How to Calculate Unusual Indirect Costs

Page Updated: October 29, 2019

In most cases, indirect (also called F&A) costs are calculated using an MTDC base. In some cases, a sponsor will have a published limitation on indirect costs, so we would use a TDC base (Scenario 1). In less frequent cases, a sponsor may require that the indirect costs be limited to a percentage of the total cost of the award (Scenario 2). See examples below.

Scenario 1: Indirect Costs Limited to Percentage of Total Direct Costs

To determine how much direct costs are allowed, divide total costs by 1.XX where XX is the indirect cost rate expressed as a decimal (e.g. 20% = 0.20).

Total Costs / (1.XX) = Maximum Direct Costs

Direct Costs x F&A rate = F&A Costs

Maximum Direct Costs + F&A Costs = Total Costs

Example 1: Total Costs Limited to a Specific Amount

Applicants may request up to $100,000, and the F&A rate is limited to 20% of total direct costs.

$100,000 (total costs) / 1.20 (1.F&A rate) = $83,333.33 (maximum direct costs)

$83,333.33 (direct costs) x 0.20 (F&A rate) = $16,666.67 (F&A costs)

$83,333.33 (direct costs) + $16,666.67 (F&A costs) = $100,000 (total costs)

Calculate your own:

Scenario 2: Indirect Costs Limited to Percentage of Total Award

To determine how much may be requested for direct and indirect costs, use the following formulas, with F&A rate % expressed as a decimal (e.g., 20% = 0.20):

Direct Costs / (1.0 - F&A rate %) = Total Award OR Total Award x (1.0 - F&A rate %) = Direct Costs

Total Award x F&A rate % = Indirect Costs

Direct Costs + Indirect Costs = Total Award

Example 2a: Total Costs Limited to a Specific Amount

Applicants may request up to $100,000 total costs, and the F&A costs may not exceed 20% of costs:

$100,000 (total costs) x (1.0 - 0.20*) = $80,000 (direct costs); *1.0 - 0.20 = 0.80

$100,000 (total costs) x 0.20 = $20,000 (F&A costs)

Example 2b: No Maximum Total Costs Indicated

The F&A rate is limited to 8% of total award, and the PI only needs $40,000 for direct costs:

$40,000 (direct costs) / (1.0 - 0.08*) = $43,478 total award; *1.0 - 0.08 = 0.92

$43,478 x 0.08 = $3,478 (indirect costs)

$40,000 + $3,478 = $43,478 (total costs)

Calculate your own (click below to expand):