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Indirect Cost Recovery

This statement describes the College’s policy and procedures for distributing indirect cost returns to the generating unit and principal investigator (PI).

Background

Research or other scholarly activities such as instruction, public service/outreach, or cooperative extension are often funded by sponsors (e.g., federal agencies, foundations, etc.) through formal contracts and grants, which have two distinct cost types:

  1. Direct Costs: The majority of a project budget will be costs that are directly related to the unique needs of a project. These costs must be allocable, allowable, and reasonable. Typical examples include personnel (salary and fringe), materials and supplies, travel, and equipment.
  2. Indirect Costs (IDC): In addition to the above, costs are also incurred by UGA to support sponsored projects that are non-allocable and relate to the environment and infrastructure. These indirect costs are also commonly termed Facilities & Administrative (F&A) reimbursement. Examples of these costs are laboratory space, utilities (e.g., water, electricity), library operations, and accounting support. The F&A reimbursement included on the project’s budget is calculated as a percentage of a project’s direct costs modified for unique items (e.g., equipment). UGA has detailed policies and distinct rates to manage F&A costs.

F&A Return (IDC Return/​Recovery) – Allocations

Because F&A expenses are incurred at several levels of university administration, UGA has a process whereby a portion of the IDC is returned to the generating unit(s) to reimburse this cost. This financial distribution and accounting process is commonly termed F&A return or IDC recovery. Additional detailed information regarding F&A/​IDC is available from Sponsored Programs Administration within the Office of Research.

  1. University to Generating Unit: The UGA policy is that 80% of a project’s F&A return remains in the institutional-level budgets -central campus- with the remaining 20% being passed through to the generating unit(s) - College of Education- in equal amounts from two distinct accounts. These accounts, defined below, are both managed by UGA accounting and follow state procurement policies but differ in their carry-forward policies.
    • UGA Research Foundation (UGARF; independent research organization, 10%): These funds can be carried over from one fiscal year to the next (fund type 20300).
    • Instructional Budget (General Operating Budget, 10%): Funds greater than 10% cannot be carried over to the next fiscal year (fund type 15000).
  2. Generating Unit to Department and PI: Currently, there is no policy at UGA mandating how, or even if, F&A returns should be shared within a generating unit – Department/Center. The current F&A return policy within the College is that of the 20% of the IDC returned from central campus, 10% remains in the Dean’s Office, 45% is returned to the Department/Center, and 45% is returned to the PI (see charts in the pdf at the link below). Departments/Centers may choose to allot more, but not less, to the PI.

F&A Return (IDC Return/​Recovery) – Important Considerations & FAQs

  1. Limited Opportunity Sponsored Projects: F&A return is different for projects that required UGA to be an applicant by limiting the opportunity to land grant institutions or institutions of higher education only. Generating unit still receives 20%, but all funds are transferred to the Instructional Budget.
  2. Multiple Investigator Teams: Many sponsored projects involve individuals from different generating units (e.g., colleges) or departments within the College. Thus, F&A return is often split among the PI team based on facility/equipment needs and administrative support for the project. These decisions must be made at the time of the proposal submission and are entered into the Grants Portal and approved by all investigators and their unit heads (i.e., department heads, deans, etc.) on the transmittal form. F&A return will be distributed based on this allocation designation.
  3. Distribution of Funds (Timing & Access to PI): F&A returns are based on incurred research expenditures; therefore, IDC funds are only available after corresponding direct funds are spent. Importantly, timing and access to these funds also depend on account type [i.e., UGARF vs. Instructional Budget (IB); see Figure above] as funds are allocated to UGARF or Instructional Budget at different times for the same grant.
    • The UGARF account uses real-time revenue accrual: As the monthly expenditure totals and IDC charges hit the contract/grant account, the 10% UGARF IDC returns become available for use at the beginning of the following month. Thus, revenue and operating budgets adjust automatically, and funds can be spent immediately.
    • The Instructional Budget account uses an advance with a true-up process: Units start the Fiscal Year (FY; July 1st – June 30th) with a budget based upon the previous calendar year. In January, there is a true-up process whereby budgets are adjusted to the calendar year that just ended. This process allows funding to be available to support personnel, especially Graduate Assistants, and plan for expenditures. It is recommended not to spend over 66% of the IDC before the true-up process occurs in order to be certain of the actual funds available.

Business Managers and Post-Award personnel can support and advise PIs with their budget planning, especially regarding IDC use. Post-Award personnel manage and update the UGARF funds, and departmental Business Managers manage and update the Instructional Budget IDC funds.

Should there be a dispute regarding the distribution or use of funds from indirect cost return, the dispute should be referred for resolution to the Associate Dean for Research and Graduate Education.

Revised: April 2023