Finance Division

Indirect Cost Proposal Preparation


An indirect cost proposal is prepared each fall for submission to the Federal Department of Health and Human Services (DHHS) by the end of the calendar year. The proposal is used to negotiate indirect cost rates for all federal grants and contracts. It may be used for grants and contracts from other governmental entities and private industry, although they are not bound by the rate, and the University may negotiate different rates with each of these potential grantors. The proposal is mailed to the state to be forwarded to DHHS. The basic rate proposals submitted by the University are applicable to:

  • Research conducted in schools and colleges other than Agriculture and Natural Resources. 
  • Research conducted in Agriculture and Natural Resources. 
  • Instruction conducted in schools and colleges other than Agriculture and Natural Resources. 
  •  Public service conducted in departments other than Agriculture and Natural Resources.
  • Information system development.
  • Cooperative meat inspection programs.

The rates are based on expenditures for the just ending June 30 fiscal year, with the computed rates applicable to grants and contracts two years hence. For example, the rates computed with fiscal year 19X0-19X1 expenditures will be applied to grants and contracts acquired for the 19X2-19X3 fiscal year.


Expenditures are analyzed and any non-applicable items, based on OMB Circular A-21, are removed by adjusting the balances with memo journal entries not recorded in the University¹s computerized accounting system. The result of these adjustments is the calculation of the Modified Total Direct Cost (MTDC).

After analyzing all accumulated information, a draft proposal is prepared for review and discussion. If necessary, several drafts will be issued. After the final draft has been discussed and any adjustments made, the final proposal is prepared for submission.