Overhead

On this page:

1. Direct vs. indirect costs
2. SFU Indirect Costs (Overhead) Rates
3. Examples of Sponsors Specific Rates
4. Overhead on Tri-Agency Grants
5. Overhead on Matching Funds
6. Overhead FAQs

Direct vs. indirect costs

Direct costs are costs directly associated with the delivery of an approved project and required to achieve the expected results. Please check the sponsor’s guidelines to make sure direct cost items are allowable under the sponsoring organization’s guidelines.

Direct costs of research typically include, but are not limited to:

• Salaries and benefits of research personnel – This includes salaries or stipends for the eligible faculty, technicians, research associates, research assistants, Postdoctoral Fellows, or other technical personnel necessary to meet the goals of the project. Salaries for project management are included here, or under Administrative Costs category, or as a stand-alone Project Management category depending on the sponsor’s requirements.
• Supplies and materials – Consumables to be used in the performance of your proposed project are included in the supplies and materials category. Examples include office supplies, laboratory supplies, glassware, chemicals, animals, animal food, and data processing supplies. If Administrative Costs are a separate budget category, office supplies will be included there.
• Travel – Transportation, accommodation, subsistence, and related items incurred by research personnel who are in travel status on official business of the institution related to the project.  The funding agency may have guidelines with respect to travel costs. You can also refer to Business and Travel Expenses for the University policies with respect to eligible and ineligible travel costs. It must be noted that in all cases, the more stringent policy should apply. In some cases, travel costs might be under Administrative Costs if travel is for team meetings or knowledge dissemination.
• Equipment – Equipment refers to apparatus used primarily for research within the proposed project.
• Services – This category includes laboratory analysis services, marketing and printing services, consultant services, publication and communication services, etc. Quotes or statements of work are usually required to justify services. Please note: services over $50,000 CAD require competitive bidding and at least three quotes.
• Investigator Fees – In some cases, the funding sponsor allows payment to investigators in recognition of their time, efforts and expertise. The amount of such a payment, often referred to as an investigator fee, will be established at the proposal stage and must be indicated in the Kuali proposal that has replaced the previous Funding Application Signature Sheet.

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, radiatio4n safety, occupational safety, campus security, liability insurance, compliance with government policies, legal and administrative services. These costs are also called “overhead”.

SFU's policy on Indirect Costs requires a minimum of 25% overhead on total direct costs in order to account for a portion of the costs of running research at SFU. Any external funding for research, or accessing research equipment, regardless if it is through a grant, research contract, service contract, sub-award or a donation, must apply the 25% 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 e.g. building upkeep, power, communications network
• Providing in-house technical expertise for ongoing and daily support to research facilities e.g. common equipment depreciation, life cycle costs
• Acquiring research resources including library holdings and datasets
• Environmental and safety monitoring, security, hazardous waste disposal
• 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, ethical review, biohazard or radiation safety, environmental assessments, provincial and/or municipal regulations and by-laws
• Managing the licensing of university technologies, contract and agreement

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.

The Principal Investigator is responsible for ensuring that direct and indirect costs are included in all proposed research budgets. Indirect costs can be applied as a 25% lump sum based on all direct costs or by adding 25% to each budget item. Some funders have published policies that may override SFU policy, please see the table below for examples.

• To be transparent and to avoid difficult conversations with funders at later stages of the funding relationship, indirect costs should always be included in the initial budget ask. (e.g. If Salaries, Equipment, Services and other direct costs add up to $100,000, the first ask to the funder should be $125,000 to reflect the full cost of research.) This way the funder can avoid having to get approval for the deficit later and SFU can avoid damaging the research relationship.
• Sometimes funders have an upper limit for a research budget. In these cases, it is the responsibility of the researcher to propose a scope that fits within the maximum allowed budget including all costs of the research, direct as well as indirect.
• If overhead is not allowed as a single line, it can be applied to individual budget items similarly, to indirect costs included in the price of goods and services worldwide. SFU will calculate the total overhead and account for it accordingly. If you forget to apply your budget for direct costs will be automatically reduced potentially posing risk to the project.

There are variations to this process due to special circumstances with the sponsor:

Tri-Agency grants: The Tri-Agency (TA) covers SFU’s indirect costs outside of individual grants so we do not add the 25% to individual TA budgets unless the funding opportunity states otherwise (e.g. NFRF specifically states that 25% is eligible on top of the maximum ask).

Industry match on TA grants need to include overhead and the overhead portion is not matched by the TA so it is important to include the proper amount in the first ask from the industry partner to avoid significant shortfalls later.

Sponsor limits overhead: Some grants (e.g. Innovate BC) have policy for overhead limitation for their portion of the funding, but the industry match should carry the full 25% SFU overhead. Unlike the Tri Agency, Innovate BC matches the full partner contribution, including overhead.

Non-profit prohibits overhead: Some non-profit sponsors are not allowed to pay for indirect costs as part of their mandate. These funders have specific, published policies available on their website. In this case SFU cannot recover the institutional portion of the cost of research. The published policy needs to be linked to the signature sheet for reference. Industry sponsors are only exempt if they provide funding by a competitive process through a Request for Proposals (RFP) or Request for Applications (RFA) that has specific terms and conditions for overhead.

Sponsor variability: Some sponsors have a different indirect cost rate in their published funding opportunity or as a general policy (NIH only allows 8%; The US Government allows 58.9% for on-campus research). Please note that not all policies apply to the overhead as a percentage of direct costs. In these cases, we follow sponsor policy and make a note of it so it is fair and consistent. (e.g. In accordance with the agreement between SFU and the US Government, SFU is allowed to charge overhead only on salaries and benefits.)

Pre-negotiation: Some sponsors have pre-negotiated rates with SFU. (E.g. Health Canada limits overhead to 10% on direct costs or allows line item charges to recover legal, accounting and other costs.) In these cases, we follow the pre-negotiated process and make a note of it.

Faculty members and Deans should not negotiate overhead rates with sponsors. Please 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.

If and when in doubt, the researcher needs to contact the Director of Research Services to identify the proper action.

The following table describes SFU indirect costs (overhead) rate based on funding category:

Examples of sponsors' specific rates

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-kind contribution and matching funds.

SFU does require to recover overhead on grants used to match Tri-Agency or other non-Tri-Agency grants or contracts. Examples of these programs include NSERC Alliance, NSERC Idea to Innovation Grants, SSHRC Partnership Grants, CIHR Industry Partnered Collaborative Research Program, CIHR Proof of Principle Grants, Genome BC Grants, Innovate BC Grants, etc. In these cases, an indirect cost recovery rate of 25% must be applied to the matching funds provided by the industry partner. Please pay special attention to terms describing whether the overhead portion of the matching fund is included or excluded in the sponsor's match and adjust your ask accordingly. 

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 sponsor does not match overhead

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

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