Cost recovery is the process of allocating costs for a service center, grant or contract, to the appropriate department or category. The indirect cost rate is the percentage the federal government allows institutions to charge on contracts and grants to cover overhead expenses such as utilities and facilities use.
At Virginia Tech, indirect cost recoveries are used to support and enhance the research mission of the university. This includes facilities renovations, equipment purchases, administration, graduate-student support, new construction through the Central Capital Account, and leased space.
According to the Virginia Appropriations Act, each state agency that accepts a grant or contract shall recover full statewide and agency indirect costs as defined by the Department of Planning and Budget, unless (a) exempted from the provision by the Governor, or (b) prohibited by the grantor. Donations and gifts to the Virginia Tech Foundation are not subject to the provision of this section of the Appropriations Act, unless they are used to support normal research functions.
For Service Centers, including Recharge Activities, Service Facilities, and Specialized Service Facilities, billing rates must be designed to recover the direct operating costs of providing the services and the center’s overhead on an annual basis. Actual costs and recoveries must be compared at the end of each fiscal year or annual review cycle.
Separate funds must be established in the university's accounting system to record the actual direct operating costs of the service, recoveries, any surplus or deficit, and the reserves for replacement of equipment. Where a service center provides significantly different types of service to users, separate billing rates should be established for each service representing a significant activity of the service center. The costs, recoveries, surpluses, and deficits should also be separately identified for each service.
