Confused about UBC's overhead policy? Please consult these frequently asked questions. If your questions remain unanswered, please contact us.
- What is overhead?
- What is the new UBC overhead rate and how has it changed?
- What about agencies such as the National Institutes of Health that won’t pay the full overhead rate?
- Does this mean I’ll get less for my research project?
- What does this new policy accomplish?
- What is the overhead rate that other Universities are using across North America?
- Why is funding from the Tri-Councils excluded from overhead charges?
- How is overhead to be calculated?
- If I build in the overhead into the price of a research project, isn’t this deceptive?
- How will this affect my NSERC Collaborative Research & Development grant application?
- Is the new rate retroactive?
- Will the new rate apply to future instalments of existing grants, contracts or agreements?
- My department or faculty deducts a percentage from my grants and contracts to cover locally-provided services; will that continue under this new policy?
- My unit or facility currently applies more than 25% overhead for contracts for services; will my revenues decline?
- When UBC collects overhead, where does it go?
- Contracts have always carried overhead, what about contribution agreements and grants?
- Will scholarships and fellowships attract overhead?
- Who negotiates overhead rates and payments with individual agencies and companies?
- Where can I find the University’s policy on indirect costs or overhead?
- Will amendments to existing Grants, Contracts or Agreements fall under the new policy?
- Will sub-awards to UBC from other institutions be subject to overhead?
- Do UBC Endowments attract overhead?
- Will grants for equipment only be subject to overhead?
The costs of doing research may be separated into direct costs and indirect costs (or “overhead”). Direct costs are costs directly related to research projects and may include salaries and benefits, supplies, equipment, research-related travel, fees and consultant costs. Indirect costs are real costs that are indirectly related to research projects and include:
- Building operating costs including heating, cooling, power, cleaning, maintenance and landscaping;
- Faculty and departmental services such as machine and electrical shops, secretarial and office assistance, purchasing, shared equipment, etc.;
- Academic services such as the Library and Computing Service;
- University-provided administrative services such as Purchasing, Finance, and Human Resources, as well as the University administration itself, President’s Office, Deans, Department Heads and Directors and administrative staff;
- Research and contract administration & support such as Office of Research Services, University-Industry Liaison Office, Research & Trust Accounting, CFI Office, Health Research Office, Hospital Research Institute Administrations, etc.; and
- Faculty salaries.
The University has accepted the recommendations from the Task Force on Overhead/Indirect Costs of Research, which state that all funded research grants, contracts and agreements should be assessed overhead at a single rate of 25% of total direct costs. This replaces the current existence of variable rates applied to different research agreements.
3. What about agencies such as the National Institutes of Health that won’t pay the full overhead rate?
The University will accept modified overhead rates from government or non-profit agencies as long as those rates are published and there is sufficient evidence that the rate is applied to all Canadian Universities.
No. Researchers are to include the overhead in addition to the direct costs of research.
- Simplification: one rate applicable to all funding arrangements will make everyone’s life easier;
- Certainty for researchers and sponsors during budget preparation; and
- Cost recovery: Indirect costs are real and are increasing rapidly as research activity increases.
Most Canadian universities charge between 15-30% of direct costs on grants, and 40% on contracts and agreements. Most U.S. universities have negotiated federal indirect cost rates that range between 45-65% of salaries, wages and benefits.
The Tri-Councils are not exempt from overhead charges; the University recovers part of its indirect costs of research funded by the Tri-Councils. At the end of each year, the University receives a reimbursement of some of its indirect costs as a lump sum through a federally-administered Indirect Costs Program.
- Whenever appropriate, budgets should build the overhead costs into each line item. For example, personnel costs are calculated as (salary + benefits) x 125% = total salary cost.
- When a government or non-profit agency requires that overhead be presented as a separate line item, budgets should include an overhead line-item equal to 25% of the total costs (or other, agency-specific rate).
- A table of agencies with UBC-approved special rates can be found here: www.research.ubc.ca/ICR.aspx#4
No. Overhead is normally built into the price of goods and services, worldwide.
The NSERC CRD grant will match the direct costs of research charged to industry sponsors. As overhead is charged to the industry partner in addition to the direct costs, the amount requested in the CRD application is unaffected by the changes being introduced. The University will collect overhead on the NSERC portion of the direct costs separately through the Indirect Costs Program.
No, it applies only to projects that are initiated on or after October 1, 2008.
13. My department or faculty deducts a percentage from my grants and contracts to cover locally-provided services; will that continue under this new policy?
With the increase in overhead collected, it is expected that Deans will implement flow-down policies to further distribute these funds at the department/institute and research group level, thus making additional, Faculty-specific “Administrative Fees” unnecessary. Should these be continued in any unit, they must be included in the budget and are subject to overhead charges.
14. My unit or facility currently applies more than 25% overhead for contracts for services; will my revenues decline?
No. Facilities that currently charge more than 25% overhead are advised, if necessary, to add the difference between the current rate and the new rate as a “Fee” which may be added separately to the budget and is subject to the 25% University overhead charge.
The distribution of indirect costs recovered through the Indirect Costs Program relating to Tri-Council funds is very complex. Overhead recovered from other sources for research projects carried out at the UBC campuses will be distributed on a slip year basis as follows:
- Central Services (General Purpose Operating Fund): 50%
- Faculty Dean: 50%
Overhead recovered from projects carried out at Health Authority (hospital) sites, including VCH facilities located at the Point Grey campus, is shared as follows:
- Clinical Trials: UBC – 20%, Hospital – 80%
- Other Projects: UBC – 50%, Hospital – 50%
The UBC share of hospital-generated overhead is then distributed 50/50 between Central Services and the Faculty Dean.
The new system recognizes that all research activities incur indirect costs and therefore, by establishing one standard rate for all types of research arrangement, the University is adopting a more sustainable model that also simplifies budgeting and accounting processes.
Awards made directly to a student or post-doctoral fellow in a competitive process will not be assessed overhead. Overhead will, however, be charged against salaries paid to student and post-doctoral assistants from research grants and contracts (i.e., projects set up by the University-Industry Liaison Office or Office of Research Services).
It is the responsibility of researchers to apply the appropriate overhead charge to budgets of all research projects.
The Vice President Research, in collaboration with the consortium of Canadian research-intensive universities, will continue to negotiate with national agencies and foundations that currently do not include indirect costs as eligible costs.
Policy #87 (Research) may be viewed in PDF format at www.universitycounsel.ubc.ca/policies/policy87.pdf. The updated policy reflecting the new standard rate will be published closer to its effective date of October 1, 2008.
Normally, no. The terms of existing agreements have already been accepted by both parties and unless agreed upon by both parties, they cannot be changed. In cases where implementing the new policy is possible and is in the interest of the university, however, the new policy may apply.
21. Will sub-awards to UBC from other institutions be subject to overhead?
Yes. It’s the responsibility of the main site to negotiate on behalf of the sub-sites sufficient funds so that the appropriate overhead for each institution is included in the transfer of funds to each institution.
No. The transfer of funds within UBC does not attract overhead.
No. Grants for which 100% of the funds are to be applied toward the purchase of equipment are exempt from overhead.