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In US, universities often have a fixed overhead rate around 50%, or at least that's what I heard. But I don't know what it exactly means. How does this affect how much grant money goes where?

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2 Answers 2

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The 'overhead' generally refers to the funding that doesn't go directly to research expenses (salaries of researchers, cost of experiments/consumables, etc) but to the supporting expenses (salaries of administrative/support staff; cost of facilities and utilities, equipment depreciation) of services that are neccessary but not directly related to research.

It often is set by university administration to some fixed rate (50% sounds high to me, but it depends on country and research domain) that is taken from all grants and used to fund those 'common' expenses.

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Unfortunately 50% is no longer considered high anymore. :-( –  RoboKaren Jul 15 at 3:46
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To explain further: when you develop a grant budget, you figure out your equipment costs and personnel costs and travel costs and summer salary, and then the university adds overhead to make up X% of the budget. So if you need $500K to support your research, and your university overhead rate is 55%, you need to apply for a $1.1M grant. Oh wait, the grant program has a $750K cap. –  JeffE Jul 15 at 5:44
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On the other hand, at some universities (like mine), a small fraction of that overhead (maybe 1-2% of the total budget) trickles back down to the PIs as unrestricted funds. –  JeffE Jul 15 at 5:47
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@JeffE Hmm, that calculation does not seem to agree with how it was done last time (and so far the only time) I applied for a grant. There, the overhead percentage was added to the total budget, rather than being the final percentage. This might be something that varies from grant to grant, so it might be good to keep in mind (as the potential difference can be quite big). –  Tobias Kildetoft Jul 15 at 11:28
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@TobiasKildetoft: It depends on how the overhead rate is reported (sometimes it's a multiplier, sometimes it's the percentage of the total taken). The difference, as you suggest, can be quite substantial. –  aeismail Jul 15 at 11:31

In the US, the overheads proposed to federal funding agencies (NSF, NIH, etc) are in my experience always calculated as an additional percentage on top of the total direct costs (salaries plus fringe benefits, travel, etc). So if your total budget for salaries, fringe benefits, and travel is $500k, and your overhead rate is 50%, then your total proposed budget is $750k.

Now, at my US university, the overhead rate is 54.5%, the majority of the budget is salary, and the fringe rate is calculated at 25% of the salaries, so a good rule of thumb for us is that the total budget should be twice the salaries. Now, that also means that you can work backwards from a total allowed budget by dividing by two.

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