Update on Federal Research Grants and Contracts

First, it is important to know that the majority of awards at NJIT follow this funding mechanism.  This type of funding mechanism means the research institution is reimbursed for the actual costs they incur while carrying out the research project.  The institution tracks and documents all eligible expenses, then submits them to the sponsor for reimbursement.

Direct costs are those that can be easily and directly associated with a specific project or activity.  They can be specifically identified with a particular project or activity and are budgeted for specific line items within the project budget.  Indirect costs, often known as facilities and administration (F&A), are those that benefit multiple projects or activities and are difficult to directly assign to a specific project.  They are calculated as a percentage of direct costs and may be limited by the granting agency.

Examples: salaries of project staff, materials and supplies used for the project, travel expenses directly related to the project.  More details about charging direct costs may be found here.

Examples: administrative salaries, utilities (heating, water, air), safety, office supplies, etc.  Borrowing an example from UW Madison: These so-called “indirect costs” aren’t optional expenses. They are both substantial and an absolutely fundamental part of innovative science. As is the case while running your household, you need both money to buy groceries (direct) and the financial resources to keep a working refrigerator and electricity (indirect) to store your milk and eggs.

A fringe rate is a percentage that represents the cost of employee benefits in addition to their base salary or wages. These benefits, often called fringe benefits, can include things like health insurance, retirement contributions, paid time off, and other perks.  Fringe is a distinct category and not included in indirect costs.

The most recently negotiated federal rates are posted here.  However, on February 7th 2025, the NIH issued supplemental guidance, specifically "For any new grant issued, and for all existing grants to IHEs retroactive to the date of issuance of this Supplemental Guidance, award recipients are subject to a 15 percent indirect cost rate. .... This policy shall be applied to all current grants for go forward expenses from February 10, 2025 forward as well as for all new grants issued.  The NIH notice NOT-OD-25-068 is posted here.  Currently, there are three separate lawsuits filed against the NIH and others concerning the rate cut. At present, there are temporary restraining orders in effect in two of the lawsuits that prevent, in the short term, the rate cut from going into effect. This means it cannot go into effect until a further order from the court is made.

The Indirect Cost Return (ICR) provides funding to PI's, departments, colleges, and centers based on collected F&A charges. Generally speaking approximately 15% of the F&A received by NJIT each year from eligible externally funded grants, is equitably distributed between PI's, departments, colleges and/or centers. This provides funds for the purchase and maintenance of equipment, travel, and other research expenses including a potential source of required cost-sharing of future proposals.  More details are posted here.