Part IV - Charge-out rates

Section D: Indirect cost rate

1. Indirect costs are not directly related to any one project or activity. However, they are a necessary part of the costs of undertaking an activity. Their costs therefore need to be attributed to projects in order to calculate a fEC. This is done through a proxy – staff and student FTEs. An indirect cost rate for Research is calculated by taking the total indirect costs for Research, and dividing it by Research FTEs. The resulting rate is quoted as a  £ per FTE. This is then applied to the number of FTEs on each project, to provide the indirect cost charge for that project.
2. This method of calculating an indirect cost rate acknowledges that the number of people – academics, research staff and students – is one of the key drivers of indirect costs. Methods other than a £/FTE should not be used (for example, a percentage of direct staff salaries).
3. This section focuses on the indirect cost rate for Research. Full robustness in the data and calculations should be achieved by the beginning of August 2007 (2006/07 data, applied to research projects from February 2008). In particular this requires FTE numbers to be calculated robustly.
4. The indirect cost rate should be historically based. For example, data from the 2004/05 year (included in the annual TRAC report submitted at 31 January 2006) is used to produce the rates applied from 1 February 2006 to 31 January 2007.
5. Rates should be calculated once a year, and apply from the 1 February of a year for the following 12 months. Institutions that are unable to calculate updated rates on 1 February of a year can continue to use their previous year’s rates (but without further indexing). When their new rates are available these would be applied to research projects until the following 31 January. The fEC-based price calculated on projects already being reviewed by sponsors will not, however, be changed. Therefore, it is not a TRAC requirement to re-cost these projects with the latest rates, although this is good practice. If new rates are not available by 31 July of Year 2 (i.e. 18 months after 1 February of Year 1 when they first were applied) then the non-compliant rates apply, until the rates are recalculated.