Sponsored Programs: Indirect Costs

What Are Indirect Costs?

When it comes to grant funding, people often think of costs such as paying staff or buying equipment. These are direct costs, which are clearly tied to the project and are usually relatively easy to calculate. However, JMU also has to pay for electricity associated with your work, to maintain the space where your research or other sponsored program activity is taking place, etc. These are indirect costs; instead of attempting to calculate these for each grant, JMU negotiates a single indirect rate with the federal government. This rate is a percentage of the direct costs (explained below). When you apply for a federal grant, the total amount of funding requested will be the total of the direct and indirect costs.

As a simplified example, consider an institution with an indirect rate of 50%. If the direct costs are $200,000, the institution would request 0.5 × $200,000 = $100,000 to cover indirect costs. The total funding requested would then be $200,000 + $100,000 = $300,000. Note that one-third of the total goes to indirect costs.

What is JMU's Indirect Cost (Overhead) Rate?

JMU has a negotiated Indirect Cost Rate (also called an overhead rate or a facilities and administration rate). This is negotiated with the federal government every four years and is described in our Negotiated Indirect Cost Rate Agreement (NICRA).

Starting July 1, 2025, our negotiated rates are:

JMU Negotiated Indirect Rates
Type of Program	On-Campus	Off-Campus
Research	52%	26%
Instruction	55%	26%
Other Sponsored Activities	33%	26%

The definition of research and instruction is in the Office of Management and Budget (OMB) 2 CFR 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; your grants specialist will assist you in determine which one is applicable.

Sponsored programs are subject only to one rate:

If more than 50% of your project is performed off-campus, the off-campus rate will be used.
If your project contains components from multiple classifications (such as both research and instruction), then the rate of the most significant component will apply.

The indirect costs for your grant are this percentage of the modified total direct costs (MTDC), which is the sum of all the direct costs excluding costs. Your grants specialist will assist you in calculating this; for your convenience, the table below summarizes some examples of what items are typically included or excluded in the calculation.

Modified Total Direct Costs (MTDC) Inclusions/Exclusions
Included	Excluded
Salaries and wages Fringe benefits Materials and supplies (which typically includes equipment under $5000) Services Travel Subgrants & subcontracts (up to $25,000 per subaward)	Equipment (typically over $5000) Capital expenditures Charges for patient care Tuition remission Rental costs for off-site facilities Student scholarships, fellowships, and stipends Portion of subgrants & subcontracts over $25,000

Where Does This Money Go?

Once indirect cost money comes into the university, it is distributed as follows: 30% to the PI's department, 10% to the PI's dean's office, 30% to REDI, and 30% to the university's educational and general revenues. The latter percentage is state mandated. Each of these units, however, is limited in how they can use these funds to ensure that they are paying for the costs mentioned above. In addition to following JMU's financial procedures, the use of these funds is regulated by the Office of Management and Budget (OMB) 2 CFR 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.

Interested in what this money can be used for? The table below gives some examples:

IDC Funds May/May Not Be Used For...
Permitted	Not Permitted
As matching funds for cost sharing for another sponsored project, unless disallowed by the sponsor. To support existing activities that secure sponsored funding. Examples include: graduate student support, secretarial, or other support staff, technical help, employee reassigned time, etc. To encourage an unfunded faculty member to develop a project that could be expanded into an externally funded project. Examples include: travel to explore potential funding sources, funds for an exploratory project (including data collection if relevant) To renovate an existing facility to accommodate specific research.	To finance educational programs normally funded by university education and general funds. To finance expenses to conferences or meetings which do not directly support scholarly activities to obtain external funding. For general travel to meetings. For entertainment purposes or the purchase of alcoholic beverages. For attendance at meetings to lobby for federal funds.