Direct & Indirect Costs

The process of determining Facilities & Administrative (F&A) rates for the University of Minnesota is managed by the Cost Allocation Services department within the U.S. Department of Health & Human Services. The guidelines for preparing the F&A rate proposal are found in 2 CFR Part 200—Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.

Direct Costs make up the base (denominator) in the F&A rate equation.

  • Direct costs can be identified specifically with a particular final cost objective (sponsored project, instructional activity, or other institutional activity) with relative ease and a high degree of accuracy.
  • Examples include salaries of research or teaching faculty, travel costs, and lab purchases for a particular grant or project.
  • Cost share obligations are included in direct costs.

Indirect Costs make up the various pooled costs (numerator) in the F&A rate equation.

  • Indirect costs are those costs incurred for common or joint objectives that cannot be readily identified with a specific sponsored program or institutional activity.
  • Examples include utilities, building maintenance, clerical salaries, and general supplies.

A full list of typical direct and indirect cost items is available in the University’s Policy Library.