Monday, 16 October 2006
Dear Colleagues,
RE: RECOVERY OF CENTRAL INDIRECT COSTS FOR EXTERNALLY FUNDED
RESEARCH AND CONSULTING WORK
Some of you will be aware that the University is moving to clarify and simplify the way that
external contracts are costed and priced. A new method for recovering indirect costs1 is also
being implemented. If you are not familiar with these developments, please refer to the
following policy:
http://policyguide.massey.ac.nz/massey/fms//PolicyGuide/Documents/Policies/Research/Rese
arch%20Costing%20policy.pdf
While the policy describes new costing, pricing and cost recovery methods in broad terms, it
does not deal with the precise mechanisms by which this will happen. This is particularly
important in the area of indirect cost recovery, because researchers and those with
consultancies need to be aware of the following issues:
1. Timing of financial transfers for indirect cost recovery
Indirect cost recovery will occur at the point of invoicing the client. GST exclusive revenue,
and the indirect cost recovery deduction, will be accrued to project accounts when invoices
are generated. The levy is not applied to the GST component.
Departmental administrators will then need to transfer any depreciation, professional time and
departmental indirect cost recoveries into appropriate accounts. Please refer to the Massey
University Policy on Use of Research Funds for guidance:
http://policyguide.massey.ac.nz/massey/for/staff/policy/policies/research/use-of-research-&consultancy-funding.cfm
Please note that, for some departments, Research Services managed these journal transfers.
While Research Management Services will continue this for existing contracts, responsibility
for all journal transfers for new and renegotiated contracts will be devolved to departments.
Graeme Mitchell (Team leader, Business Services) is available for advice and assistance (Ext
5944, g.b.mitchell@massey.ac.nz) in this regard.
2. The quantum of funding involved in indirect cost recovery
Indirect costs are recovered as a levy on total revenue for the contract. At present, the central
indirect cost levy is 15%, although the Vice-Chancellor reserves the right to review this from
time to time. A costing spreadsheet is available to facilitate budgeting from a full cost and
internal cost recovery perspective:
http://research.massey.ac.nz/massey/research/research-management-services/projectmanagement/project-management.cfm#costing
Revenue for certain items is exempted from the levy. These items are bona fide, externally
funded capital purchases, scholarships, and subcontracts to external parties. For the avoidance
of doubt, externally funded capital purchases do not include depreciation, which is a cost of
operating an asset or assets to carry out contracted research and consultancy work.
1
Costs associated with library, buildings, IT systems and services, lighting, heating, HR services, payroll
services, OSH etc.
Exemptions will be taken into account by Research Management Services according to the
financials agreed with purchasers and suppliers as specified in research and consultancy
contracts (e.g. where the contract stipulates that $20,000 (Exc GST) is to spent as a
scholarship, this amount will be exempted from the levy). Similarly, exemptions for
subcontracted work must be based on a legal subcontract with suppliers as approved by
Research Management Services.
3. The contracts to which central indirect cost recovery will be applied
The levy will apply to ALL new and renegotiated externally funded research and consultancy
work from 1 November 2006. Contracts dated prior to this will remain under the old indirect
cost recovery regime.
For all questions on this matter, please refer to Graeme Mitchell (Team leader, Business
Services,
Research
Management
Services)
on
Ext
5944
or
e-mail
g.b.mitchell@massey.ac.nz).
Professor Nigel Long
Deputy Vice-Chancellor (Research)