Indirect Costs

Minnesota State University, Mankato Indirect Cost Rates

Facilities and Administration Costs Procedure FY23-28

F & A Distribution by College

College of Allied Health and Nursing (updated 6/30/22)

College of Science, Engineering & Technology (updated 6/30/22)

Federal Grants & Contracts

Federal grants and contracts rate is negotiated with DHHS Central States Office and dated September 14, 2022; the current rate is classified as "predetermined." Indirect costs reflect Facilities and Administrative (F&A) expenses; the off-campus rate is lower because it does not include facilities:

State, Local, Foundation or Corporate Contracts

For all activities performed in facilities not owned by the institution and to which rent is directly allocated to the project(s), the off-campus rate will apply.  In addition to the University not owning the space, one other criterion should be met:  a) the space is remote from the university campus, OR b) no University entity bears a lease cost for occupying the space.

Some agencies limit indirect cost recovery (e.g., 15% of total direct costs). In this case, the agency’s rate must be documented and is used for calculation. Where appropriate (consult the RASP office), the difference between Minnesota State Mankato standard IDC rate and the amount allowed by the agency should be described as an institutional contribution.


Everything you ever needed to know about Indirect Cost Recovery:


Indirect cost recovery is vital to the health of Minnesota State Mankato sponsored programs activity.

Federal funding cannot be administered under institutional policies that differ from other funding sources. Federal auditors look for evidence that Minnesota State Mankato consistently recovers indirect costs. If indirect costs can be recovered, they must be recovered consistently from all funding agency types (not just federal programs). At Minnesota State Mankato, research and sponsored programs activity is encouraged by a generous allocation policy based on the amount of indirect cost recovery achieved by each externally funded administrative unit.

F&A Budget Distribution
The purpose and goal of the Grants and Contracts F&A Recovery budget distribution is to provide funding and support for continued and new activity in research, grants, and contracts to the University.

Distribution Formula
By October of each year, University funds equivalent to the amount of F&A costs recovered from grants and contracts in the previous year will be distributed as follows:

Areas to be covered:
Research and Sponsored Programs
– $10,000 to cover grant administration costs (i.e. University’s grant database subscription, grant professional development, etc.,) and the funds to support the two full-time staffing positions, grants coordinator and grant/contract specialist
Finance and Administration
– the funds to support 75% of the grants accountant position
Library Services
– the funds to support the following two products: Digital Commons (aka Cornerstone) and Expert Gallery Suite (aka Scholar Profiles). The Library retains the right to change those vendor services to increase effectiveness.
Remaining amount distributed:
To the appropriate division(s) or college(s) generating the activity in the previous year
Any reallocation variance will need to be reviewed and approved by the Associate Vice President of Research.

 The bottom line: IDC recovery is good for you and good for Minnesota State Mankato!


What Are Indirect Costs?

Indirect costs are real costs incurred by the University as a result of administering sponsored projects. They are indirect because they cannot be readily identified or associated with a single sponsored project or institutional function. Examples are utilities, public safety, building and equipment use, and maintenance, libraries, student administrative services, personnel, payroll, academic and sponsored administration, and purchasing. Other terms for IDC are overhead or facilities and administrative expenses (F&A).

How Is the Rate Determined?

The U.S. Office of Management and Budget establishes procedures to determine universities’ indirect costs using ratios that relate these costs to the direct costs of the “normal” primary functions of the institution, such as instruction, organized research, and other activities. The resulting rates are then reviewed by the cognizant federal agency, which is Health and Human Services for Minnesota State Mankato. Final rates are negotiated with the Division of Finance and Administration and a formal rate agreement is signed. The agreed rates apply to all federal agreements with the University unless other mandatory stipulations apply. Indirect costs on corporate, foundation, and state grants, agreements, contracts, and subcontracts are charged an on-campus rate of 12% or an off-campus rate of 8% (or the amount allowed by the funding agency) of total direct costs. (See “rationale” above.) The only exception is for awards from agencies that specifically disallow indirect cost recovery and for which this condition of the award was documented on the CAEFP.


  1. The funding agency clearly refuses to pay indirect costs. In this case, the PI/PD is required to attach to the CAEFP form the documentation of this agency policy. If the application information is not clear on this point, the PI/PD must obtain an official e-mail or written confirmation from a program officer that indirect cost recovery is disallowed. When indirect cost recovery is disallowed, these costs should be described as Minnesota State Mankato's contribution to the costs of carrying out the project. Even though indirect costs are by definition unallowable, they are real costs. RASP staff can suggest language to describe this contribution.
  2. Indirect costs are a line item permitted by the funding agency.
    • The agency is not Federal State and local government, foundations, and corporate contracts are charged: 12% (on-campus) of Total Direct Costs or the maximum allowed by the agency.
    • The agency is Federal and there are no indirect cost limitations: Minnesota State Mankato's current rate agreement is dated 09/14/2022. The cognizant agency is Health and Human Services (DHHS). The rates approved in the agreement are predetermined from July 1, 2021, until June 30, 2025, and from July 1, 2025, until amended (by the process described above). These rates are on-campus projects – 39.4%; off-campus projects – 12.3%. The base is: Direct salaries and wages including vacation, holiday, sick pay, and other paid absences, as well as all other fringe benefits.