University of California
ANR Employees

Contracts & Grants: Indirect Costs

Indirect Costs

Current Indirect Cost Rates
Indirect Costs? What’s That?
What is the Base? Is the Applicable Indirect Cost Rate Applied to All Direct Costs?
How to Calculate Indirect Costs When Using a Split Rate
What if a Sponsor Agency Refuses to Pay Indirect Costs?
Why Do I Want To Include Indirect Costs In My Proposal Budget?
How Are The Rates Determined?


Current Indirect Cost Rates         

  • UCD Rate Agreement – Dated 11/28/2023
  • Off-Campus - Research
    26% 07/01/2020 – 06/30/25
  • Off-Campus – Other Sponsored Activities
    25% 07/01/2020 – 06/30/22
    26% 07/01/2022 – 06/30/25
  • On-Campus - Research
    57% 07/01/2020 – 06/30/22
    59.50% 07/01/2022 – 06/30/2023
    60% 07/01/2023 – 06/30/2024
    61%% 07/01/2024 – 06/30/2025
  • On-Campus – Other Sponsored Activities
    39% 07/01/2020 – 06/30/22
    42.50% 07/01/2022 – 06/30/25
  • Berkeley Campus Specialists: Berkeley campus Specialists who have joint appointments with a campus department (Associate appointments in the Agricultural Experiment Station are not considered official joint appointments for these purposes) may process proposals and administer subsequent agreements for research activities only through their campus department and the campus research office. The activity should qualify as an official Agricultural Experiment Station project, and the campus indirect cost rate for "Sponsored Research" must be used in the proposal budget where applicable. See the ANR Administrative Handbook Series 200 - Business and Finance Chapter 264 Contracts and Grants for Research, Training, and Public Service Providers.
  • UC Merced Cooperative Extension Specialist: Merced campus Specialist must submit proposals through the UC ANR Office of Contracts and Grants. The UC Merced Campus Indirect Cost Rate rates must be used in the proposal budget where applicable.

Top of Page 

Indirect Costs? What’s That?

Indirect costs, sometimes called overhead, are those that are incurred for common or joint objectives and which cannot be easily identified with a particular project or grant with a reasonable degree of accuracy. Indirect costs are real, actual expenses incurred by the University and associated with all activities of the University for facilities and administrative purposes.

For more information please refer to:

  1. Chapter 8 of the UC Contract and Grant Manual
  2. UC Costing Policy and Analysis: Facilities and Administration (F&A) Rates/Recovery

Top of Page 

What is the Base? Is the Applicable Indirect Cost Rate Applied to All Direct Costs?*
When using our Federally Negotiated Indirect Cost Rate, the rate is applied to a base figure known as Modified Total Direct Costs (MTDC) which is the Total Direct Costs (TDC) less:

  • Equipment
  • Capital expenditures
  • Patient care charges
  • Tuition remission
  • Rental costs of off-site facilities
  • Scholarships and fellowships
  • Portion of each subgrant/subcontract in excess of $25,000

*Please note if using a different indirect cost rate due to sponsor policy, the base used to calculate the indirect costs may be different.

Top of Page 

How to Calculate Indirect Costs When Using a Split Rate

The Fiscal Year (FY) for the UC system is July 1st through June 30th. Project budget years will frequently spread across multiple FYs and therefore different indirect cost rates will be applied based on when the costs are incurred. For budgeting purposes, indirect costs should be calculated using a split rate.

  • Take the Total Direct Costs (TDC) and subtract any items excluded from the base which will give you the Modified Total Direct Cost (MTDC) base
  • Take the MTDC and divide it by 12 months to get a monthly amount of direct costs.
  • Take that monthly amount and multiple it by the number of months at the first rate and then by the first rate itself. This will give you the amount of indirect cost for the number of months at the first rate.
  • Take the monthly amount again and this time multiple it by the number of months at the second rate and then by the second rate itself. This will give you the amount of indirect cost for the number of months at the second rate.
  • Add those two amounts together to get the Total Indirect Costs using a split rate.


  • Period of Performance is April 01, 2022 through March 31, 2023.
  • Rate for the Period of July 1, 2021 – June 30, 2022 for Off-Campus Other Sponsored Activity is: 25.00%
  • Rate for the Period of July 1, 2022 – June 30, 2023 for Off-Campus Other Sponsored Activity is: 26.00%

Therefore there will be three (3) months at the 25% rate and nine (9) months at the 26% rate.

The Total Indirect Costs = (((MTDC/12)*3)*.25) + (((MTDC/12)*9)*.26)

Top of Page 

What if a Sponsor Agency Refuses to Pay Indirect Costs?

Sponsors sometimes restrict reimbursement of indirect cost to less than the full rate. An exception to approved indirect cost rates may be requested in certain circumstances. The sponsor's indirect cost rate must be a bona fide restriction initiated by the sponsor and not an ad hoc restriction based on discussion with the campus. This sponsor policy exception does not generally apply to for-profit organizations or foreign government organizations.

When preparing a proposal budget, always start out assuming that full indirect costs will be applied. In the event that indirect costs may be reduced or waived by exception, you might be able to increase your programmatic budget by rebudgeting from indirect to direct costs. However, if you present a sponsor with a budget that does not include indirect costs, and it turns out that indirects are applicable, you will probably end up having to reduce funds budgeted for program activities in order to cover indirect costs.

If you think an award might be subject to lower-than-standard overhead, contact OCG. We will determine if the university has an exception for an individual sponsor’s program or if a request to waive overhead in the particular case will be successful.

Top of Page 

Why Do I Want To Include Indirect Costs In My Proposal Budget?
The university, as a publicly funded institution, must conduct its activities, including sponsored projects, on a "no profit, no loss" basis. Direct costs in project budgets do not fully reimburse the institution for all of its costs. For example salaries of those individuals involved in administrative services are not part of the direct costs. In addition, facility costs, general office supplies, or copying expenses are seldom included in budgets, yet those expenses are reasonable and necessary and must be borne by the institution. Accordingly, the university is required to cover all of the expenses associated with projects conducted for extramural sponsors.

The UC Regents' policy on full cost recovery imposes a duty on all university administrators and PIs to perform sponsored projects on a full cost recovery basis -- to ask for and obtain indirect costs from all sponsors. Any exception reduces revenue to the University and to each campus.

Top of Page 

How Are The Rates Determined?
The rates are developed on a campus-by-campus basis, through complicated cost analyses isolating the various elements of overhead costs that can be allocated to the 3 types of sponsored activities:

1) Research; 2) Instruction (training and postdoc fellowships); 3) Other sponsored activities–including public service activities such as CE.

The rates are further elaborated according to whether the activity is on-campus or off-campus. On-or off-campus is determined by whether the University owns or pays rent for the office location for the majority of the people working on a particular award. Since our CE folks are usually located at county offices, we usually use the off-campus rates.

Off-campus rates are lower than on-campus because they don't include elements such as depreciation for buildings and equipment, operation and maintenance of the physical plant, library expenses, or student administration and services. Both off- and on-campus rates include general (systemwide and campus-level) administration, departmental administration and sponsored projects administration.

Once a campus prepares this cost analysis (called an "indirect cost proposal"), UC representatives negotiate overhead rates with our "federal cognizant agency" In our case, that's the Department of Health and Human Services (DHHS). In the negotiation, the federal auditor assesses the reasonableness of the costs presented in the analysis. We usually accept a rate several points below the calculated rate, which means UC collects considerably less than total overhead costs incurred in carrying out sponsored activities. University policy applies these rates to all sponsors, not just federal agencies, because infrastructure costs must be paid regardless of the sponsors involved. We cannot provide no-cost or low-cost facilities and services to other sponsors when full reimbursement is required from the federal government.

Top of Page 

Webmaster Email: