Calculating Indirects on Total Project Costs

Calculating Indirects on Total Project Costs
Per 2 CFR §200.412, there are two primary components that make up a budget: Direct Costs and Indirect Costs. The total cost of federally sponsored research includes a combination of both, direct and facilities and administrative (F&A) costs. Both types of expenditures are key to UNM's ability to conduct cutting-edge research. More information about Indirect Costs, in general, can be found on the Office of Sponsored Projects website.
For questions or updates to this guide, contact [email protected].
F&A Applied to Total Project Costs (vs. TDC/MTDC)
In rare instances, a sponsor may require that Facilities & Administrative (F&A) costs be applied to Total Project Costs (TPC) rather than Total Direct Costs (TDC) or Modified Total Direct Costs (MTDC). In these cases, the total project cost equals the award ceiling, and F&A is calculated accordingly.
This calculation method differs from the standard approach where F&A is applied to direct costs only.
Example:
If an RFP sets a $30,000 award ceiling and allows a 10% F&A rate on total project costs, the calculation would be:
F&A: $30,000 × 10% = $3,000
Direct Costs: $30,000 – $3,000 = $27,000
This results in an effective F&A rate of 11.11% ($3,000 ÷ $27,000) on TDC, which should be the rate reflected in UNM's OSP budget template.
Calculation Tool
You can download an Excel workbook to help calculate IDC on Total Project Costs from the UNM FRDO website(under Templates and Boilerplates). This calculator will work whether you have an award ceiling or not.
The calculator simplifies the process of determining both direct costs and indirect costs when working with total project cost-based F&A requirements.
Subawards and Total Project Cost-Based F&A
When a sponsor requires F&A on total project costs and UNM is issuing subawards, use the following steps—unless the sponsor or solicitation specifies otherwise:
Step 1: Calculate Total Allowable F&A
Use the award ceiling or the linked calculator to determine total F&A.
Example: $30,000 award ceiling × 10% = $3,000
Step 2: Determine the overall Total Direct Costs
Example: $30,000-$3,000=$27,000
Step 3: Determine Each Institution's Share of Total Direct Costs
Divide each institution's direct costs by the total direct costs.
UNM: $16,000 ÷ $27,000 = 59%
Subawardee: $11,000 ÷ $27,000 = 41%
Step 4: Allocate F&A Proportionally
Multiply each percentage by the total F&A amount:
UNM's F&A: 59% × $3,000 = $1,770
Subawardee's F&A: 41% × $3,000 = $1,230
Step 5: Calculate Effective F&A Rates on TDC for Budget Entry
Compute effective F&A rates on TDC to enter into UNM's budget template.
Subawardee: $1,230 ÷ $11,000 = 11.18% of TDC
UNM: $1,770 ÷ ($27,000 + $1,230) = 6.27% of TDC
Visualizing the Subaward F&A Distribution
This chart illustrates the distribution of both direct costs and F&A costs between UNM and the subawardee in our example. The proportional allocation ensures that each institution receives F&A funding relative to their share of the direct costs.
Resources and References
Federal Regulations
2 CFR §200.412: Federal Cost Principles
UNM Resources
Direct Costs Information: OSP Direct Costs
Indirect Costs Information: OSP Indirect Costs
Budget Components Overview: OSP Budget Components
PI toolkit: UNM PI Toolkit