The University’s Indirect Cost Rate Agreement, negotiated with the Department of Health and Human Services and dated 9/27/24: Indirect Cost Rate Agreement.

Indirect costs are those costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project. The recovery of indirect costs reimburses UConn for actual costs incurred by support functions to sponsored research programs at the University.  In addition, a portion of this money from research grants goes to the Research Council to be used for research incentive funds, grant programs for faculty and graduate students, and to meet cost sharing requirements for large equipment purchases. The University negotiates its rate, which is based on Modified Total Direct Costs (MTDC), with the Department of Health & Human Services.

It is the policy of the University to collect full indirect costs at the federally negotiated rates from all funding sources whenever possible.  Occasionally, sponsors may specify an indirect cost policy inconsistent with the University’s negotiated rate, and budgets should be prepared using the sponsor rate. Only the Office of the Vice President for Research has the authority to accept a reimbursement rate other than the negotiated rate.

Effective 9/27/24:

• UConn’s Modified Total Direct Cost (MTDC) base has been updated to raise the threshold for inclusion of subaward dollars from $25,000 to $50,000, effective 7/1/25 (see below). As a result, the first $50,000 of the total amount of each subaward budgeted for inclusion after 7/1/25 should be included in the base when calculating indirect costs using an MTDC base (see Definition below).
• Current awards will continue to utilize the IDC rate in effect at the time of the initial award;
• New awards may continue to use the proposed rate (if lower), if allowed by the sponsor.

Federal & Corporate Rates

	Rate Base*	FY24 07/01/23 – 06/30/24	FY25 07/01/24 – 06/30/25	FY26-27 07/01/25 – 06/30/27	FY28 07/01/27 – 06/30/28	FY29+ 07/01/28 Until Amended
Research
On Campus	MTDC	61.0%	61.0%	62.5%	63.5%	63.5%
Off Campus	MTDC	26.0%	26.0%	26.0%	26.0%	26.0%
Instruction
On Campus	MTDC	57.0%	57.0%	57.0%	57.0%	57.0%
Off Campus	MTDC	26.0%	26.0%	26.0%	26.0%	26.0%
Other Sponsored Activities
On Campus	MTDC	35.0%	35.0%	37.0%	37.0%	37.0%
Off Campus	MTDC	26.0%	26.0%	26.0%	26.0%	26.0%

*Indirect costs are calculated on Modified Total Direct Cost (MTDC) which is Direct Costs minus certain exclusions. Direct Costs include salary, fringe benefits, materials and supplies, travel, and the first $50,000 of each subcontract (after 7/1/25).

Exclusions include equipment over $5,000**, rent, fellowships, tuition, participant support costs and subcontract amounts beyond the first $50,000 for each subcontract (after 7/1/25).

**In order to be consistent with State classification standards, the dollar threshold for capitalization of equipment at UConn is $5,000.

Modified Total Direct Cost (MTDC) Base Definition, Awards Beginning 7/1/2025 and Later:

Modified total direct costs, consisting of all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $50,000 of each subaward (regardless of the period of performance of the subawards under the award). Modified total direct costs shall exclude equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs.

The following language should be used in all proposal budget justifications that include indirect costs using rates listed on the rate agreement, with adjustments for the budget periods being proposed:

“Indirect costs are based on University of Connecticut’s federally negotiated rates and are applied at a rate of 62.5% in Year 1, and 63.5% in Years 2-5 applied to a modified total direct cost (MTDC) base. Any applicable capital equipment, participant support, and subaward costs from the University of Connecticut to other organizations after the first $50,000 are excluded from the MTDC base calculation. The rates and exclusions are consistent with the University’s federally negotiated indirect cost rate agreement (DHHS, 9/27/2024).”

Total Direct Cost (TDC) Base:

When applying the indirect cost rate to a Total Direct Cost base, no exclusions apply; the budget justification language should be revised to correspond.

Off-Campus Rate

For all activities performed in facilities not owned by the institution and to which rent is directly allocated to the project(s), the off campus rate will apply. Grants or contracts will not be subject to more than one indirect cost rate.  If more than 50% of a project is performed off campus, the off campus rate should be applied to the entire project.

The off campus indirect cost rate can be budgeted as follows:

• If rent is directly charged to the project.
• If more than 50% of all program activities are performed off campus.   (with written confirmation from the PI).
• If the sponsor specifically requires the off-campus rate per the solicitation.

The on-campus rate is normally applied whenever the University leases or pays for space costs that are not direct charged to a grant or contract.

If you have questions, please contact your SPS Grants/Contracts Specialist.

Sponsor-Stated Limits

When the University collects indirect costs at less than the full federally negotiated rates,  indirect costs are charged to Total Direct Costs (including equipment, participant support costs, subcontracts, etc.,)  unless otherwise stated in the sponsor guidelines.

Funding from Connecticut State agency appropriations and local municipalities are charged a current reduced rate of 20%.  Indirect costs should be charged to Total Direct Costs.  If the Originating Sponsor is non-State, the full rate allowable by the originating/prime sponsor should be applied.

Reduction of F&A on Projects Having a Total Cost of $50k or Less

To allow for more buying power on small sponsored projects and to help foster smaller awards which may lead to additional funding, indirect costs on new awards received after October 1, 2017 with total costs of $50,000 or less, will be reduced to 20% or the difference between the full indirect cost rate and 20% will be distributed to the investigators indirect cost account.  Indirect costs are charged to Total Direct Costs (TDC) or Modified Total Direct Costs (MTDC),  as required by the specific sponsor or solicitation.

Sponsored Program Services (SPS) has developed guidance and FAQs on how this program is implemented.

Consistent Treatment of Costs:

Costs must be treated consistently.  Consistent treatment means that similar costs must be treated uniformly in the same manner as either a direct cost or as indirect costs.  Certain types of costs, such as the salaries of administrative and clerical staff, office supplies, and postage are normally treated as indirect costs; therefore, the same types of costs cannot be charged directly to federally sponsored agreements.