Indirect Cost Recovery

Indirect cost recovery funds (i.e., ICR or "overhead") are monies received by the university in reimbursement for services rendered in support of grants and contracts.  ICR funds are paid to the University by the granting agencies as reimbursement for indirect support provided to the grants and contracts. 

UC Campuses play an active role in the negotiation process, preparing indirect cost proposals, and providing data to the Costing Policy and Analysis unit of the UC Office of the President. Costing Policy and Analysis is jointly responsible, along with UC campuses, for determining what information is needed to compute indirect costs. Indirect costs are computed in accordance with the applicable provisions of the uniform guidance (Part 200) and UCOP Policy.

See UCOP's Indirect Cost Recovery webpage for additional information.

Overhead reimbursement is tied to the expenditure of direct costs associated research awards (primarily federal contracts and grants).  The amount is based on the indirect cost rate, which includes the cost of facilities (such as equipment, research space, maintenance and utilities, and the library) as well as departmental administration and support.  The federally negotiated rate for the Santa Cruz campus is 55% for FY23 and FY24 and will increase to 56% as of 7/1/2024.

The specific rates for organized reseach, instruction, and other sponsored activities for the period 6/30/21-6/30/26 are available here: UCSC Indirect Cost Rate Agreement; 02/27/2023

Excerpt from above IDC rate agreement:

07/01/2022 to 06/30/2024    55.00 % On-Campus Org Research
07/01/2022 to 06/30/2026    26.00 % Off-Campus Org Research
07/01/2022 to 06/30/2026    57.00 % On-Campus Instruction
07/01/2022 to 06/30/2026    26.00 % Off-Campus Instruction
07/01/2022 to 06/30/2026    27.00 % On-Campus Other Sponsored Activity
07/01/2022 to 06/30/2026    20.00 % Off-Campus Other Sponsored Activity
07/01/2022 to 06/30/2026      9.00 % Off-Campus IPA

The “effective” indirect cost rate (the amount actually generated as a percentage of expenditures) is closer to about 18% because not all contracts and grants generate overhead (i.e. equipment grants) and sometimes the sponsor's solicitation doesn't allow overhead costs or a reduced overhead rate is specified.  Waivers, the voluntary reduction of overheads, are not allowed within the UC system.

Recovered IDC is used to fund research-related administrative costs, promote research and support campus investment in capital infrastructure. UCSC has adopted formulas for managing and distributing its overhead receipts from federal and private contracts and grants as follows:


  • Off-the-top funds (OTT) The first 20% of federal indirect cost receipts are taken “off-the-top” to directly fund activities related to the administration of research.   Such funded activity includes accounting, human resources, the Office of Sponsored Projects, financial systems and reporting related to contract-funded research activities.
  • Opportunity funds (UOF).  Just over one-third (36%) of federal indirect cost receipts are categorized as University Opportunity Funds.   UOF bolsters funding for research activities through both direct allocation to research activities and grant matching.   UOF funding is also deployed for capital infrastructure improvements, particularly in support of faculty start-up renovation.  Specific allocations of central UOF includes funding to the Office of Research to seed new research activities and an annual allocation to the Academic Senate’s Committee on Research that provides $2,000 per Senate faculty for research.
  • General Fund support.  The 44% of indirect costs receipts remaining after OTT and UOF are directed into the UC General Fund.  As part of the General Fund, these dollars indirectly support research by directly supporting the campus operation and maintenance of plant, facilities, technology, libraries, central financial and operating services and administration.

In addition, 6% of the receipts from OTT and UOF is held to help pay the UC Office of the President (UCOP) assessment—a charge levied to support UC-wide initiatives and UCOP operational costs.