Policies and Procedures

Policy

Indirect Costs

Category(ies)
Budget and Planning
Approval(s)
Thomas L. Purce: January 27, 1993
Steward(s)
Executive Director of Operational Planning and Budget
Revision(s)
Technical correction for title change to Vice President for Finance and Administration
November 20, 2000

(1) PURPOSE

The purpose of this policy is to identify procedures for allocating indirect earnings from grants and contracts at The Evergreen State College. This policy applies to all funds earned as of January 1, 1993.

(2) DEFINITION OF INDIRECT COST

Indirect costs are real costs. they are by their nature difficult to assign to any one specific project without extensive cost accounting procedures. Federal granting agencies and most non-governmental entities recognize the existence of such costs. These costs include:

(a) the costs of using the buildings and equipment;
(b) accounting, personnel, computing, and purchasing expense;
(c) mail, printing, and duplicating expense;
(d) library services; and
(e) administration.

(3) INDIRECT COST RATE CALCULATION

Although indirect expenses are recognized as real costs, many funding agencies will not provide full reimbursement of indirect costs. Given this reality, the college should strive to recover the maximum indirect costs allowable by the granting agency. Grant writers will need to check with the Grants and Contracts Accountant and the funding agency for appropriate indirect cost rates.’ The recovery of all possible indirect costs is essential.’ When recovery is incomplete, other budgetary units and programs suffer.’ In addition, if the college does not recover as much indirect costs as we estimated in our biennial budget request, we are required to cut budgets somewhere to offset the shortfall.

The process of establishing indirect cost rates is complex, and the policies of granting agencies toward them vary.’ Because of this, it is important that all grant applicants review this aspect with the Grants and Contracts Accountant, before completing an application and before any negotiations are entered into with the granting agency.

Additionally, the grant writer should make every effort to include all direct charges on the grant request. Quite often, many indirect-types of expenses can be requested and accounted for as direct costs.

(4) APPROVAL REQUIRED TO REQUEST LESS THAN ALLOWABLE INDIRECT RATES

All grants and contracts that will require the college to absorb the indirect cost or use them as a cost sharing initiative must have the concurrence of the appropriate dean, director and budget coordinator and must ultimately be approved by the Vice President for Finance and Administration.

(5) INDIRECT COST DISTRIBUTION

All indirect reimbursements are deposited at the college for internal allocation according to college policy. In accordance with federal, state and college policy, the Vice President for Finance and Administration has the responsibility to ensure that all expenditures of these funds are made consistent with the following college priorities:

(a) Full cost of Grants and Contracts Accountant position and support budget for the current year.
(b) Indirect reserve equal to one year of the projected cost of the Grants and Contracts Accountant position and support budget for the next fiscal year.
(c) Provide that future year projections indicate that there are sufficient funds to cover item numbers 1 and 2 above, any excess earnings will be allocated at the end of the fiscal year in which the revenues were collected according to the following schedule:

1. 20% will be transferred to the library
2. 70% will be transferred to the department or division that realized significant indirect costs associated with having grants in their area.
3. 10% will be allocated to the Provost for purposes of grant support. The intent of this allocation is to provide faculty with incentive funds to produce additional grants for the benefit of the college, and/or to support costs resulting from direct grant activity.’ Expectations of funds should in no way diminish efforts to identify all grant-related costs at the point of grant submission.