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7.6.3 Indirect Cost


Illinois State University has negotiated an approved predetermined Facilities & Administrative Cost Rate (F & A, Indirect Cost, or IDC) for use on grants, contracts and other agreements with the federal government. This F & A cost rate agreement is dated September 6, 2013. This rate has been negotiated with the University's cognizant audit agency at the federal Department of Health and Human Services.

The approved rate is 48% of Modified Total Direct Cost as amended 07/01/2022. Modified Total Direct Cost includes all direct costs less:

  • Equipment over $5,000
  • Subcontracts for the portion over $25,000
  • Participant Support costs

Additionally, there is an off-campus rate of 26%. If a majority of the research and/or training occurs in a building not owned by the University, then the 26% rate applies.

Some agencies restrict the indirect cost reimbursement rate. The University has generally accepted these restricted reimbursement rates as long as they are documented. Other agencies may decline to pay indirect costs. If the agency's policy is to not pay indirect costs and this policy is documented, the University may choose to waive the collection of indirect costs. Indirect cost inclusion or waivers are determined prior to proposal submission.

  • If the Principal Investigator and/or Agency wishes to waive or reduce the Indirect Cost Rate (IDC), the Principal Investigator must complete an IDC Waiver Request.   The IDC Waiver request will require Chair, Dean, and Associate Vice President for Research and Graduate Studies electronic approval.

A calculation of indirect costs recovered is done each month for each grant. By journal entry, the costs recovered are transferred to an Agency account for distribution at the end of the year.

Indirect Cost Distribution

It is University policy to return to units involved in research grants and contracts a set percentage of indirect costs generated by that unit. The expectation is these funds will be used to enhance scholarly productivity.


  • Indirect cost amounts generated by charges to research grants and contracts are calculated monthly and transferred from Restricted funds to the Agency funds Indirect Cost Entity. The funds remain in the University's Indirect Cost Recovered account until the end of the fiscal year. At this time, the Local Funds accountant determines (by a preset formula) the indirect cost allocations to the various Colleges, departments and other related areas, for use during the new fiscal year.
  • A summary of these allocations is sent to the Budget Office. The Budget Office then sends the respective Budget Officers (fiscal agents) a request to develop a budget for the use of the funds. When the Budget Office receives responses from the Budget Officers, the amounts to be allocated are transferred from the University Indirect Cost Recovered account to each unit's RGF Agency account and the budget is established. The Appropriated fund part of the allocation is referred to as the “Appropriated Exchange” and is processed by the Budget Office as a temporary transfer.
  • Funds remaining in a Restricted Grants Fund (RGF) account on August 15th are transferred forward to the new fiscal year. Also, any outstanding encumbrances are transferred forward. Note that Budget Officers should re-budget any carried over encumbered funds in the same expense classification as the original encumbrance.

The funds processed as the Appropriated Exchange, however, must be expended or obligated by June 30th of the current fiscal year.

Currently the annual distribution of indirect costs collected is calculated as follows:

  • 24.0% to Colleges
  • 23.0% to Departments
  • 32.2% to the Research & Sponsored Programs
  • 9.7% to the Provost’s Office
  • 8.1% to Graduate School
  • 3.0% to Milner Library
    = 100.0%

Of the 23% allocated to departments, 3% is allocated (within the same RGF account) to the Principal Investigator of the research project. Each departmental Budget Officer receives an annual statement showing how much indirect cost each investigator generated and the 3% allocation that the investigator is entitled to spend from the department's RGF account for grant-related purposes.

Policy Owner: Vice President for Finance and Planning

Contact: Comptroller's Office (309-438-5674)

Revised:  02/2023

2023-02-23T08:40:00.722746-08:00 2023