2.12. Indirect costs i.e. overheads of a project

Owned by Varmo Pilt
02 December 2021
2 min read

In many projects, indirect costs, i.e. overheads, are allowed in addition to the direct eligible costs.  The component of indirect costs or overheads may vary in projects:

  • Calculated on the basis of direct personnel costs only
  • Calculated on all costs other than subcontracting costs
  • Added to all costs.

Overheads are added only to the eligible costs and are calculated automatically. No documentary evidence needs to be provided to the funder for overheads incurred.

According to the university’s Financial Regulations a percentage of indirect costs is allocated to the university’s general fund as overhead allocation. Overhead allocation to the general fund is calculated on the percentage of the project grant and after the grant has been received. The Target Funding Division keeps accounts of project overhead allocations.

The following rules apply to overhead allocations at the university:

  • the rate of overheads allocation on contracts and similar agreements is 15%.
  • The overhead allocation to the general fund on personal research funding granted through the Estonian Research Council is calculated based on the overhead allocation rate established by the funder.
  • As regards the project grants for which a contract has been entered into or an administrative decision has been made not earlier than 01.11.2015, the overhead allocation to the general fund shall be calculated according to the rate established by the funder, but it shall not exceed 15% of direct costs.
    Project grants include funding received based on the 2014-2020 Structural Assistance Act from service contracts concluded with state foundations and from the members of consortia formed for the implementation of those contracts. The university is involved in the implementation of the abovementioned contracts on the basis set out in legislation of the government authority (the 1st level intermediate body) and the service contract is necessary for the implementation of a project aimed at the public and society as a whole. 
  • The overhead allocation to the general fund on project grants is calculated when the funder approves the costs and overhead allocation is not calculated on grants transferred to partners.
  • The provisions on project grants shall apply to grant agreements.
  • The overhead allocation to the general fund on contracts and agreements of the Smart City Centre of Excellence is 1/3 of the general fund allocation rate (5% at the time of signing the internal regulations).