Policy 5211 — Policy on Research Overhead / Indirect Costs | Mount Allison

Policy 5211 — Policy on Research Overhead / Indirect Costs

Policy section:
Section 5200-5299 Research & Creative Activities
Policy number:
5211
Subject:
Policy on Research Overhead / Indirect Costs
Group:
Institutional
Approved By:
Provost and Vice-President, Academic & Research
Approved date:
September 1, 2010
Effective date:
September 1, 2010
Revised:
May 1, 2021
Administered by:
Provost and Vice-President, Academic & Research

1. PREAMBLE

All research, regardless of the source of funds, carries with it a variety of indirect costs borne by the University to administer such funds. The indirect costs (also known as overhead) refer to those costs that are real but not easily identifiable with a particular research project. These include, for example, utilities, the provision of institutional facilities, space, accounting, payroll and personnel services, research office services, janitorial services, and provision for equipment replacement.

This means that it is necessary to charge all costs associated with a grant or contract against the related funds unless we cannot because of a term of the grant or unless Research Services and/or Financial Services decided this is not to be done. The University should be willing to decline certain research grants or contracts if the overhead burden is too significant.

To account for indirect or overhead costs, a charge is normally levied on payroll costs (wages plus fringe benefits) of non-student employees, and must be included in all contract proposals. Exceptions may be permitted (as agreed to by the Provost and Vice-President Academic and Research) when alternative compensation is provided or favourable terms, such as ownership of intellectual property, are offered.

It is the responsibility of all researchers to consult with the Office of Research Services regarding this policy prior to budgetary discussions with sponsors. Any budget negotiations that are finalized with Sponsors without prior consultation with the Office of Research Services shall be automatically assumed to have the appropriate indirect costs included (i.e., these costs will be deducted from the amount received by the University from the sponsor).

This document describes the policies and procedures to administer all research excluding funding from Canada's Tri-Council agencies, for the purpose of ensuring appropriate indirect costs are recovered. As such, the policies and associated procedures described herein do not apply to Tri-Council funding.

If you expect to be compensated in addition to your usual salary for any research you may undertake, you should also consult other applicable documents, especially the full-time Collective Agreement between Mount Allison University and the Mount Allison Faculty Association.
 

2. DEFINITIONS

Overhead costs (also referred to as indirect costs) are those expenditures incurred by the University in the conduct of research which are not readily identifiable as specific expenses. They are generally related to such items as building use (space, heating, light, custodial), equipment depreciation, physical plant and maintenance (including utilities, hazardous waste disposal, security), insurance, research administration, financial administration (including purchasing and accounting), academic administration, human resource services, and libraries and archives.
 
Direct costs are those directly attributable to the research activity. These include the salaries and benefits of research personnel, materials and supplies, travel, equipment, and purchase of specialized services.
 
University employees refers to University faculty, staff, post-doctoral fellows, and students.
 
Non-University employees refers to other individuals who are not employees of the University but who are part of the research project team; it may include any or all of the following: faculty, staff and students of other institutions; employees of private sector firms; employees of non-profit organizations; individuals.
 
Research grants are grants received for research with a public or private organization which provides funding to pay for all or part of the costs of a research project. Payment is not conditional on the researcher delivering to the sponsor a pre-determined set of research outcomes.
 
Research contracts (or contracted research) means any research agreement signed between the University and a Sponsor which, in exchange for payment of direct and indirect costs, sets out a task or tasks to be completed within a specified timeframe to arrive at an outcome, the results of which constitute a deliverable under the agreement. These results may also be published in the scholarly literature, sometimes following an appropriate deferral period.
 
Contribution agreements (or grants in-aid) are research agreements in which the project is predefined by consultation between the Principal Researcher and the sponsoring agency and differ from a Research Contract as the conditions of timing of delivery and other terms are relaxed.
 
Contracts for research services (or service agreements) are research agreements of a more routine nature that still require specialized expertise or laboratory facilities to conduct the work. Provision of specialized or certified analytical services that are not routinely available from private sector laboratories is an example of a contract for research services.
 
Administrative and operating costs are defined as actual expenses incurred to indirectly support research activities, including but not limited to, office space, lab space, telephone/fax line charges, financial services, etc. (Note: specific eligible costs are usually defined by the Sponsor.)
 
Principal Investigator (PI) refers to the holder of a research grant, contribution agreement, or research contract and is the lead researcher for the project. In some cases, there may be co-PI's.

Sponsor is defined as any entity which provides financial support for the completion of research.
 
The following table is for illustrative purposes only, to summarize the main differences in the types of funding sources for various types of research activities.
 

Research Grant Contribution Agreement (Grant In-aid) Research Contract Research Service(s) Contract
Work conceived and planned by investigator Subject area suggested by sponsor; project idea initiated by investigator and jointly planned with sponsor Work conceived by sponsor or jointly with investigator; both parties participate in planning of research. Sponsor defines work and deliverables
Generic description of deliverables General description of deliverables with some flexibility in content and timing Specific deliverables with timelines Specific deliverables with timelines
Payment fully committed in advance Payment may be fully committed in advance Payment by installments on completion of deliverables Payment on completion of deliverables
No payment for PI's time No payment for PI's time May include payment for PI's time May include payment for PI's time
Very limited or no restrictions on publication Very limited restrictions on publication Results may be confidential with restrictions and delays on publication Results are confidential with restrictions and delays on publication
Projects may be suitable for senior undergraduate or graduate students Projects may be suitable for senior undergraduate or graduate students Publication restrictions may make projects unsuitable for student research Publication restrictions make projects unsuitable for student research
Intellectual Property owned by the Investigator and/or University Intellectual Property owned by the Investigator and/or University Intellectual Property owned by the contractor and/or the Investigator and/or University Little or no expectation of Intellectual Property rights
Investigator and/or University can sell commercial rights to third parties Investigator and/or University can sell commercial rights to third parties University may have research, teaching and non-commercial use rights only Results have no commercial resale value to University
No guarantee of a specific result No guarantee of a specific result No guarantee of a specific result Generally routine work without a risk factor

(Adapted from University of Prince Edward Island)

3. PRINCIPLES

The following principles are used to guide decision-making and implementation of this policy:

The University recognizes that most, if not all, funded research from sources other than Tri-Council research projects are administered by a contract, even if they are not “research contracts” as defined in Section 2 of this policy.

The University shall ensure that appropriate overhead charges are included except in cases where the Sponsor has a specific policy excluding overhead, indirect, or administrative costs as an eligible expense.

In cases where the agreement provides for the payment of salaries, or portions thereof, for faculty or employees whose salaries are already paid for by the university’s operating budget or by a designated funding source, such payments will be in the form of reimbursement to the University.

Faculty time must be calculated for each University research contract. If the faculty member(s) or staff are directly involved in conducting the research work, the amount of time (in days or hours) they will devote to the research must be specified.

The costs of wages and benefits for all other personnel working on the research project, including post-doctoral fellows, shall be included in any calculation of overhead charges.

All direct costs of any research must be included within the budget. The University should not be left in a position in which it must subsidize the cost of the project.

In the context of student-led research only, indirect costs will not be charged where the ownership of the work remains with the University and the student/fellow, and where the results of the research will be incorporated into a thesis, dissertation, or senior level project.

4. POLICY

4.1 Overhead Charges

It is the policy of the University to follow federal government guidelines for overhead recovery on federal sources of funds. It is the policy of the University that the following overhead cost charges shall apply, unless otherwise stated or provided for by agreement with the Sponsor:
 

 FOR RESEARCH CONTRACTS
Sponsor Overhead Charge Rate Notes
Federal Government (administered by Public Services and Procurement Canada or Service Canada)   65% of salaries and benefits (for work completed by University employees)

30% of salaries and benefits (for work completed by non-University employees)
As per Treasury Board guidelines
Other Federal Government   30% of total direct costs Or as stated in a Request for Proposals or Terms of Reference
Provincial Government     30% of total direct costs Or as stated in Request for Proposals or Terms of Reference
US Government    62.9% of direct salaries and benefits This is a non-negotiable rate set every three years by the US government
All other Government
(municipal, foreign, etc)   
30% of total direct costs Or as stated in Request for Proposals or Terms of Reference
Private Sector     30% of total direct costs Or as stated in Request for Proposals or Terms of Reference
Non-Profit Sector     15% of total direct costs Or as stated in Request for Proposals or Terms of Reference
National Research Council –
IRAP Network Member Agreements   
15% of salaries and benefits  
For Research Grants, Contribution Agreements, and Contracts for Research Services
Federal Government 15% of total direct costs Includes Contribution Agreements
Other Government 15% of total direct costs Includes Contribution Agreements
Non-Profit Sector 15% of total direct costs Or as published in grant application guidelines
Foundations 15% of total direct costs Or as published in grant application guidelines
Private Sector 15% of total direct costs Or as published in grant application guidelines

It is the policy of the University that the Director, Office of Research Services (in consultation with the Provost and Vice-President Academic and Research and/or the Director of Finance-Controller) has the authority to deviate from the above schedule when advising/assisting Principal Investigators with the preparation of research project budgets, if and when it is deemed to be in the best interests of the University.

It is the policy of the University that in cases where lump sum overhead charges calculated on a percentage basis are not an eligible expense, but specific, itemized actual administrative and operating costs are eligible (as defined in Section 2), these latter costs shall be itemized and included in the budget.

4.2 Distribution of Overhead

It is the policy of the University that 70% of the revenue received by the University as overhead recovery shall be distributed within the University as general revenue.

It is the policy of the University that 30% of the revenue received by the University as overhead shall be retained, after all accounting requirements are complete, in a holding account for use by the Principal Investigator. Use shall be considered the direct costs of any research or creative activity. If two or more faculty or staff are involved as co-investigators or in other working arrangements within the terms of the research activity, the distribution of their respective portions of the overhead must be declared in writing prior to the start of the project and filed with the Office of Research Services.

It is the policy of the University that if a project under this policy goes over budget and incurs cost over-runs, the Principal Investigator’s (or co-PI's) holding account(s) will cover these cost over-runs.

5. POLICY REVIEW

This policy shall be reviewed and updated every five years or at such shorter time period as necessary.

Acknowledgement: This policy document was originally adapted from the policies of Dalhousie University, Memorial University of Newfoundland and Labrador, St. Francis Xavier University, and the University of Prince Edward Island

Procedures on Research Overhead / Indirect Costs

1. PREAMBLE


These procedures accompany Policy 5211: Research Overhead / Indirect Costs. Note that there may be other University policies that should be consulted when planning to undertake research to which overhead applies, such as Policy 5205 (Portion of Salary as a Research Grant), Policy 5210 (Research Contract Administration), Policy 8001 (Signing Officers), etc.
 

2. PROCEDURE


Principal Investigators (PI) preparing proposals are required to notify the Office of Research Services that such a proposal is being prepared and deliver a copy of the terms of reference, call for proposals, draft proposed contract from the sponsor, acknowledgement forms, signature forms, or other relevant information, to the Director, such that the Office of Research Services can provide advice and guidance on the preparation of the proposal, budget, intellectual property issues, commercialization issues, etc.

Proposals initiated by a PI and related supporting materials (as noted above) should be submitted to the Office of Research Services at least 14 days prior to delivery date.

The Director, Office of Research Services, in consultation with the Provost and Vice-President, Academic and Research and/or the University Controller as necessary, is responsible for calculating overhead charges to be included in budgets.
 

3. CALCULATIONS


As noted in the overhead schedule (section 4 of the Policy), most of the overhead charges are based on total direct costs of a project. In most cases, this is the full amount of the project budget. In some cases, where the overhead is charged on the basis of salaries and benefits only, there is a need to clearly define those in the budget. Furthermore, in some cases, where overhead is not an eligible expense, but administrative and operating costs are eligible (as defined in section 2 of the Policy), these too must be shown in the budget. These are discussed below.


3.1.    Salaries and Benefits

The following formulas will be used to calculate staffing costs. To determine the appropriate rate to be used for each staff person on the contract, the salary and benefits rate to be used are obtained from the Human Resources Department and each individual’s salary rounded up to the nearest $1,000 to determine a base salary. The following formulas are used (to be employed based on whichever formula fits with the nature of the research proposal budget structure) to calculate the overhead charge rates:
⦁    Daily base rate for staff person A = [(Base salary) + (Base salary X benefits (14.5%))] / 260 days
⦁    Hourly base rate for staff person A = Daily base rate / 7.5


3.2.    Supplies and Services Costs

These should be costed using the best estimate of anticipated expenditures and be based on actual prices or quotations from suppliers. Travel costs are estimated on the basis of the University’s Travel Expense Policy (7100).


3.3.    Other Administrative Costs

In cases where there is scope and provision in a research proposal to provide specific budgets for administrative and operating costs, the following shall apply (and shall be removed from any calculation of overhead involving total direct costs):

⦁    Phone and fax – prorated based on percentage of time devoted to the research contract from a monthly recurring cost of $30
⦁    Space – $60.00 per m2 per month
⦁    Financial services support – $60 per hour of service (includes opening a research account, preparing invoices, preparing financial statements, preparing final claims and reports, etc., as required by the Sponsor); $60 per purchase order.
 

4. HOLDING ACCOUNT


As noted in the Policy (section 4.2), it is the policy of the University that 30% of the revenue received by the University as overhead shall be retained, after all accounting requirements are complete, in a holding account for use by the PI(s). Specifically:

a)    After 90 days, any financial residual from a research project and/or a service covered by Policy 5211 is moved to a single holding account for the PI (or co-PI’s if there is a risk/reward sharing agreement). Any and all financial liabilities must have been settled before such transfer occurs.
b)    Any salary payable to a PI (or co-PI’s) must have been settled (per above) before any transfer of residual funds. Once transferred, no salary can be claimed by a PI (or co-PI’s).
c)    The holding account can build up over time (i.e., there is no time limit for use). The University will already have claimed its overhead as applicable.
d)    Any future cost overruns by a PI (or co-PI’s) from a research project and/or a service covered by Policy 5211 is automatically charged against this holding account.
e)    If a PI leaves the University, for whatever reason, any funds left in the holding account revert to general revenue for the University (i.e., they are not transferred to another entity).
 

5. PROCEDURES REVIEW

These procedures shall be reviewed and updated every five years or at such shorter time period as necessary.