Indirect Costs FAQ

Indirect costs of research are real, ongoing, necessary operating expenses that cannot be wholly attributed to any one department, project or product. They include elements such as:

• Building and facility operating costs including heating, cooling, power, cleaning, maintenance; 
• Faculty and departmental services such as machine and electrical shops, grant facilitation, 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; and 
• 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. 

Unlike direct costs of research, many of the indirect costs are incurred whether or not research funding applications and proposals are successful.

For research activities to be sustainable, both the direct and indirect costs must be fully recovered. This is increasingly important as UBC’s level of research funding continues to increase.

The indirect costs recovery rates are:

• 25% of all direct costs for all non-industry funding (government and non-profits)
• 40% of all direct costs on all industry funding 

The only exceptions to this rate will continue to be funds from any of the Tri-Council funding agencies (apart from the SSHRC-administered Tri-Agency New Frontiers in Research Fund. Applicants to this fund should contact ORS about building indirect cost recovery into their application) and funds through grant applications that specify a verified, alternate rate. 

The only exceptions to the standard rate are funds from the Tri-council agencies, (which provide indirect cost payments annually through the Federal Research Support Fund), and certain grant applications when any of the following conditions are met:

• The grant application form clearly states a different indirect costs recovery rate that applies to all applicants; or 
• The alternate rate can be verified (by UILO or ORS, as the case may be), through publicly-available documents, or the sponsor’s website. 

If either of these conditions are met, UBC will accept the posted rate. An Indirect Costs of Research Rates Table on RISe lists many verified exceptions to the standard UBC rates (CWL required to log in).

No. Researchers are to include the indirect costs in addition to the direct costs of research.

Indirect costs of research will be automatically deducted from research accounts at the standard (or other verified special) rate as expenses are incurred.

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 50-90% of salaries, wages and benefits.

The Tri-council agencies are not exempt from indirect costs of research charges. The University recovers part of its indirect costs of research funded by the Tri-Councils from the federal Research Support Fund , as a lump sum at the end of each year.

It’s strongly recommended that each budget line item include the indirect costs.

This standard is used worldwide by industry and government and is referred to as a “price” model, instead of a “cost” model.

For example, the price for personnel would be (salary + benefits) x 125%  (x140% for industry) = total salary price. 

When an application form of a sponsor requires that indirect cost be presented as a separate line item, budgets should include an indirect costs line-item equal to 25% of the total costs (or other, agency-specific rate) and 40% for industry. In other words, a “cost” model should be used. 

No. Indirect costs of research are normally built into the price of goods and services, worldwide.

For Tri-Council grants requiring funding from one or more funding partners, the Tri-Council agency matches only the direct costs of the partners.

Examples of these programs include, NSERC Collaborative Research and Development Grants, SSHRC Partnership Grants, CIHR Industry Partnered Collaborative Research Program.

In these cases, the agency may require that direct and indirect costs be shown separately in the budget submitted to the Tri-Council agency.

In all cases, an indirect cost recovery rate of 40% must be applied to the matching funds provided by the industry partner.

Indirect costs should not be applied to the funds requested from the Tri-council agency.

As we recover more of our indirect costs , it’s 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 as a direct cost and are subject to the indirect cost recovery rate.

The distribution of indirect costs recovered through the Research Support Fund relating to Tri-council agency funds is very complex.

Indirect costs recovered from other sources for research projects carried out at the UBC campuses will be distributed on a slip-year basis as follows: 

Where there is no involvement of an approved centre or institute, the distribution is:

• Central Services (General Purpose Operating Fund): 25% 
• Faculty Dean: 75%

If research is conducted primarily at an approved centre or institute, the allocation is as follows:

• Central Services (General Purpose Operating Fund): 25%
• Faculty Dean: 25%
• Eligible centre of institute: 50%

Indirect costs recovered from projects carried out at any of the affiliated teaching hospitals, including VCH facilities located at the Point Grey campus, are generally shared as follows:

• Clinical Trials: UBC – 20%, Hospital – 80% 
• Other Projects: UBC – 50%, Hospital – 50% 

The UBC share of hospital-generated indirect costs of research is then distributed as described above.

Each March, the faculty deans confirm a list of approved centres and institutes that are to be eligible to receive the 50% allocation of indirect costs.

The current list of approved centres and institutes is available here.

Awards made directly to a student or post-doctoral fellow in a competitive process are not subject to indirect cost recovery.

Indirect costs 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).

The University does not negotiate indirect cost rates with sponsors. It is the responsibility of researchers to apply the appropriate indirect cost rate to budgets for all research projects.

Policy LR2 (Research) may be viewed in PDF format.

Yes. Please contact the Faculty Development Team for guidance and to ensure that the indirect costs of research are included in the budgeting.

Yes. It’s the responsibility of the main site to negotiate on behalf of the sub-sites sufficient funds so that the appropriate indirect costs are included in the transfer of funds to each institution.

No. The transfer of funds within UBC does not attract indirect cost recovery.

No. Grants for which 100% of the funds are to be applied toward the purchase of equipment are exempt from indirect cost recovery.