MIT's indirect cost rates for FY25 and FY26

Dear colleagues,

I am writing today to make you aware that MIT’s facilities and administration (F&A) rates have been updated as a result of our routine, yearly negotiations with the federal government. New rates for FY25 and FY26 have been implemented today in MIT systems and are ready for use. Due to new complexity in the rate structure, described below, a detailed FAQ provides guidance on how to understand and apply the rates to research budgets in proposals, new awards, and existing awards. MIT Research Systems & Support (ra-help@mit.edu) will also be providing drop-in help to research administrators next week.

How F&A rates are determined

F&A rates are used by universities to obtain reimbursement from sponsors for the indirect costs of sponsored research awards — the facilities (mainly) and administrative systems and support that are critical components of organized research. The Institute annually negotiates its F&A rates with the Office of Naval Research (ONR), which is our cognizant agency. The rates are based on a detailed accounting of the Institute’s total indirect research costs, estimated future costs, and the estimated base of direct research funding to which the rate will be applied. Then, after the research has been conducted, detailed accounting is completed (and audited by the government) to ensure our recovery reflects our actual costs.

What is changing and why

1. Retroactively to October 1, 2024, and going forward into FY26, we will have separate rates for projects sponsored by agencies under the Department of Health and Human Services (HHS). As negotiated with ONR, rates for these HHS projects will be slightly lower than for other federal sponsors.

   Note that this change is completely unrelated to the NIH’s recent effort to cap indirect cost rates at 15%, which is under litigation and has been blocked by a federal judge, pending appeal. Rather, the creation of a unique HHS F&A rate at MIT is a result of an independent change in HHS financial policy that took effect in October 2024 and was incorporated into our recently completed negotiations with ONR.
2. For FY26, we will see a modest increase in our on-campus F&A rates, across all sponsors. This is because our indirect research costs are anticipated to stay about the same (being driven largely by the costs of existing physical facilities), while direct research costs are anticipated to drop as a result of recent and proposed federal actions.

The new rates

During FY25 to date, we have been operating with provisional F&A rates: 59.0% on campus and 6.5% off campus. MIT’s final rate agreement with ONR provides fixed rates for FY25 (retroactive) and FY26, as follows:

Applying the new rates

As of today, the new rate structure has been implemented in Kuali Coeus and SAP, and the rates can be applied to proposals and awards. I encourage all principal investigators and research administrators to read through the Frequently Asked Questions (FAQ), which provide particularly important information on how the rates apply to new and existing awards, as well as HHS awards with competing renewals or non-competing continuations. MIT Research Systems & Support (ra-help@mit.edu) will also be providing drop-in help to research administrators next week.

With FY26 budgeting underway, all of us in MIT’s senior leadership team recognize the challenge of managing research budgets amid the current federal funding dynamics. Please continue to raise any FY26 financial concerns with your DLCI leadership first, and then elevate issues to your dean (or me, for VPR units) as needed, so that we can work with you to address these concerns.

Sincerely,

Ian A. Waitz
Vice President for Research