Subject: Policy Statement on Research Overhead
Group: Institutional
Approved by: Provost and Vice-President, Academic & Research
Approval date: 1 September 2010       
Administered by: Provost and Vice-President, Academic & Research

1 — PREAMBLE

All research, regardless of the source of funds, carries with it a variety of indirect costs borne by the University to administer such funds. The indirect costs (also known as overhead) refer to those costs that are real but not easily identifiable with a particular research project. These include, for example, utilities, the provision of institutional facilities, space, accounting, payroll and personnel services, research office services, janitorial services, and provision for equipment replacement.

This means that it is necessary to charge all costs associated with the grant against the grant funds unless we cannot because of the term of the grant or unless the Research Services and / or Financial Services decided this was not to be done. The University should be willing to not accept certain research grants or contracts if the overhead burden is too significant.

To account for indirect or overhead costs, a charge is normally levied on payroll costs (wages plus fringe benefits) of non-student employees, and must be included in all contract proposals. Exceptions may be permitted (as agreed to by the Provost and Vice-President Academic and Research) when alternative compensation is provided or favourable terms, such as ownership of intellectual property, are offered.

It is the responsibility of all researchers to consult with the Office of Research Services regarding this policy prior to budgetary discussions with sponsors. Any budget negotiations that are finalized with Sponsors without prior consultation with the Office of Research Services shall automatically be assumed to have the appropriate indirect costs included.

This document describes the policies and procedures to administer all research excluding that funded by the Tri-Council agencies, for the purpose of ensuring appropriate indirect costs are recovered. As such, the policies and procedures described herein do not apply to any funding received from the Tri-Council agencies.

If you expect to be compensated in addition to your usual salary for any research you may undertake, you should consult other appropriate documents, especially the Collective Agreement (article 12.03 and others) between Mount Allison University and the Mount Allison Faculty Association.

2 — DEFINITIONS

Indirect costs (also referred to as overhead) are those expenditures incurred by the University in the conduct of research which are not readily identifiable as specific expenses. They are generally related to such items as building use (space, heating, light, custodial), equipment depreciation, physical plant and maintenance (including utilities, hazardous waste disposal, security), insurance, research administration, financial administration (including purchasing and accounting), academic administration, human resource services, and libraries.
 
Direct costs are those directly attributable to the research activity. These include the salaries and benefits of research personnel, materials and supplies, travel, equipment, and purchase of specialized services.
 
University employees refers to University faculty, staff, post-doctoral fellows, and students.
 
Non-University employees refers other individuals who not employees of the University but who are part of the research project team; it may any or all of the following: faculty, staff and students of other institutions; employees of private sector firms; employees of non-profit organizations; individuals.
 
Research grants are grants received under research with a public or private organization which provides funding to pay for all or part of the costs of a research project. Payment is not conditional on the researcher delivering to the sponsor a pre-determined set of research outcomes.
 
Research contracts (or contracted research) means any research agreement signed between the University and a Sponsor which, in exchange for payment of direct and indirect costs, sets out a task or tasks to be completed within a specified timeframe to arrive at an outcome, the results of which constitute a deliverable under the agreement. These results can be published in the scholarly literature following an appropriate deferral period.
 
Contribution agreements (or grants- in aid) are research agreements in which the project is predefined by consultation between the Principal Researcher and the sponsoring agency and differ from a Research Contracts as the conditions of timing of delivery and other terms are relaxed.
 
Contracts for research services (or service agreements) are research agreements of a more routine nature that still require specialized expertise or laboratory facilities to conduct the work. Provision of specialized or certified analytical services that are not routinely available from private sector laboratories is an example of a Contract for Research Services.
 
Administrative and operating costs are defined as actual expenses incurred to indirectly support research activities, including but not limited to, office space, lab space, telephone/fax line charges, financial services, etc. (Note: specific eligible costs are usually defined by the Sponsor.)
 
A Sponsor is defined as any entity which provides financial support for the completion of research.
 
The following table is for illustrative purposes only, to summarize the main differences in the types of funding sources for various types of research activities.
 
Work conceived and planned by investigator     
Contribution agreement (Grant in Aid): Subject area suggested by external organization, project idea initiated by investigator and jointly planned with external organization
Research contract: Work conceived by contractor or jointly with investigator. Both parties participate in planning
Research service contracts: Contractor defines work
 
Generic description of deliverables             
Contribution agreement (Grant in Aid): General description of deliverables with some flexibility in content and timing
Research contract: Specific deliverables with time lines     
Research service contracts: Specific deliverables with time lines

Payment fully committed in advance          
Contribution agreement (Grant in Aid): Payment may be fully committed in advance     
Research contract: Payment by installments on completion of deliverables
Research service contracts: Payment on completion of deliverables

No payment for Principal Investigator's time
              
Contribution agreement (Grant in Aid): No payment for Principal Investigator's time
Research contract: May include payment for Principal Investigator’s time
Research service contracts: May include payment for Principal Investigator’s time

Very limited or no restrictions on publication               
Contribution agreement (Grant in Aid): Very limited restrictions on publication
Research contract: Results may be confidential with restrictions and delays on publication
Research service contracts: Results are confidential with restrictions and delays on publication

Projects may be suitable for senior undergraduate or graduate students          
Contribution agreement (Grant in Aid): Projects may be suitable for senior undergraduate or graduate students
Research contract: Publication restrictions may make projects unsuitable for student research     
Research service contracts: Publication restrictions make projects unsuitable for student research

Intellectual Property owned by the Investigator and/or University
         
Contribution agreement (Grant in Aid): Intellectual Property owned by the Investigator and/or University
Research contract: Intellectual Property owned by the contractor and/or the Investigator/ University     
Research service contracts: Little or no expectation of Intellectual Property

Investigator and/or University can sell commercial rights to third parties
    
Contribution agreement (Grant in Aid): Investigator and/or University can sell commercial rights to third parties
Research contract: University may have research, teaching and non-commercial use rights only
Research service contracts: Results have no commercial resale value to University

No guarantee of a specific result
Contribution agreement (Grant in Aid): No guarantee of a specific result
Research contract: No guarantee of a specific result
Research service contracts: Generally routine work without a risk factor
    
(Adapted from University of Prince Edward Island)

3 — PRINCIPLES

The following principles are used to guide decision-making and implementation of this policy:

The University recognizes that most, if not all, funded research from sources other than the Tri-Council granting agencies are administered by a contract, even if they are not “research contracts” as defined in Section 2 of this policy.

In cases where the sponsor does not have a specific policy excluding overhead, indirect, or administrative costs as an eligible expense, the University shall ensure that appropriate overhead charges are included.

In cases where the agreement provides for the payment of salaries, or portions thereof, for faculty or employees whose salaries are already paid for by the university’s operating budget or by a designated funding source, such payments will be in the form of reimbursement to the University.

Faculty time must be calculated for each University research contract. If the faculty member(s) or staff are directly involved in conducting the research work, the amount of time (in days or hours) s/he will devote to the research must be specified.

The costs of wages and benefits for all other personnel working on the research project, including post-doctoral fellows, shall be included in any calculation of overhead charges.

All direct costs of any research must be included within the budget. The University should not be left in a position in which it must subsidize the cost of the project.

In the context of student-led research only, indirect costs will not be charged where the ownership of the work remains with the University and the student/fellow, and where the results of the research will be incorporated into a thesis, dissertation, or senior level project. The costs of student wages and benefits (undergraduate or graduate) shall not be included in any calculation of overhead charges, including in projects where students are employed by faculty or staff.

4 — POLICY
 
Overhead Charges

It is the policy of the University to follow federal government guidelines for overhead recovery on federal sources of funds. These guidelines can be found at http://www.tpsgc-pwgsc.gc.ca/acquisitions/text/sm/chapter10-e.html#10.090.

It is the policy of the University that the following overhead cost charges shall apply, unless otherwise stated or provided for by the Sponsor:
 
For Research Contracts
 
Sponsor: Federal Government (administered by PWGSC or Service Canada   
Indirect Cost Rate: 65% of salaries and benefits (for work completed by University employees); 30% of salaries and benefits (for work completed by non-University employees)
Notes: As per Treasury Board guidelines

Sponsor: Other Federal Government    
Indirect Cost Rate: 40% of total direct costs
Notes: Or as stated in a Request for Proposals or Terms of Reference

Sponsor: Provincial Government    
Indirect Cost Rate: 40% of total direct costs
Notes: Or as stated in Request for Proposals or Terms of Reference

Sponsor: US Government     
Indirect Cost Rate: 54.1% of salaries and benefits
Notes: This is a non-negotiable rate set every three years by US Govt

Sponsor: All other Government (municipal, foreign, etc)   
Indirect Cost Rate: 20% of total direct costs
Notes: Or as stated in Request for

Sponsor: Private Sector    
Indirect Cost Rate: 30% of total direct costs
Notes: Or as stated in Request for Proposals or Terms of Reference

Sponsor: Non-Profit Sector    
Indirect Cost Rate: 10% of total direct costs
Notes: Or as stated in Request for Proposals or Terms of Reference

Sponsor: National Research Council – IRAP Network Member Agreements     
Indirect Cost Rate: 15% of salaries and benefits  
 
 
For Research Grants, Contribution Agreements, and Contracts for Research Services

Sponsor: Federal Government
Indirect Cost Rate: 15% of total direct costs
Notes: Includes Contribution Agreements

Sponsor: Other Government
Indirect Cost Rate: 15% of total direct costs
Notes: Includes Contribution Agreements

Sponsor: Non-Profit Sector
Indirect Cost Rate: 15% of total direct costs
Notes: Or as published in grant application guidelines

Sponsor: Foundations
Indirect Cost Rate: 15% of total direct costs
Notes: Or as published in grant application guidelines

Sponsor: Private Sector
Indirect Cost Rate: 15% of total direct costs
Notes: Or as published in grant application guidelines
 
It is the policy of the University that the Director, Office of Research Services (in consultation with the Provost and Vice-President Academic and Research, and the Controller), has the authority to deviate from the above schedule when advising / assisting Principal Investigators with the preparation of research project budgets, if and when it is deemed to be in the best interests of the University.

It is the policy of the University that in cases where lump sum overhead charges calculated on a percentage basis are not an eligible expense, but specific, itemized actual administrative and operating costs are eligible (as defined in Section 2), these latter costs shall be itemized and included in the budget.

Distribution of Overhead

It is the policy of the University that 50% of the revenue received by the University as overhead recovery shall be distributed within the University only as general revenue.

It is the policy of the University that 50% of the revenue received by the University as overhead recovery shall be retained in a research grant account for use by the Principal Investigator. If two or more faculty or staff are involved as co-investigators or in other working arrangements within the terms of the research activity, the distribution of their respective portions of the overhead recovery must be declared in writing prior to the start of the project, and filed with the Office of Research Services.

It is the policy of the University that the research grant account created by the distribution of overhead to the Principal Investigator(s) shall be treated as per the University’s policy on Internal Research Grants (5200).

It is the policy of the University that if a research project goes over budget and incurs cost over-runs on expense items, the Principal Investigator’s share of the overhead will cover these cost over-runs.

5 — PROCEDURE
 
Principal Investigators preparing proposals are required to notify the Office of Research Services that such a proposal is being prepared and deliver a copy of the terms of reference, call for proposals, draft proposed contract from the sponsor, acknowledgement forms, signature forms, or other relevant information, to the Director, such that the Office of Research Services can provide advice and guidance on the preparation of the proposal, budget, intellectual property issues, commercialization issues, etc.

Proposals initiated by the Principal Investigator and related supporting materials (as noted above) should be submitted to the Office of Research Services at least 7 days prior to delivery date.

The Director, Office of Research Services, in consultation with the Provost and Vice-President (Academic and Research) and the Controller, shall be responsible for calculating overhead charges to be included in budgets.

6 — CALCULATIONS
 
As noted in the overhead schedule in Section 4, most of the overhead charges are based on total direct costs of the project. In most cases this is the full amount of the project budget. In some cases, where the overhead is charged on the basis of salaries and benefits only, there is a need to clearly define those in the budget. Furthermore, in some cases, where overhead is not an eligible expense, but administrative and operating costs are eligible (as defined in Section 2), these too must be shown in the budget. These are discussed below.
 
Salaries and Benefits

The following formulas will be used to calculate the staffing costs. To determine the appropriate rate to be used for each staff person on the contract, the salary and benefits rate to be used are obtained from the Human Resources Department and round up the individual’s salary to the nearest $1,000 to determine a base salary. The following formulas are used (to be employed based on whichever formula fits with the nature of the research proposal budget structure) to calculate the overhead charge rates:

  • Daily base rate for staff person A = [(Base salary) + (Base salary X benefits (14.5%))] /260 days
  • Hourly base rate for staff person A = Daily base rate / 7.5

Supplies and Services Costs
These should be costed on the best estimate of anticipated expenditures and be based on actual prices or quotations from suppliers. Travel costs are estimated on the basis of the University’s Travel Policy.
 
Other Administrative Costs
In cases where there is scope and provision in a research proposal to provide specific budgets for administrative and operating costs, the following shall apply (and shall be removed from any calculation of overhead involving total direct costs):

  • Phone and fax – prorated based percentage of time devoted to the research contract from monthly recurring cost of $26
  • Space –$4.75 per sq foot per month
  • Financial services support –$50 per hour of service (includes opening a research account, preparing invoices, preparing financial statements, preparing final claims and reports, etc, as required by the Sponsor); $50 per purchase order 

7 — RELATED POLICIES

Signing Authority
Research Contract Administration
Intellectual Property
Integrity in Research, Scholarly, and Creative Activity
Internal Grants
 
ACKNOWLEDGEMENT
This policy document is adapted from the policies of Dalhousie University, Memorial University of Newfoundland and Labrador, St. Francis Xavier University, and University of Prince Edward Island.