Research Dissemination and the Need for Grants: A Basic Overview of the Funding Process, Part 2

Part 2 of 4: Missed last week’s blog post? Read Part 1 now.

Indirect Costs: What are they and why must they be in my grant budget?

If grants are so vital towards conducting research studies, then needing to account for “university indirect costs” in the grant budget request seem like getting the grant would be that much harder. So why can’t we just cut out indirect costs, since they’re not related to the study anyway?? First, we must dispel a myth: The amount for indirect costs is so high–at UNC, it is 55% of the costs that the researcher needs–that if it is added to the amount the researcher actually needs, then this inflated total request could be the reason the funder declines the application, because they don’t think it deserves that much. This is false, according to the National Endowment for the Humanities. The total amount requested is not considered in the evaluation: the content is–and if the total amount requested is more than the NEH can or is willing to offer, their budgeting office will send you a negotiated reduced offer.

In the grant application, the indirect cost sum is totaled up in a separate column from the direct costs, so there is transparency in what the researcher needs versus what the university’s agreed percentage for receiving federal grants is.

Also, when calculating 55.5% of the “direct costs” to make an indirect costs total, you don’t actually include any direct costs funds that are related to rent, student fees, and participant fees. So you actually calculate 55.5% of a “modified direct costs” total.

How does the Indirect Cost rate get calculated?

The federal government and each public university come to a federally approved rate about that university’s indirect cost percentage paid in a grant, so it would be unfair for a federal agency to consider this amount in the evaluation. This is called “Uniform Guidance” (more at All federal grant agencies must comply with a public university’s indirect cost percentage, but state and private funders do not apply.

Here’s why UNC’s Indirect Cost rate is 55.5%: The Office of Sponsored Research’s Cost Analysis and Compliance team sends out a survey every 4-6 years to all departments and offices on campus, to look at the percentage of the department that is taken up by research space–for example, 100% of the university libraries is considered research space. The team then pulls the percentages from all the departments together–they are looking to see what proportion of the entire campus is taken up by research space and how it is used (example breakdown shown at They then negotiate and agree upon an Indirect cost amount for all federal agency funders with the university’s assigned “cognizant agency,” which, for the East Coast, is the US Department of Health and Human Services.

The indirect costs (also known as F&A rate, or Facilities & Administrative rate) can then help to pay for infrastructure for the university’s research spaces and other related costs related to university research. This is especially important, considering that state funding for university operations has decreased dramatically (according to Figure 3 of Pew’s 2015 report and Figure 2 in The Lincoln Project’s 2015 report), so F&A allows an opportunity to receive funding for departments. For each grant that comes in, the university will disburse a percentage of the indirect cost funds to the grant awardee’s department,

who can use the money at its discretion. The UNC School for Library Science (SILS), for example, gets 19.5% of the 55.5% Indirect Costs money from a grant awarded to a SILS faculty member. The rest of that 55.5% may go to the University Libraries and facilities and grant support staff around campus.

Of that portion given to the grantee’s department, some may go back to the grantee (the PI) but this is not required of the department. Especially for departments that have poor departmental funding, this indirect costs portion can help pay for departmental rejuvenation, such as paying for technical equipment in the department to allow for the department to stay state-of-the-art and support future research endeavors, as well as paying for any grant support staff within that department. If the PI has been given back some of the indirect costs moneys, any payments will be required to be reported for federal auditing purposes (so travel fees for conferences is allowed, but buying alcohol at a conference dinner isn’t allowed!).

Stay tuned for Part 3: Funding and Open Access

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