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Indirect Costs (F&A)

It is a goal of the State of Texas to increase research activities within the state. Toward this end, the State allows state colleges and universities to retain earned facilities and administrative (indirect) costs (aka IDC or F&A). It is expected that this return will provide seed funding which will result in greater research activity and funding. UH has a policy of returning a portion of the earned F&A recovery on a pro-rata basis to the college that generated this income.

The following formulas apply to the portion of the funds that are returned to the generating units:

When a single investigator, department and college are involved, the F&A funds returned to operating units are distributed as follows. In the case of multiple principal investigators, multiple departments, or multiple colleges, each unit will participate on a proportionate basis, in accordance with the distribution identified on the transmittal form.

  • 56% to the college
  • 44% to the department

Individual colleges may return more to their departments, and departments may share IDC with PIs. The following distributions are in place:

  • Gerald D. Hines College of Architecture and Design:
    • 100% college
  • Katherine G. McGovern College of the Arts:
    • 100% college
  • C.T. Bauer College of Business:
    • 100% college (distribution to in-house centers and institutes varies)
  • College of Education:
    • 50% college
    • 25% department
    • 25% PI
  • Cullen College of Engineering:
    • 56% college
    • 44% department (distribution to PIs varies by department)
  • Conrad N. Hilton College of Hotel and Restaurant Management:
    • 100% college
  • UH Law Center:
    • 100% college
  • College of Liberal Arts & Social Sciences:
    • 100% department (distribution to PIs varies by department)
  • College of Medicine:
  • College of Natural Sciences & Mathematics:
    • 56% college
    • 44% department (distribution to PIs varies by department)
  • College of Nursing:
    • 100% college
  • College of Optometry:
    • 100% college
  • College of Pharmacy:
    • 46% college
    • 36% department
    • 18% PI
  • Graduate College of Social Work:
    • 56% college 
    • 44% research centers 
  • College of Technology:
    • 50% college
    • 40% department
    • 10% PI
  • Hobby School of Public Affairs:
    • 100% college
  • Honors College:
    • Not applicable
  • Libraries:
    • 90% college
    • 10% PI

Uses of Returned Indirect Funds

Texas Constitution and Statutes, Education Code, Chapter 145.001 defines the use of IDC funds returned to departments and units:

“The funds shall be expended under guidelines approved by the institution’s governing board for projects encouraging further research at the unit, agency, or department level at which the research was conducted, including: conducting early pre-grant feasibility studies; preparing competitive proposals for sponsored programs; providing carryover funding for research teams to provide continuity between externally funded projects; supporting new researchers pending external funding; engaging in research programs of critical interest to the general welfare of the citizens of this state; purchasing capital equipment directly related to expanding the research capability of the institution; and research or project administrative costs; and the funds remaining after the application of Subdivision shall be used by a general academic teaching institution or a medical or dental unit to support research as approved by a general academic teaching institution or a medical or dental unit.”

IDC Policy

The University of Houston’s policy is to apply the University's negotiated indirect (Facilities & Administrative or F&A) cost rate to all externally-sponsored projects. The University of Houston sets indirect (F&A) cost rates with the federal government based on formulas and negotiation processes set forth in the Uniform Guidance.

An explanation of rate and the current UH negotiated FA rates can be found here.

Roles and Responsibilities

The fiscal management of sponsored projects, including the application of appropriate indirect (F&A) cost rates in proposed project budgets and management of awarded projects within budget and funding limitations, is the responsibility of the Principal Investigator. The PI is not authorized to negotiate a reduction or waiver of indirect (F&A) costs with the sponsor on any sponsored project. The Principal Investigator shall work with their Research Administrator to submit fully loaded budgets that include both the direct and indirect (F&A) cost of performing research at the University of Houston.

Reductions and Waivers

Full or partial IDC reduction below the rates published by the Division of Research will be considered, if provided full supporting documentation to the Division of Research in a timely manner. The following exceptions do not require additional documentation to accept IDC reduction: 

  1. Payments to students between partnering institutions that allow a student or post-doctoral fellow from one university to work at another university will not be assessed IDC, provided that the award instrument used is a Salary Reimbursement Agreement (SRA) and not a sub-award agreement. When a sub-award agreement, in which the prime agency's terms and conditions are passed down to UH, is used for student's salary reimbursement, the other university must honor the UH IDC rate or offer the rate given to them by their sponsor.
  2. IDC reductions or waivers required by the sponsor as a condition of obtaining an award (mandatory cost sharing) will be approved without additional justification or exception. The cost-sharing commitment must be included in the proposal to be considered by the sponsor.

Pre-Approved Exceptions

The University of Houston recognizes that many non-profit institutions have their own policies regarding the use of their funds for overhead expenses. In the case where the non-profit has an official written and publicly disclosed policy in this regard that is applied on a consistent basis, or where a public solicitation for proposals defines a limit on indirect (F&A) cost recovery as a condition of the program, the University of Houston will normally accept these requirements. If it is not a public policy available on the web, a project specific waiver will need to be requested.

Note: In cases where the University of Houston’s agreement to accept a lower indirect (F&A) rate is based on our understanding of the sponsor’s policy, and where the University of Houston becomes aware of a higher indirect (F&A) cost rate paid by that sponsor to another recipient, the university reserves the right to apply the higher rate to that sponsor’s University of Houston projects.

Consortiums (SPCs), commonly known as Industrial Affiliates Programs, have received a reduced IDC (F&A) rate of 20% applied to their sponsored projects. This exception will continue.

For all other sponsored projects, a reduction in IDC will not be approved.