Part IV - Charge-out rates

Section D: Indirect cost rate

Chapter D.1  Indirect cost total

1. Indirect cost totals for Teaching, Research and Other should be established. The indirect cost total should not include any Research cost that:
   • was charged directly to projects in the prior year as a directly incurred or directly allocated cost; or
   • is covered by the estates charges; or
   • is contained in a charge-out rate (equipment or laboratory technicians); or
   • is a scholarship, bursary or fee remission for PGR students.
2. The indirect costs that should be included in the rates are therefore those that are currently defined as Support costs within annual TRAC, with the following exceptions. The following should not be included in the indirect cost rate:
   • the estates costs of academic departments;
   • laboratory technicians’ costs;
   • the costs of equipment in academic departments;
   • scholarships/bursaries.
3. The indirect cost totals should therefore include:
   • the Support time (cost) of academics
   • clerical and administrative staff in academic departments*
   • non-staff costs in academic departments*
   • central services including academic services such as the library and learning resources
   • the estates cost for central service departments
   • the gross cost of capital employed, incorporating interest and restructuring costs.

     * These costs exclude any that have been directly charged to a project.

4. By definition, the Support time/cost of academic staff already excludes time/cost that has been charged to a project or is otherwise a direct Teaching, Research or Other activity. Clerical staff and non-staff costs in academic departments that have been charged to a research project as a directly incurred cost should be excluded.
5. Restructuring costs are redundancy/retirement and severance payments, or any other type of specific payment made for restructuring, including any top-ups to pension on early retirement. These costs may or may not be treated as exceptional items in the financial statements. Interest costs include mortgage interest. Both restructuring costs and interest costs are covered by the COCE adjustment. Therefore these costs should initially be included in the indirect cost total, but then deducted from the gross COCE total. This means that the indirect costs will include a gross COCE which incorporates the costs of restructuring and interest. Put another way, the indirect costs will include a net COCE adjustment plus actual restructuring costs plus actual interest costs.
6. Indirect costs could include generic IT costs (or these could be directly allocated, or included in the estates charge).
7. Indirect costs used to calculate the indirect cost rates should include the indirect costs of PGR students.
8. Indirect costs that have been charged to projects during the year (e.g. during 2004/05) are not relevant to the calculation of subsequent indirect cost rate calculations (e.g. rates calculated on 2004/05 costs, applied from 1 February 2006 should be based on total indirect costs actually incurred in 2004/05, irrespective of any recovery in 2004/05).