BMGF Indirect Cost Policy
BMGF Indirect Cost Policy
BMGF Indirect Cost Policy
forApplicantOrganizations
Definition
TheBill&MelindaGatesFoundationdefinesindirectcostsas:
Overheadexpensesorongoingoperationalcostsincurredbytheapplicantorganizationonbehalfofthe
organizationsactivitiesandprojects,butthatarenoteasilyidentifiedwithanyspecificproject.
Administrativeorotherexpenseswhicharenotdirectlyallocabletoaparticularactivityorproject.
Expensesrelatedtogeneraloperationsofanorganizationthataresharedamongprojectsand/orfunctions.
Basicexamplesincludeexecutiveoversight,existingfacilitiescosts,accounting,grantsmanagement,legal
expenses,utilities,andtechnologysupport.Tofurtheraidtheinterpretationofthisdefinition,the
Foundationhasestablishedexamplesfortheuseofourapplicantsandprospectiveapplicants,whichare
includedinAppendixA.
OtherFunding
TheFoundationisacharitableentityandisnotcommittedtomatchingtheindirectcostratesoftheU.S.
governmentorotherentities.Werecognizethatthismeansthat:(a)somegranteesmayneedtoengageincost
sharingbetweenprojects,tapintounrestrictedfunds,orconductotherfundraisingtocoveroperations;or(b)
somecontractorsmaychoosenottocontractwiththefoundation.However,webelieveourpolicyisconsistent
withthatofmanyprivatefoundationsandcertaingovernmententitiesthathaveaflatormaximumratethatcaps
theamountanapplicantinstitutioncancharge.TheFoundationspolicyhelpsensurefurtheranceofour
charitablepurpose.
MaximumIndirectCostRates
Indirectcostratesforgrantsandcontractsaresubjecttothefollowinglimitations:
0% rate
Government agencies,
Other private foundations,
Forprofit organizations
Up to a 10% rate
U.S. universities,
U.S. community
colleges
Up to a 15% rate
Nongovernmental
organizations (NGOs),
International organizations,
NonU.S. universities
IndirectCostsReimbursements=Rate%*TotalProjectCosts(incl.personnel,subcontracts,supplies,
equipment,etc.)
Ratesandlimitationsapplytoboththeprimaryapplicantorganizationandanysubgranteesandsub
contractors.Eachrespectiveorganizationmayreceiveindirectcostsuptotherateapplicabletotheir
organizationtype.
o Example:IfaU.S.universityistheprimarygranteeandincludesaninternationalorganizationasa
subgrantee,theU.S.universitycanreceiveuptoa10%rate,whiletheinternationalorganizationcan
receiveuptoa15%rateforindirectcosts.
TheratesprovidedabovearethemaximumratesallowedundertheFoundationspolicy.Agranteeor
contractorwithanactualindirectcostratelowerthanthemaximumrateprovidedaboveshouldnotincrease
thefundingrequesttothemaximumallowed.
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GiventhepolicyprovidesanUPTOpercentageamount,theindirectcostrateapprovedmaybeanywhere
from0%to15%dependingonthespecificsituation.Forexample:
o Example1:Atthediscretionofthefoundation,alargegrantmaybeawardedalowerindirectcost
ratetoreflectreducedoverheadrequiredtoadequatelymanagealargegrantsdirectcosts.Actual
administrativeandmaintenancecostsdonotnecessarilyincreaseindirectproportiontograntfunds.
o Example2:Ifaprimarygranteeisreceivinggrantfundswhicharelargelysubgrantedtoanother
organization,thefoundationmaylimittheindirectcoststheprimarygranteereceivesonthesub
grantedfunds.Therefore,toreflectthis,theratecouldbelessthanthemaximumallowedratefor
theprimarygrantee.
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AppendixA:DirectandIndirectCostExamples
DIRECTCOSTS
Thefollowingmaybeincludedasdirect
costsinbothgrantsandcontractsif
DIRECTLYATTRIBUTABLETOTHEPROJECT:
Salariesofemployees
CanincludeProjectManagement
Canincludedirectlyattributable
administrativesupport,legalor
accountingfunctions,withdistinctand
measuredeffortontheproject.
Fringebenefitsofemployees
Travelforemployees
Consultants
Supplies
Subgrants(definedasworksourcedfrom
theprimarygranteetoanotherorganization,
wherefundingisprovidedupfront)
Subcontracts(definedasworksourcedfrom
theprimarygranteetoanotherorganization,
wherefundingisprovidedinarrears)
INDIRECTCOSTS
Existingfacilitiescosts(e.g.rent,maintenance,etc.)
suchas:
Universityheadquarters
Country/regionaloffices
Utilitiesforexistingfacilities
ExistingInformationtechnologyequipmentand
support(e.g.centralizedITsystems,networks,etc.)
Existingsharedequipment
Thefollowingmaybeincludedasdirect
costsinGRANTSONLYifDIRECTLY
ATTRIBUTABLETOTHEPROJECT&NEWLY
ACQUIREDSPECIFICALLYFORTHEPROJECT:
Equipmentpurchases[Notethatallexisting
equipmentwouldrepresentindirectcosts.]
Newlyacquiredfacilitiessuchas:
Anewfieldclinic
Newtestinglaboratories
Newprojectimplementationunitoffice
[Notethatallexistingfacilitieswould
representindirectcosts.]
Utilitiesfornewlyacquiredfacilities
NewlyacquiredInformationTechnology
equipmentandsupportfortheproject
Existingequipmentmaintenance
Depreciationonequipment
Insurance
Communicationsexpenses(e.g.phones,etc.)
Administrativeofficesupplies
Generaladministrativesupport:
Executivemanagement(CEO,COO,CFO,etc.)
Executiveadministrators
Generalledgerandgrantsaccounting
Generalfinancialmanagementstaff
Internalauditfunction
Institutionallegalsupport
Researchmanagementpersonnel
Informationtechnologysupportstaff
Facilitiessupportpersonnel
Scientificsupportfunctions
Environmentalhealth/safetypersonnel
Humanresources
Library&informationsupport
Sharedprocurementresources
Generallogisticssupport
Materialmanagement(e.g.tracking
procurement,inventorymanagement,shipping)
Othersharedresourcesnotdirectlyattributable
totheproject
Note:Wemakeeveryefforttoensurethatcostevaluationunderthepolicyisdoneconsistentlyandregularlybyfoundation
personnel.Forquestionsorissueswithcostlineitemsforyourgrantorcontractproposal,pleasecontactyourfoundation
representative.
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AppendixB:FrequentlyAskedQuestions(FAQs)
Question:WhydoesntthefoundationmatchmyinstitutionsNegotiatedIndirectCostRateAgreement
(NICRA)ratewiththeU.S.governmentorotherfundingorganizations?
Answer:Giventhefoundationisacharitableentity;wecannotcommittomatchingindirectcostsratesfrom
otherentities(e.g.,theU.S.federalgovernment,etc.).Thefoundationspositionisthat,wheneverpossible,
specificallyallocablecostsshouldbeidentifiedasdirectcosts,includingthosefordedicatedongoingproject
managementandsupport.PleaseseeAppendixAforexamplesofdirectandindirectcosts.Pleasenotethat
ourcategorizationdiffersfromtheU.S.governmentsinstructionstotreatprojectmanagementandsupport
expensesasindirectcosts.Therefore,thefoundationfundsthesecostsasdirectcostsontowhichisaddeda
1015%rateforindirectcostswhicharenotdirectlyattributabletotheproject.
Question:AnorganizationthathasaNICRArateof40%saysitsNICRAratewouldbereducedornegatively
impactedifitacceptsalowerratefromtheFoundation.Isthistrue?
Answer:No.AcceptingagrantorcontractfromafoundationwithlessthanfullNICRAratewillnotimpactthe
NICRAratecalculationdifferentlythanacceptingagrantorcontractwiththefullNICRArate.Thecalculation
oftheNICRArateisaratiowherethenumeratoristheactualindirectcostsandthedenominatorisallofthe
projectdirectcosts.Ifthebaseordenominatorincreasesfasterthantheindirectcoststhentheratewill
decrease.Clearly,acceptingagrantorcontractwithlessthanfullNICRAratemayimpactactualcashflow
sincethefulloverheadcostrecovery,iseffectivelyreimbursingtheinstituteforalltheapplicableindirect
costs,whiletheFoundationmaybereimbursingforsome(butnotall)overheadcosts.However,organizations
thatreceivemultiplegrantsorcontractswithafullNICRAratewillhaveagreatercapacitytoabsorbalower
indirectcostratefromtheFoundationasmoreoftheorganization'sindirectcostsarebeingpaidbyother
parties,butagrantorcontractwithalowerindirectcostratedoesnotlowertheNICRArate.
Question:Whyareexistingfacilitiesthatareusedforafoundationprojectnotclassifiedasdirectcosts?
Answer:Rentandotherfacilitiescostsarepartofdoingbusinessforanorganizationandthereforearenot
specificallyattributabletoaprojectoractivity.Therefore,facilitiesexpensesoftheorganizationshouldbe
categorizedasindirectcosts.Theexceptiontothisinthefoundationspolicyiswhenafacilityhastobebuilt
oracquiredspecificallyforaGatesfoundationgrantorcontract.Thissituationshouldoccurinlimited
circumstances.However,whennecessary,thecostsforacquiringsuchfacilitieswillbefundedorreimbursed
asdirectcosts.
Question:Howdoesthecalculationofindirectcostsworkfortheprimarygranteeandthesubgrantee?
Answer:Theprimarygranteereceivesindirectcostsonthetotalbudgetwhichincludesdirectcostsandsub
grantedorsubcontractedcosts.But,thesubgrantedorsubcontractedfundswouldalsoincludedirect
costsandindirectcoststothatrespectiveinstitution.Therefore,thecalculationmaylookasfollows:
GranttoUniversityABC:
ABCdirectcosts(personnel,supplies,travel,etc.)
>$850k
SubgrantedcoststononprofitorganizationXYZ
>$1.15M
Includesdirectsubgranteecosts$1.0M
Includesindirectcostsubgranteeallowance(15%)$150k
TotaldirectandsubgrantedcoststononprofitorganizationABC
Indirectcostprimarygranteeallowance(10%)
Totalgrantaward
>$2.0M
>$200k
>$2.2M
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Question:Whyareindirectcostsnotprovidedtoforprofitsandgovernmentagencies?
Answer:AsafoundationbasedintheU.S.,wegenerallymustensurethatourfundsareusedforcharitable
purposes.WhenthefoundationmakesagrantorentersintoacontractwithaU.S.publiccharity,the
organizationsstatusasacharitybytheU.S.governmentisbasedonanassessmentoftheorganizations
missionandactivitiestoconfirmthefundswillbeusedforcharitablepurposes.However,inallothercasesof
granteeentities,therearenoassurancesthatfundswillbeusedforonlycharitablepurposes.Whenthe
foundationmakesagranttoaforprofitentity,theburdenisshiftedtothefoundationwithExpenditure
Responsibilityrequirementstoensurethat1)thegrantfundsareusedforcharitablepurposes,and2)we
obtainreportingtoensurehowthefundsarespent.Sincethedefinitionofindirectcostsismainlyexpenses
thatarenotdirectlyallocabletoaparticularactivityorproject,itisnotpossibleforthefoundationtoconfirm
thatindirectcostspaidtoaforprofitentityareusedonlyforourprojectandthuscharitableonly.
Inregardstogovernmentagencies,thefoundationspositionisthatgovernmententitiesaretypicallyfunded
bythecitizensofthecountryforvariousagencies(e.g.MinistryofHealth,Finance,Agriculture,etc.).The
governmententitiesarebenefitingthecommunitiesofwhichthecitizensareapart.Therefore,the
foundationspolicyistofundtheprogramspecificcostsrelatedtoourprojectoractivity,butthe
administrativeandgeneraloperationscostsofthegovernmentagencyshouldbefundedbytherespective
countrysbudgetaryfunds.
Question:WhydoU.S.universitiesreceivealowerratethaninternationaluniversities?
Answer:ThefoundationhasanimportantrelationshipwithUniversitygranteestoperformvaluablework
projects,including(butnotlimitedto)discoveryresearch,vaccinedevelopment,andclinicaltrials.The
foundationspolicyconsidersthatU.S.universitiesshouldrequestalimitedamountofindirectcostsfrom
privatefunders.IntheU.S.,indirectcostsrecoveriesarenegotiatedwithfederalfundingagenciesbecause
themajorityofU.S.fundedresearchisperformedonuniversitycampuses.Therefore,thefoundationspolicy
istoprovidearateof10%toU.S.universitiestoallowforadditionaladministrativeandoverheadcostsofthe
institutiontobefundedbyothersources.
Question:Whatarethemaindifferencesinthispolicyversusthepreviouspolicyapplicablein20062011?
Answer:Themainchangesthatbenefitgranteesare:
o Alldirectcostsmaynowbeusedtocalculatetheamountofindirectcostreimbursement.This
includesallfeesandexpensesaswellasdirectandindirectcostspaidtosubgranteesor
subcontractors(providedsuchindirectcostsarewithintheabovestatedcaps)andapproved
equipment.
o Wehavereclassifiedcommunitycollegestobeeligiblefor10%indirectcosts,whichwillbringthem
inlinewithU.S.universities.
o Thispolicynowappliestobothgrantsandcontractswiththefoundation.
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