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3.11 Indirect Costs

Indirect Cost Distribution Bases

Regardless of the allocation method used by the organization, the following “direct cost” bases may be used as a distribution base:

  • Modified Total Direct Cost, or MTDC. This base includes all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and subawards and subcontracts up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency.
  • Direct Salaries and Wages. This base includes only the costs of direct salaries and wages incurred by the organization.
  • Direct Salaries and Wages plus Fringe Benefits. This base includes the costs of direct salary and wages and the direct fringe benefits incurred by the organization.