10. Overhead
Principle
Iowa State University is committed to the full recovery of all project costs,
including overhead, for all externally funded projects. The basis for ISU’s
overhead rate is in accordance with OMB Circular A-21 "Cost Principles for
Institutions of Higher Education" and negotiated with the Department of Health
and Human Services.
Guidelines
Please refer to ISU’s Indirect Cost Policy,
www.vpresearch.iastate.edu/docs/policies/indir_cost.html and Indirect
Cost (overhead) rate information.
Definition of Overhead
Overhead costs are broad categories of costs narrowed down into two categories,
facilities and administration. "Facilities" is defined as depreciation and use
allowances, interest on debt associated with certain buildings, equipment and
capital improvements, operation and maintenance expenses, and library expenses.
"Administration" is defined as general administration and general expenses,
departmental administration, sponsored projects administration, accounting,
purchasing, and all other types of general administrative expenditures not
listed specifically under one of the subcategories of Facilities.
Background
Overhead costs represent the expense of doing business that are not readily
identified with a particular grant, contract, project function or activity, but
are necessary for the general operation of the sponsored project at ISU.
Overhead costs are actual costs such as heat, light, accounting, purchasing,
phones, clerical support, and maintenance that cannot be easily identified as
direct costs in a project budget. Therefore, overhead rates are used to
distribute those costs to internal units that support sponsored projects.
Federally funded research is a prominent feature at all major American research
universities today. The negotiation of overhead costs is based on the
principles outlined in the Office of Management and Budget Circular A-21 and
negotiated with the Department of Health and Human Services. Universities
across the country apply their federally negotiated rates to all sponsored
activities.