Sent to all federal PIs, research associate deans, other academic leaders, and central and departmental research administrators.
Dear Research Colleagues,
On Friday, May 2, the National Science Foundation (NSF) issued a Policy Notice implementing a standard 15% Indirect Cost Rate (or F&A rate) on modified total direct costs (MTDC) for Institutions of Higher Education (IHEs). The policy states that this change will apply to all new awards issued on or after May 5, 2025. It also states that NSF funding opportunities issued after May 5, 2025 will include notice of this policy change.
NSF asserts that this new policy overrides previously negotiated rates for all awards in accordance with 2 CFR 200.414(c) for the class of NSF financial assistance awarded to IHEs.
A legal challenge contesting this F&A reduction is likely to be filed early next week.
Our guidance for PIs and research staff at this time is as follows:
1. You may continue spending on existing awards using the F&A rate shown on your Notice of Grant Award and approved budget. This policy change does not impact awards issued prior to May 5, 2025.
2. For proposals that need to be submitted immediately, continue to budget normally using our federally negotiated rates. Please delay submission of proposals that do not have short-term, defined due dates at this time.
3. Temporarily, SPA will not be accepting any requests to set up pre-award spending on NSF awards. Please note that the University has not yet made any decision about whether or not it will accept NSF awards issued at a 15% rate; therefore, the risk of unnecessary use of non-sponsored funding to cover costs incurred is very high. If an unusual situation exists that you believe would warrant an exception, contact David Hagen to discuss prior to submitting the request. As always, University policy prohibits incurring costs on one sponsored project with the expectation that the costs will be moved onto the correct project at a later time.
4. This guidance applies regardless of whether the University of Minnesota is the prime recipient of NSF funding or whether we are a subrecipient of funding. This policy only applies to recipients who are IHEs, so some recipients or subrecipients may not be impacted. If the University is the primary recipient and is issuing a subaward to another IHE from our own award, we will honor whatever action the subrecipient wishes to take. Although it is unlikely, if a subrecipient voluntarily asks to reduce its F&A rate to 15%, then we will honor that request. However, we will not restore funding to the subrecipient at their negotiated rate in the event the courts impose a temporary restraining order or a preliminary injunction. For that reason, we encourage subrecipients to be cautious about voluntarily agreeing to a reduced rate.
5. For new awards issued with a 15% F&A rate, the award will be held temporarily until senior leadership makes a determination about whether to accept this rate.
For questions, contact David Hagen at [email protected].
Please continue to visit our SPA Federal Executive Orders and Other Policy Directives website for the most up-to-date guidance.
Sincerely,
April Coon, Director, Sponsored Projects Administration
David Hagen, Director, Office of Cost Analysis