University Policies

Indirect Cost Recovery Policy

Approval Date: April 7, 2003
Revision Date: September 3, 2024
Approved By: President

POLICY STATEMENT 

Western Illinois University has adopted a formal policy in response to the updated Legislative Audit Commission University Guidelines, found at https://www.ilga.gov/commission/lac/lac_home.html.

SCOPE (WHO SHOULD READ THIS POLICY) 

University employees responsible for fiscal management.

DEFINITIONS 

  • Direct Costs – Costs that can easily be identified with and allocated to specific activities.
  • Indirect Costs – Costs incurred that cannot be directly allocated to specific activities, but are necessary for the general operation of the University.

POLICY

  1. Purpose:
    To set forth University practices and procedures for establishing indirect cost rates and utilizing revenues received from indirect cost reimbursements (ICR). These practices and procedures apply to all externally funded grants and contracts to the University, excluding financial aid.
  2. University Costs:
    The operation of the University involves both costs that pertain to a specific unit or project and costs that are general in their application. For administrative and accounting purposes, these costs are grouped into two categories, direct and indirect.
    1. Direct Costs:
      Direct costs are costs that can easily be identified with and allocated to specific activities (e.g., a project) including, but not limited to:
      1. Salaries and Wages:
        Salaries and wages of persons fully employed on a project or an appropriate percentage of the salaries of those employed part-time on the project.
      2. Fringe Benefits:
        Health and life insurance, retirement plan contributions, etc., for persons employed on a project.
      3. Supplies:
        Consumable supplies needed exclusively for a project.
      4. Travel and Transportation:
        All such charges, including motor pool charges, incurred for a project.
      5. Equipment:
        Equipment acquired for a specific use on a project.
      6. Contractual Charges:
        Costs of services that directly benefit the project.
      7. Alterations and Renovations:
        As determined by specific agreements in a grant or contract.
    2. Indirect Costs:
      Indirect costs are costs that are incurred by the University for the support of a variety of University functions, activities and projects and that cannot be allocated specifically to those functions, activities or projects. These types of general support costs are usually included under the following categories:
      1. General Administration and General Expense:
        Accounting, Purchasing, Human Resources, Payroll, Internal Auditing and other administrative offices.
      2. Sponsored Projects Administration:
        Personnel and other costs of offices whose responsibility is the administration of sponsored projects.
      3. Plant Operation and Maintenance:
        Utilities, janitorial services, routine maintenance and repairs, etc.
      4. Library Expense:
        Books, periodicals, library staff, etc.
      5. Dean and Departmental Administration Expenses:
        Administrative costs at the college and departmental levels.
      6. Depreciation or Equipment Use Allowance:
        For buildings and equipment, excluding those paid for by the federal government.
  3. Recovery of Costs:
    Grants and contracts should provide for sponsor support of the total costs (direct and indirect) of each project when possible.
  4. Establishing Indirect Cost Reimbursement (ICR) Rates:
    1. The Business Office is responsible for documenting and preparing the appropriate forms required under Uniform Guidance 2 CFR 200 and negotiating the federal indirect cost reimbursement rate.
    2. The ICR rate used in budgeting an amount for the indirect cost in any proposed project shall be the federally negotiated rate, or a rate of reimbursement mandated by the established policy or practice of the sponsoring agency, or some other exception rate based on either:
      1. Standard rate alternatives determined by the Provost and Director of Sponsored Projects; or
      2. Special circumstances related to an individual proposal. Any exception rate based on special circumstances used in any specific proposal shall be mutually agreed upon (during the internal proposal review and approval process) by the Director of the Office of Sponsored Projects and the respective Dean(s) or Vice Presidents.
    3. In determining the rate to be used in a proposed project, consideration shall be given to the following:
      1. Whether limited or excessive demands will be made upon University facilities;
      2. Whether limited or special demands will be placed on business support areas such as Purchasing, Accounting, etc.;
      3. The relative benefits to be received from the project by the sponsor, University, public, etc.; and
      4. The potential for the project to lead to expanded opportunities in the future.

        In the event the internal reviewers of the proposed project do not agree on the negotiated ICR rate, the areas receiving the reimbursements (as listed below) may choose to waive all or part of the eventual distribution of ICR funds.
    4. The federally negotiated off-campus rate shall apply when the majority of the work (greater than 50%) is performed off-campus. Projects qualifying for the off-campus rate require the project director to be physically located, on a continuous basis (semester, summer term, or period of performance of the sponsored agreement), at a site not owned by the University.
  5. Use of ICR Funds:
    1. Allowable uses of ICR funds include the following:
      1. To pay for the costs of the grants and contract operations of the university.
      2. To pay for overhead expenses of the University in a manner consistent with the formula under which the funds were recovered.
      3. For payment of cost sharing and matching requirements of grants and contracts.
    2. Examples of appropriate uses of ICR funds include, but are not limited to:
      1. Overhead expenses such as utilities, maintenance, support staff, etc.;
      2. Sponsored Projects Office operational expenditures;
      3. Seed money to faculty to initiate new research projects (including University Research Council Grants);
      4. Any costs of an administrative unit (with the exception of direct educational expenses); and
      5. Research matching/cost sharing.
  6. Allocation of ICR Funds:
         Except as otherwise agreed upon when proposals are internally reviewed and approved, or in those cases where the use of ICR funds is specified or limited by policy of the sponsoring agency and cannot be altered by the University, the following distribution of ICR funds shall be made:
    • Fifteen percent to one or more accounts used for institutional support under the Vice President for Finance and Administration;
    • Thirty-five percent to one or more accounts for the use of the University Office of Sponsored Projects for the general University research purposes and sponsored program administration;
    • Five percent to one or more accounts used for administrative support under the Provost's Office; and
    • Forty-five percent to one or more accounts to the University college(s).

PROCEDURES 

Individuals are encouraged to review further procedures on indirect costs at www.wiu.edu/sponsoredprojects

RESPONSIBILITIES (Implementation and Enforcement) 

Office of Sponsored Projects and Business Services.

RESOURCES 

Standards