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                      UNIVERSITY OF VIRGINIA

TITLE:  INDIRECT COSTS                            POLICY:  VIII.D.1x


The total cost of a sponsored program consists of direct and
indirect costs. The direct costs are those costs readily identified
with a particular sponsored project.  Such costs are itemized in
the budget submitted by the principal investigator and may include
salaries and wages, fringe benefits, equipment, consumable
supplies, travel and other expenditures, and subcontracts.

Indirect costs are those costs incurred in support of many
activities and cannot be identified with a single sponsored
project.  The cost of operating and maintaining buildings, use of
equipment, general and departmental administrative expenses,
sponsored projects' administration, and library costs are usually
considered indirect costs.  These costs are essential in the
support of sponsored program activities.  Indirect costs differ
from direct costs in that indirect costs cannot be broken down and
directly charged to a specific program.

An indirect cost rate is a method of allocating a portion of the
indirect costs to each project or activity.  The rate is an average
of the indirect costs for all projects and is generally expressed
as a ratio of indirect costs to modified total direct costs (MTDC).

The modification generally excludes equipment, student aid, and
health care expenditures.  The indirect cost rate recovers only
those costs actually incurred.

Administrative Responsibility

The development, negotiation and application of the University's
indirect cost rates are the responsibilities of the Assistant Vice
President for Finance and University Comptroller.  The rates are
developed by the Department of Financial Analysis, applied by the
Office of Sponsored Programs, and negotiated by the Assistant Vice
President for Finance and University Comptroller with the
University's cognizant Federal agency (Department of Health and
Human Services). Annually, following the completion of the
University's audited financial statements for the fiscal year,
indirect cost proposals are developed in accordance with Federal
regulations.  The completed proposals are submitted to the
Department of Health and Human Services and negotiated as approved

Distribution of Indirect Cost Recoveries

The 1984-86 State Appropriations Act provides:

         "seventy percent of indirect cost reimbursements on grants
         contracts shall be retained by institutions of higher
         education as an appropriation of funds by the General
         for the conduct and enhancement of research and related

In accordance with this provision, the Assistant Vice President for
Fiance and University Comptroller distributes 100% of the overhead
recoveries as follows:

Overhead distribution Percentage Allocations, Effective July 1,

              Arts      Engr      Schools    Units
               &         &         Other     Other    School of  
School of
Category      Sci     Appl Sci      (A)       (B)     Medicine    

State        30.00%     30.00%     30.00%     30.00%     30.00%    

Reserve      20.00%     20.00%     20.00%     20.00%     20.00%    

Initiatives    -          -          -          -         1.00%    


Technology     -          -          -          -         1.00%    


Unit Heads   17.20%     29.02%     17.20%     17.20%     29.59%    

Departments  19.40%     12.43%     19.40%     19.40%      9.86%    


Libraries     3.50%      3.50%      3.50%      3.50%      3.50%    


Fellowships   4.85%       -         4.85%      4.85%       -       


Computing     1.30%      1.30%      1.30%      1.30%      1.30%    


Health        1.50%      1.50%      1.50%      1.50%      1.50%    


Vice Prvst.
Research      2.25%      2.25%      2.25%      2.25%      2.25%    


Total       100.00%    100.00%    100.00%    100.00%    100.00%   

Click here to also see relevant grant information.


Other Schools (A) include Architecture, Darden, Continuing
Education, Law, Commerce and Education.

Other Units (B) include Center for Public Service, George
Washington Papers, Upward Bound, Alderman Library and Women's

Assumptions:  Reduced distribution to Deans/Departments/Fellowship
proportionally applied to reduced total going to those units based
on prior distribution.

Current Indirect Cost and Fringe Benefit Rates

Rates are developed for three major functions of the University:
(1) Organized Research, (2) Instruction and Training and (3) Public
Service and Other Sponsored Programs.  For each function off and on
Grounds rates are developed as a percentage of modified total
direct costs (MTDC).  The current rates are:

Indirect Cost Rates

        Function             Location        95-96        96-97

Organized Research             On
                             Grounds         52.0%       51.0%

Organized Research             Off
                             Grounds         23.5%       22.5%

Instruction                                  50.0%       50.0%

Public Service and Other       On
  Sponsored Programs         Grounds         28.0%       28.0%

Fringe Benefit Rates for Sponsored Program Accounts
(5-ledger accounts only):

PROGRAMS                EFFECTIVE 7/1/99    1998/99

Faculty Salary (1)            23.5%          23.0%
Classified Salary             33.5%          31.0%
Wage (2)                       7.0%           7.0%

(web version to have cross reference here to OSP Rate Sheet)

(A) Salaries include faculty salaries paid over nine or 
twelve months using salary object codes 211XX. 
(B) Salaries include all classified salaries using object 
codes 221XX and 22650.  

(C) Wages include hourly employees, 9-pay faculty payments 
made during June-August, amounts paid to students who 
are not registered during the summer, And overtime 
payments to classified employees.

Each year's rates are effective July 1 and should be used 
when preparing budgets to which  fringe benefits are 
charged, including sponsored program proposals.

If you have any questions regarding the application 
of the fringe benefit rates to sponsored program proposals 
or awards, please contact Mike Glasgow or Tom Dod in the 
Office of Sponsored Programs at 924-4270.  

See also Procedure 8-14, "Budgeting
Direct Costs of Sponsored

ISSUED BY:                                                 07/01/99

Sponsored Programs