IDC Policy Memo

The University of Houston's indirect {F&A) cost rate is negotiated with the U.S. Department of Health and Human Services (DHHS) and reflects the cost of real, auditable expenses incurred in the conduct of research. Included among these costs are depreciation costs of buildings and equipment, maintenance and repairs, janitorial services, utilities, hazardous waste disposal, libraries, and general administrative costs such as sponsored program administration, departmental administration and general administration (accounting, purchasing, legal services, personnel, and compliance).

These costs are 'indirect' because they are not readily identified with a specific project and therefore are not included in the 'direct' cost portion of the budget. Such indirect costs support the conduct of research, regardless of the source of funding, and therefore must be applied to all sponsored projects when applicable.

When a rate less than the negotiated indirect (F&A) rate is applied to a sponsored project it represents an involuntary cost share by the institution. This results in a smaller amount of money returned to units, who receive a share (approximately 53%) of the IDC generated by their faculty. Applying the negotiated indirect {F&A) rate provides the units with the option of contributing to the projects if they wish to do so by utilizing their portion of the recovered IDC. It is the University of Houston's policy that all proposals and agreements for external funding include full indirect (F&A) costs using the federally negotiated rate in effect at the time of proposal submission. The University's official policy is located here.

Effective September 1, 2017 the agreed upon rates, as set forth in the University of Houston/DH HS Indirect Cost Rate Agreement, are as follows.

  • 53% - Organized Research On-campus
  • 26% - Organized Research Off-campus
  • 31% - Other Sponsored Activities

Less than Full IDC (F&A) Cost Recovery

For non-profit institutions the University of Houston recognizes that many of them have their own policies regarding the use of their funds for overhead expenses. In the case where the non-profit institution has an official written policy, a formal letter, or other documentation deemed official, the University of Houston will normally accept these requirements.

For Federal and State Sponsors, except where specifically identified in a program solicitation or other published sponsor guidelines, the applicable federally negotiated IDC rate must be applied to all proposals. IDC waivers or reductions for project in which the sponsor written instruction does not forbid or limit the IDC costs will not be approved.

Profit and Foreign Government Sponsors whether US or international, or an office or agency of a foreign government, including organizations funded by that government, are expected to pay the federally negotiated indirect (F&A) rate on sponsored projects. The University of Houston will not accept a letter or other documentation from for-profit and/or foreign government sponsors stating their policy is to pay an indirect (F&A) rate lower than the federally negotiated rate.

Special Rates:
Consortiums (SPCs), commonly known as Industrial Affiliates Programs, have received a reduced IDC
(F&A) rate of 20% applied to their sponsored projects. This exception will continue. For all other sponsored projects, a reduction in IDC will not be approved.

For additional assistance as it relates to indirect cost rates and sponsored projects please contact Benjamin Mull.