Indirect Costs of Research

Indirect costs of research (or ‘overhead’) are those expenditures incurred in the conduct of research that are not directly attributed to a specific research effort. Maintaining and improving research infrastructure requires ongoing reinvestment on a significant scale. For this reason, research project funding should cover the full costs of the research. The university requires that all research project budgets include both indirect and direct costs except where expressly prohibited by the sponsor.

The minimum indirect cost recovery rate for research grants, contracts and technical service agreements is 20% of direct costs. Certain sponsors calculate indirect costs following a different formula – some of those rates are found in the university’s Application for Indirect Cost Recovery Rates Procedure

Contact your research facilitator if you have questions about the specific ICR rate to use. 

Proposals and applications that do not include ICR will not be approved for submission unless there are exceptional circumstances.

What are Indirect Costs of Research?

Indirect costs of research are expenditures incurred in the conduct of research that are not readily or effectively traceable to specific expense activities, yet are real costs that must form part of the budget for a research project.

Such costs include:

  • infrastructure and space maintenance
  • support services for research including central research and financial service
  • environmental health and safety resources
  • meeting regulatory certification requirements
  • providing key resources such as library and computer information services

At the request of University Research Policy Committee, RSO prepared a background information document on indirect costs of research.

How Do I Calculate Indirect Costs of Research?

The overhead amount is calculated based on the direct cost of research.

It can be calculated on the total award amount using the percentage amount stated for the sponsored project. For example, for a total budget of $50,000 with 20% indirect costs, the calculation is as follows:

  • (50,000 x 0.20) / 1.20 = $8,333.33

Or it can be calculated by subtracting the direct costs from the total award. The same example above would be calculated as follows:

  • 50,000 – (50,000 / 1.20) = $50,000 - $41,666.67 = $8,333.33 

Alternatively, it can be calculated as a percentage amount of direct costs. For example, for a project with direct costs of $25,000 and 20% indirect costs, the calculation is as follows:

  • (25,000 x 0.20) = $5,000.00. In this case, the total award would be $30,000.