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Using the New indirect Cost Rates
DRDA-Net Memo dated July 9, 2008
Dear Friends,
Last week [July 3, 2008] Cheryl Soper, University Controller, announced that the University had signed a new Facilities and Administrative Cost (aka indirect cost) rate agreement with the Federal government. In today's note we address some of the practical implementation questions that have been asked since the new rates were announced. (We are attaching this memo in Word format for those of you who find that easier to read.)
1. As Cheryl noted, the new rate agreement is dated June 30, 2008. (This replaces the previous agreement dated March 7, 2005.) The rate structure in the new agreement is effective immediately. (See the complete updated list of Indirect Cost Rates for various activities and sponsors at http://www.research.umich.edu/proposals/budgets/indirect_cost_rates.html)
2. If you are preparing proposal budgets for on-campus research projects, please use the new rates included in the agreement. Two options can be used, though Option 2 (prorating) is preferred and most correct. Please check with the relevant DRDA project representative to determine the best option for a particular sponsor.
Option 1: For each individual budget period, use the rate in effect on the first day of that budget period and use it for the entire budget period. Example: If preparing a five-year budget that begins May 1, 2008, use 52% MTDC for the entire first year; and 54.5% for the budget years 2, 3, 4, and 5. There is no prorating within individual budget periods to accommodate different rates with this option.
Option 2: For each individual budget period, use the rates effective for each individual month. Using the same example, the first budget period would use 52% for the first two months (5/1/08 - 6/30/08) and 54.5% for the next ten months. Years 2, 3, 4, and 5 would carry the rate of 54.5%
Note: Do NOT use weighted averages (i.e., 2 months at 52% and 10 months at 54.5% should not be expressed as an average 54.08%)
3. For proposals submitted prior to the rate change announcement (i.e., July 3, 2008), with budgets calculated at then current full rates, DRDA will attempt to secure the additional funding from the sponsor to accommodate the rate increase when notice of award is received if requested by the recipient unit. DRDA will do this on a proposal-by-proposal basis during the normal budget negotiation process with the sponsor. This may require submission of a revised budget to DRDA. If the budget cannot be increased to accommodate the rate, the units receiving the award will be asked to approve a partial indirect cost waiver and the award will be established and budgeted at the rate indicated in the award documents (and noted on the applicable PAN or PAC). Please note that some sponsors do not allow submission of revised budgets for pending proposals, e.g., NSF.
4. For existing (ongoing) projects the University will continue to charge indirect costs at the rate that the award was accepted. Projects will be held harmless with regard to the increase in the indirect costs that would have been caused by the rate increase assuming that increase has not been funded, i.e., no direct costs will need to be rebudgeted to cover the increase in the indirect cost.
5. The industry rate will change consistent with the Federal rate change. Effective July 1, 2008, the on-campus research industry rate will increase to 54.5% MTDC.
6. In proposals you might be preparing now, please reference the new agreement date. A pdf of the fully-signed agreement is available at the Financial Operations website:
(http://www.finops.umich.edu/CRO/09-11.pdf )
If you have questions, please contact the offices indicated above or either of us.
Rob Barbret, rbarbret@umich.edu
Elaine Brock, ebrock@umich.edu
July 9, 2008