U.S. Dept. of Health, Education, and Welfare. Division of Grant Administration Policy A Guide for

Educational Institutions

Establishing Indirect Cost Rates

for Research Grants and Contracts

with the

Department of

Health, Education, and Welfare

In order that we might be more effective, more timely and more uniform in the establishment of indirect cost rates for research and training activities we are modifying the arrangements for the handling of this function. Hereafter this function will be handled on a centralized basis for the entire Department. The responsibility has been assigned to the Division of Grant Administration Policy in this Office.

In developing a plan for improvement in the handling of the indirect cost activity we have consulted extensively with representatives of the many types of institutions affected and with staff of the various institutional associations. We are grateful for their interest, support and thoughtful observations. Their constructive suggestions and recommendations have been and will, I am sure, continue to be helpful.

The actions which we have taken thus far are:

(1) We have established work-sharing arrangements with the Department of Defense and the National Science Foundation which provide that a rate established with a given institution by one agency will be utilized by the others.

(2) We are working to extend these arrangements to all other federal agencies involved in the sponsorship of research.

(3) We are utilizing fixed predetermined rates wherever feasible.

We have also noted that many of our grantee institutions, both educational and other non-profits, have experienced difficulties in preparing indirect cost proposals because they did not fully understand the provisions of the governing policy, Bureau of the Budget Circular A-21, and could not readily translate those provisions into the mechanics of proposal preparation. In addition we have found that this Circular, which contains cost principles applicable to educational institutions, has proven particularly difficult for non-educational institutions to apply.

In an effort to alleviate these difficulties we are developing three additional sets of cost principles applicable to hospitals, state and local agencies, and other non-profit institutions, respectively. We are also developing informational brochures which incorporate these cost principles and sample proposal formats and explain the rate determination process and our policies in relation to it.

The enclosed brochure is applicable to educational institutions. It is also being sent to other grantee institutions pending the development of the cost principles and brochure specifically applicable to them, in the belief that in this interim period it will provide useful guidance to them. Two copies have been enclosed one of which is for the Business Manager. Additional copies may be purchased from the Superintendent of Documents.