competing renewal applications submitted after receipt of this memo should use the 44% rate effective immediately.

New Federal regulations, that also became effective July 1, 1996, require Federal funding agencies to use the negotiated indirect cost rates in effect at the time of the initial award throughout the life of the sponsored agreement. "Life" as defined in Federal regulations means each competitive segment of a project. "Competitive Segment" means a period of years approved by the federal funding agency at the time of the initial award. Because our new indirect cost rates became effective the same day as this new regulation, Federal agencies will be required to lock-in only our new indirect cost rates.

The attached Table of Indirect Cost Rates, first published as part of Notice 95-1, has been updated to reflect the new indirect cost rates.While the new negotiated rates have replaced the old rates on the grid, the application of specific rates during this transitional period will be governed by 1-3 above.

Projects that include rates that have decreased (e.g. Public Service from 36% to 34%) will be adjusted to the lower rates retroactively to July 1, 1996. Generally, the indirect cost savings can be rebudgeted and used for direct costs. If in doubt, please confer with the appropriate grant accountant in this office.

Your consistent use of the appropriate indirect cost rate in all application budgets submitted to extramural sponsors will be appreciated. Deans and Departmental Offices should update their copy of the "Extramural Support Guidelines" by inserting this memo into Appendix 19.

Questions concerning indirect cost rates on current and future proposals and awards should be directed to Diane Barrett, Assistant Director at 608-262-0252.