HKS Sponsored Programs Overhead Shortfall Reconciliation

Facilities and Administrative costs (also F&A, Indirect Costs, or Overhead) are actual expenses incurred by the institution that cannot be directly and specifically allocated to an individual grant or contract with a high degree of accuracy. When external sponsors cap the OH recovery rate they will allow in their sponsored proposals, HKS policy requires an internal agreement to reconcile this overhead under-recovery. In all such agreements, the School must ensure it is making conscious, informed decisions about when and under what circumstances subsidies (if any) are provided.

HKS policy requires that proposals which do not include the normally required minimum indirect cost rate of 20% compensate for the overhead “shortfall” through one of the methods described below. The overhead shortfall compensation method must be confirmed at the proposal stage, and is managed as part of the Dean’s Approval Process for Sponsored Proposals by the HKS Research Administration Office.

Overhead shortfalls may be reconciled by one or more of the following methods:

Center/Program unrestricted funds offset by grant direct costs: refers to Center/Program funds that are freed up by grant direct costs. In these cases, Centers are held harmless as the grant has covered expenses normally covered by the Center. All such expenses need to be allowable, allocable and appropriate to include in the grant.

Other Center/Program funds: refers to Center/Program funds (e.g., unrestricted) that subsidize the overhead shortfall independent of any direct connection to the grant budget.

Grant direct costs directly credit HKS core budget: refers to allowable and allocable expenses charged to grants to offset fixed costs the School’s budget would otherwise bear. In most cases, such charges are limited to faculty term time salary and benefits, faculty assistant salary and benefits, or faculty/FA office rent.

Overhead Shortfall Waiver: refers to approval by the Academic Dean to waive all or part of the overhead shortfall. In reviewing these requests, the Academic Dean will in most cases give relatively greater weight (and preference) to the following factors:

• Junior faculty principal investigators
• Smaller subsidy requests
• The sponsor will pay some overhead but less than the normally required minimum rate
• Proposals that, if funded, may lead to larger, follow-up projects
• Proposals where all or most of the research faculty and staff are full-time Harvard employees (vs. project-specific contract staff)

Other factors are given due consideration, including:

• The degree of direct engagement of the project PI and of other HKS faculty members;
• The specific linkages between the new proposal and other ongoing or planned HKS research, teaching and outreach activities;
• The degree to which the new proposal would impose incremental costs (financial and otherwise) on HKS infrastructure services (IT, facilities, HR, etc.);
• Other recent sponsored funding secured by the PI that included full overhead recovery (e.g., federal research grants);
• First-time waiver requests.

The Academic Dean will look first to Centers to subsidize all or part of an overhead shortfall through methods 1-3 above, before approving a waiver. All overhead shortfall agreements will be documented at the proposal stage by the RAO and included in the permanent file.