Overhead & Indirect Cost

The cost of conducting research comprises not only the direct costs of the project but also an array of indirect costs. These indirect costs include spending that is frequently taken for granted but is rather real cost incurred by BAU to support the infrastructure required to allow a funded research project to be implemented.

Unless the indirect costs of research are recovered in the form of overhead charges to the funding bodies, these costs will have to be allocated from the operating budgets of BAU. It is important when research funding is received from external sources that every attempt is made to guarantee that, whenever possible, the full indirect costs, associated with the funded research project, are recovered. Indirect costs include human resources, research administration, library services, access to computer services, provision and maintenance of research facilities, office space, and Faculty/Department administration, services.

Indirect costs are usually recovered through a percentage assessment on the direct cost charges for all research grants. Most funding organizations refund the direct costs charged to specific projects as well as the facilities and administrative costs that support research projects generally. This charge is determined by applying either a fixed percentage (e.g. 20%), or a facilities and administrative cost rate, to certain direct costs charged to that project during the financial year concerned.

A rate of overhead charges is added to all service grants. Any extra cost not charged to a particular sponsored project is not to be on the expense of other projects, but must be funded by BAU.

Cost sharing refers to BAU’s expenditure beyond the amount provided by the funding body to support a certain project or activity, and it occurs when part of the research project costs is not tolerated by the sponsor, but is covered by BAU. Cost-sharing commitments can be met using direct or indirect costs that are permissible, applicable, practical, and consistently accounted for by BAU.

Cost sharing is divided into two types:

• Direct costs (faculty effort, research staff salary, equipment, and other direct expenses)
• Indirect costs (unrecovered overhead on sponsored expenditures, overhead on cost-shared University resources, and costs normally considered indirect)