Indirect Costs (Overhead)

What are Indirect Costs (Overhead)?

Indirect costs are costs that cannot be attributed directly or easily to a specific research project, but they are nevertheless just as real and necessary for conducting research. They include such items as building space and utilities, university libraries, hazardous waste disposal, radiation safety, occupational safety, campus security, liability insurance, compliance with government policies, legal and administrative services. These costs are also called “overhead”. The terms "indirect costs" and "overhead" mean the same thing and are used interchangeably at SFU.

At SFU, indirect costs of research include

  • Maintaining high quality research infrastructure through the renovation and maintenance of research facilities, upgrades to equipment and the operating costs of research space
  • Providing in-house technical expertise for ongoing and daily support to research facilities
  • Acquiring research resources including library holdings and datasets
  • Facilitating research through institutional support for the completion of grant applications and proposals, financial administration and reporting, and research planning and promotion
  • Ensuring the requirements of regulatory bodies are met, including the Tri-Council & Canadian Council on Animal Care
  • Managing the licensing of university technologies

SFU Indirect Costs (Overhead) Rates

With regard to indirect costs on research grants and contracts, the Vice-Presidents of the four research universities in BC have pre-negotiated indirect costs rates with various organizations, to ensure consistency within the Province. It should be noted that funds from overheads not only provide research support to the Faculties, who receive 50% of the indirect costs, but also fund the services offered by the Research Services.  Fair overhead rate benefits researchers and improves the services that can be offered.

Faculty members and Deans should not negotiate overhead rates with sponsors but should contact Research Services (ors@sfu.ca) to find out what rates have already been negotiated.  If Research Services has not had prior dealings with an organization, it will negotiate overhead rates after it has been apprised of the nature of the grant or contract.

The following table describes SFU overhead rate based on funding category.

Funding Category Indirect Costs (Overhead) Rate
Grants from government and not-for-profit organizations 25% on total direct costs unless externally limited by sponsor's published policy
Contracts with government and not-for-profit organizations
Contracts with business and industry
Matching funds on Tri Agency grants
Examples of Sponsors Specific Rates
Canadian Space Agency FAST program Administrative costs not to exceed 10% of grant value
National Institute of Health (NIH) 8% on total direct costs except equipment
US Government (Pre-negotiated for Colleges and Universities including SFU for use on grants, contacts and other agreements) 62.9% on direct salaries and wages including all fringe benefits

Overhead on Tri-Agency Grants

For Tri-Agency grants (i.e., SSHRC, NSERC, and CIHR), please do not include overhead in your research budget. Overhead is received by SFU through the federal Research Support Fund grant.

The Canadian federal government supports the indirect costs of research funded by the National Granting Councils (Tri-Agencies) and Networks of Centres of Excellence (NCE).  Canadian universities receive an annual grant to contribute towards their indirect costs of research based on the average level of funding attributed to SFU investigators over the previous three years from those sources. The annual Research Support Fund grant at SFU has historically been approximately 25% of the total grants attributed to SFU investigators. Therefore, indirect costs should not be included in individual grant applications to the Tri-Agencies.

Overhead on Matching Funds

Please go to the Budget Development page for the definitions of in-lind contribution and matching funds.

SFU does charge overhead on grants used to match Tri-Agency or other non-Tri-Agency grants or contracts. Examples of these programs include NSERC Collaborative Research and Development Grants, NSERC Idea to Innovation Grants, SSHRC Partnership Grants, CIHR Industry Partnered Collaborative Research Program, CIHR Proof of Principle Grants. In these cases, an indirect cost recovery rate of 25% must be applied to the matching funds provided by the industry partner.

Please note that matching funds in the form of in-kind contribution will not have to include overhead. See the following examples with and without in-kind contribution.

Example 1: If your budget does not include in-kind contribution from the sponsor

Industry Matching Contribution

$100,000 toward direct costs

$25,000 toward indirect costs (@25%)

Total Industry Contribution $125, 000
NSERC Contribution $100,000 toward direct costs (1:1 match of Industry $)
Total Direct Costs of Research $200,000 (Industry cash toward direct costs + NSERC)
Total Budget (Direct + Indirect) $225,000
Note. If the indirect cost is not negotiated up front with the industry sponsor, and the sponsor agrees to contribute $100,000 total toward your budget, your total budget available for research (direct costs) will only be $160,000 instead of $200,000. In this case, $20,000 is deducted after applying 25% indirect costs rate to the remaining $80,000 cash contribution from the sponsor’s $100,000 and another $20,000 is deducted from the NSERC contribution.

Example 2: If your budget includes in-kind contribution from the sponsor

Industry Cash Contribution

$100,000 toward direct costs

$25,000 toward indirect costs (@25%)

Total Industry Contribution $125, 000
Industry In-Kind Contribution

$100,000 toward direct costs (no overhead on in-kind)

NSERC Matching Contribution

$100,000 to match industry cash contribution to direct costs

$100, 000 to match industry in-kind contribution to direct costs

Total NSERC matching contribution $200, 000 (2:1 match of industry where 50% of industry funds are in cash)

Total Direct Costs of Research $300,000 (Industry cash toward direct costs + NSERC)
Total Budget (Direct + Indirect) $325,000
Note. If indirect cost is not negotiated into the industry cash contribution, funds for total direct costs of research will be reduced to $260,000 instead of $300,000. In this case, $20,000 is deducted after applying 25% indirect costs rate to the remaining $80,000 cash contribution from the industry sponsor’s $100,000 and another $20,000 is deducted from the NSERC contribution.

In these two examples, NSERC contributes to the university's indirect costs of research through the federal Research Support Fund grant.