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Overhead, indirect costs, and the 10 per cent rule

All research projects incur both direct and indirect costs. The direct costs are usually covered by the grant, whereas indirect costs should be covered by overhead. At SDU, a "University Fee" (universitetsafgift) of 10 per cent is levied on the department to recover indirect costs; this "10 per cent rule" is explained below.

In Denmark, overhead rates for public funders are defined in legislation and grants to universities carry an overhead of 44 per cent, whereas grants to hospitals get and overhead of 3.1 per cent. This is unfortunate and stupid, because the indirect cost rate is the same for both universities and hospitals, and would require an overhead of 67 per cent for indirect costs to be fully recovered. The consequence is that all externally funded health research in Denmark requires substantial co-funding from the institutions.

At SDU, the "10 per cent rule" has been established to somewhat alleviate the problem of insufficient funding for research projects. The rule applies without exceptions to all externally funded research and it works like this: 

Whenever an expenditure occurs within a project—goods or services are paid for—the central administration of SDU will charge the department (NB, not the project) a 10 per cent University fee. The diagram below illustrates how the rule works in two examples; one public grant with 44 per cent overhead, and one private grant with no overhead.

 10 per cent rule for overhead at SDU
Definitions:

Direct costs are those that are caused by—and can be easily attributed to—activities in the project, e.g. salaries, lab materials, travel and similar.

Indirect costs are also caused by—but can only indirectly be attributed to—activities in the project, e.g. rent for labs, offices and facilities; internet access and use; HR and legal services; library services, including access to scientific journals and databases; research support; and general administration. 

Overhead is the portion of a research grant that is intended to cover indirect costs.

For a  typical research project at universities in Europe or the US, indirect costs make up about one third of the project's total costs, which would be equivalent to an overhead of 50 per cent.

 

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