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Indirect Cost

PPD-0211

PPD Number: 0211
Title: Indirect Cost
Responsible Office: Finance
Effective Date: 08/01/2025
Last Updated: First Version

I. Scope

This policy and procedure document (PPD) applies to William & Mary’s Batten School of Coastal & Marine Sciences (Batten School) & Virginia Institute of Marine Science (VIMS). It applies to all members of the Batten School & VIMS community, including faculty, staff, and students. It applies to all Batten School & VIMS campuses, including the Eastern Shore Laboratory (ESL) and the Kauffman Aquaculture Center (KAC).

II. Purpose & Policy Statement

The purpose of this policy is to define and explain the concept of indirect costs.  When conducting research projects, not only are costs directly related to the project incurred but also indirect costs. These indirect costs, known as Facilities and Administrative (F&A) costs, support research and academic infrastructure.

F&A costs ensure that the Virginia Institute of Marine Science (VIMS) can maintain the necessary environment and support systems for research activities. To recover these costs, VIMS applies an F&A rate to the direct costs of research projects. This rate is negotiated with the federal government every two years, and reflects the proportion of indirect costs relative to direct research expenses.

III. Rate Determination, Recovery, & Composition

How Is the F&A Rate Determined?

The F&A rate is calculated by dividing the VIMS’ total indirect costs by its total direct research costs. This rate is then applied to eligible direct costs in research grants to determine the amount that can be recovered for indirect expenses. 

As specified in the Commonwealth Accounting Policies and Procedures Manual, VIMS is required to apply the full federally negotiated rate to all grants, contracts and other agreements proposed and/or accepted unless an exemption has been granted (see PPD-0221 Sponsored Programs – Facilities and Administrative Cost Rate Reduction/Waiver Policy)

Indirect Cost Recovery

Indirect cost recovery, or Facilities and Administrative (F&A) Cost Recovery, also known as FACR, is revenue generated from externally funded grants and contracts. These funds are intended to support the infrastructure and administrative expenses associated with sponsored research. Departments receiving F&A funds must adhere to the following guidelines to ensure responsible and strategic use of these resources.

Components of the F&A Rate:

Facilities:

  • Building and equipment depreciation
  • Operations and maintenance
  • Library expenses
  • Utility costs
Administrative:
  • General administration
  • Departmental administration
  • Sponsored project administration