Indirect Costs FAQ

Research projects have two types of costs: direct costs and indirect costs. Both are essential to conducting research and creative activities. 

• Direct Costs: Expenses that can be directly attributed to a specific project, such as salaries for project staff, lab supplies, or travel expenses.
• Indirect Costs: Expenses that are not easily identifiable to a specific project, like building utilities, administrative salaries, and IT infrastructure.

This distinction is important because sponsors fund both direct and indirect costs to reflect the full cost of research and creative activities.

Indirect costs fund the essential infrastructure and services required for all scholarly endeavors, including research and creative activities. These include, but are not limited to:

• Maintaining and operating facilities such as labs, studios, classrooms, and collaborative spaces that provide the physical environments needed for your work.

• Providing IT systems, library resources, secure data storage, and other shared tools that enable access to cutting-edge research and creative technologies.

• Ensuring compliance with federal regulations, including IRB, IACUC, IBC, and other research compliance requirements, so your work meets the highest ethical and legal standards.

• Supporting administrative functions, such as human resources, financial services, and grant management, to reduce your administrative burden and streamline processes.

• Covering operational costs, including utilities, building maintenance, and custodial services, to ensure a safe, reliable, and productive environment.

These resources allow you to focus on your research and creative work, enhance your productivity, and position your projects for greater success.

UNO charges indirect costs to recover some of the shared expenses necessary to support research and creative activities. These costs enable the university to:

• Maintain critical infrastructure, such as labs, studios, offices, and shared facilities.

• Provide essential services, including human resources, compliance, and financial management.

• Ensure compliance with federal regulations, including Uniform Guidance (2 CFR Part 200), which requires federal agencies to accept the university’s negotiated indirect cost rates.

• Equitably distribute operational expenses, ensuring all projects have access to necessary resources.

Recovering these costs ensures UNO can sustain a high-quality environment for research and creative activities, meeting both federal standards and institutional priorities.

Indirect costs can sometimes be used as institutional cost-sharing, but this must be approved in advance. Cost-sharing commitments must be clearly justified, documented in the proposal, and comply with sponsor requirements and UNO’s cost-sharing practices. 

UNO’s indirect cost rates are determined through a federally regulated process that ensures they reflect actual costs incurred by UNO in supporting research and creative activities. The process involves:

• Cost Allocation: UNO categorizes and allocates its actual, incurred expenses (e.g., facilities maintenance, utilities, compliance, and administrative support) into specific cost pools. These costs are necessary for research operations but cannot be directly assigned to a single project. Federal guidelines require that these costs be measured, documented, and allocated proportionally across major university functions such as organized research, instruction, and other sponsored programs.

• Negotiation: UNO submits a detailed cost proposal to DHHS, its cognizant federal agency, using actual, audited financial data from a designated base year. DHHS then reviews the data to ensure compliance with Uniform Guidance (2 CFR Part 200) and negotiates the final indirect cost rate, which typically remains in effect for four years.

This process ensures that UNO’s indirect cost rates are based on real, documented expenses and accurately reflect the costs required to maintain the research infrastructure and administrative support necessary for sponsored projects.

UNO’s Indirect Cost rate is divided into two components: 

• Facilities Costs (Uncapped) – Based on UNO’s actual expenses for research infrastructure. 

• Administrative Costs (Capped at 26%) – The federal government has capped the administrative portion at 26% since 1991, meaning UNO cannot recover more than this percentage, even if actual administrative costs exceed this limit. 

While the facilities portion is determined by UNO’s real costs, the 26% cap on administrative costs is a federal restriction that applies to all universities, regardless of their actual administrative expenses. This limitation impacts cost recovery and how universities allocate resources to support research administration. 

UNO follows this structure to ensure compliance with Uniform Guidance (2 CFR Part 200) while sustaining the necessary infrastructure and support for research and creative activities. 

Once the rate is established, it is applied to eligible project costs using the Modified Total Direct Costs (MTDC) base. MTDC includes costs such as salaries, wages, fringe benefits, materials, supplies, travel, and the first $25,000 of each subaward, but excludes: 

• Equipment costing $5,000 or more with a useful life of more than one year. 

• Tuition remission, scholarships, and fellowships. 

• Rental costs and capital expenditures. 

• Participant support costs. 

• Charges for patient care. 

• The portion of subawards exceeding $25,000. 

For example, if a project has $100,000 in MTDC and the indirect cost rate is 48.5%, UNO would recover $48,500 to support shared institutional expenses. In cases where sponsors apply alternate rates (e.g., total direct costs or capped rates), UNO works within those limitations while ensuring compliance. 

The appropriate indirect cost rate for your project depends on the type of activity, the sponsor’s requirements, and the project’s location. At UNO, the federally negotiated rate agreement identifies the following major categories of sponsored projects.

Instruction (48.50%)

This category applies to teaching and training activities funded by sponsored projects that directly support the university's academic mission. These activities primarily benefit UNO’s internal audience, such as students, faculty, or staff, and focus on formal or informal education and training. 

Examples include: 

• Curriculum development for degree or non-degree programs, including new course creation. 

• Educational workshops or training programs targeted at UNO students, faculty, or staff. 

• Sponsored instruction or training activities established by grant, contract, or cooperative agreement (e.g., training programs for healthcare professionals). 

Organized Research (48.50%)

Organized Research includes all research and development activities of an institution that are separately budgeted and accounted for. This category encompasses: 

• Basic Research: Experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without a specific application or use in view. 
  Example: A systematic study on the effects of climate change on ecosystems. 

• Applied Research: Original investigation undertaken to acquire new knowledge directed primarily toward a specific, practical aim or objective. 
  Example: Research to develop a new vaccine or study the effectiveness of a policy intervention. 

• Experimental Development: Systematic work that draws on existing knowledge gained from research and practical experience to produce new products, processes, or methods, or to improve existing ones. 
  Example: Developing a prototype for a medical device. 

Organized Research also includes research training programs (e.g., NIH training grants) and clinical trials (Phases I, II, or III) that meet the definitions above. 

Other Sponsored Activities (34.00%)

This category includes work other than instruction or organized research that benefits external communities, organizations, or the general public. These activities are typically service-oriented and focused on providing programs or outreach that extend beyond UNO’s internal academic mission. Examples include: 

• Community outreach programs or workshops aimed at engaging or supporting external audiences. 

• Capacity-building grants or public health programs that address infrastructure or service needs. 

• Professional development programs designed for individuals or groups outside UNO, such as educators, practitioners, or community leaders. 
• Studies involving data collection for public repositories or registries without additional analysis.

Off-Campus Rate (26.00%)

The off-campus indirect cost rate applies only when at least 50% of the project activities are conducted in facilities not owned by UNO, and when UNO does not incur facility-related costs (e.g., rent, utilities, or maintenance) for those spaces.

What Does Not Qualify?

🚫 Working remotely (e.g., from home) does not qualify.

🚫 Convenience, telecommuting, conferences, and travel are not justifications for the off-campus rate.

What Qualifies for the Off-Campus Rate?

Projects conducted in non-UNO facilities where the sponsor or a third party directly covers facility costs.
Examples:

• Fieldwork performed in leased spaces

• Research conducted at partner institutions

How to Apply the Off-Campus Rate

   1. Consult your Grants Coordinator to review eligibility.

   2. The Office of Sponsored Programs will make the final determination on the appropriate indirect cost rate for the project.

Carnegie Community Engagement Rate (26.00%)

This rate applies to sponsored projects funded by local government or non-profit agencies within the Omaha Metro Area. While not part of UNO’s federally negotiated rate agreement, this internally established rate was approved by the Associate Vice Chancellor for Research and Creative Activity to align with UNO’s strategic mission as a Carnegie Community Engagement institution. 

Projects must meet the following criteria: 

1. The sponsor must reside in Cass, Douglas, Harrison, Mills, Pottawattamie, Sarpy, Saunders, or Washington County, AND

2. The sponsor must be a local government entity or a non-profit organization.

 By offering this rate, UNO streamlines the process for eligible projects, eliminating the need for a formal rate reduction request while supporting community-focused initiatives in alignment with its mission. 

Some sponsors, including certain foundations and state agencies, may impose caps or restrictions on indirect costs. In such cases, UNO requires written documentation of the sponsor’s policy, such as a funding announcement or official policy statement, to justify the reduced rate.

If a sponsor prohibits indirect costs or enforces a cap, a formal rate reduction request may not be necessary. However, OSP must verify and approve the restriction to ensure compliance with UNO policies and federal guidelines.

For federal sponsors, Uniform Guidance (2 CFR Part 200) requires the use of UNO’s federally negotiated indirect cost rate, unless specific exceptions apply. UNO works to ensure compliance with sponsor requirements and federal regulations while recovering as much of the actual cost of research and creative activities as possible.

Yes, you can request a reduction in the indirect cost rate; however, such requests are carefully reviewed by the Associate Vice Chancellor for Research and Creative Activity. 

When the full indirect cost rate isn’t applied, UNO must subsidize the unrecovered costs. This means the university absorbs the financial burden, which can affect its ability to broadly support research and creative activities. Therefore, rate reduction requests are approved only in exceptional circumstances and must demonstrate a clear strategic benefit to UNO. 

If you still wish to request a reduction, you must follow UNO’s formal process: 

1. Consult with your Grants Coordinator to discuss the rationale for the reduction and how it aligns with UNO’s policies. 

1. Complete the F&A Rate Reduction (FARR) Form in NuRamp, where you can upload documentation justifying the request, such as a specific benefit to UNO or sponsor preferences. 

1. Submit the form for review by OSP (Office of Sponsored Programs), where OSP will verify that all required information is complete and evaluate the request’s compliance with UNO policies. 

1. Await final approval from the Associate Vice Chancellor for Research and Creative Activity (AVCRCA). 

Your Grants Coordinator will work with you to ensure the request is properly prepared and submitted in compliance with institutional and sponsor requirements. 

Proposals submitted directly to a sponsor without routing through OSP may result in delays, processing issues, or non-compliance with UNO policies. If an incorrect indirect cost rate was used, budget revisions will be required, and the sponsor may need to approve a modified budget, potentially delaying the award process.

Additionally, UNO cannot guarantee acceptance of the award if institutional approvals, compliance reviews, and indirect cost verification were not completed before submission. This applies to all award mechanisms, including grants, contracts, fellowships, and cooperative agreements.

Yes, UNO’s indirect cost rate policy applies to all externally funded projects, including those funded by non-federal sponsors such as foundations, industry partners, and state or local government agencies.

UNO’s Office of Sponsored Programs reviews each proposal to ensure the appropriate indirect cost rate is applied based on sponsor terms, university policy, and federal guidelines under Uniform Guidance (2 CFR Part 200).

Projects funded by non-federal sponsors rely on the same university research infrastructure, administrative services, and compliance oversight as federally funded projects. Applying indirect costs ensures that UNO can sustain operations, maintain compliance, and support all sponsored projects.

Only specific non-federal sponsors meet the criteria for the Carnegie Community Engagement Rate (see Question #9 for details). All others are expected to pay the full negotiated indirect cost rate.