Calculating Indirect Costs


After completing this lesson, you will be able to:

  • Explain indirect costs

Introduction: Indirect Costs

Indirect costs (IDC) represent additional administrative costs in conjunction with the expenses or payments that are directly related to the grant. When a sponsor accepts liability for these extra charges, you can enter the negotiated rate and further details for the IDC postings in the grant master data.

The posting of indirect costs on the basis of expenses or payments are directly related to the grant that is regularly scheduled as an application job. IDC postings are created as the following: expense to the external fund and revenue to an internal fund. The amount posted as expenses to the external fund can be reimbursed by GM billing.

The following graphic illustrates the indirect cost posting process and the follow-on process GM billing.

Configuration for Indirect Cost Postings

IDC Configuration

The IDC configuration determines the G/L accounts for the IDC expenses and the revenue (Cost reimbursement).

In your role as a configuration expert (application role SAP_BR_BPC_EXPERT), perform the configuration activity Define Chart of Account Settings for Indirect Costs.

Indirect Cost Settings in Grant Master Data

IDC Settings

In the grant master data, you determine whether indirect costs are to be recorded for expenses or payments, the types of expenses relevant for IDC at sponsored class level, and the details of the IDC rate. You maintain these IDC settings in the following sections of the grant master data:

IDC Settings

Section in Grant Master DataUsage
Financing SourcesMark one internal fund as IDC Recovery fund. This fund receives the IDC revenue amounts. IDC expense amounts are posted on the external fund and are reimbursable by GM billing.
Sponsored ClassesDetermine the sponsored classes (from the class type, Expense) that apply to the IDC calculation. These sponsored classes must be defined as IDC-Relevant.
Indirect Cost RuleChoose one of the pre-delivered IDC rules, Liabilities or Payments. For IDC rule, Liabilities, expenses are the basis for IDC calculations; for IDC rule, Payments, the paid amounts are the basis for IDC calculations.
Template IDC Rate %Define the Template IDC Rate %. This field allows you to fill the template rate in all marked lines of the table when the Apply Template IDC Rate button is pressed. Following this process simplifies the way rates are entered.
Indirect Cost Rates by Sponsored ObjectIn this section, define the IDC rate for sponsored objects (as a combination of sponsored program / sponsored classes) to be used for the IDC calculation. You can set rates for specific validity periods.
Indirect Cost Caps OverallIn this section, you can define the overall maximum admissible indirect costs as an IDC Cap for a specific validity period. For comparison purposes, the Used field displays the IDC amount that has already been posted.
Indirect Cost Caps by Sponsored ObjectIn this section, you can define parts of the overall IDC cap as a maximum amount for selected sponsored objects and specific validity periods. For comparison purposes, the Used field displays the IDC amount that has already been posted.

Indirect Cost Posting


Indirect costs are posted with a background job. For each relevant Grant, one journal entry is created.

Use the job template, Grants Management Indirect Cost Posting, to schedule the indirect cost (IDC) posting.

This template provides the following features:

  • Determine when to run the job - for example, immediately - for a specified date in the future or at regular intervals
  • Determine under Selection Criteria for which company code, grants, and sponsors the IDC postings are to be executed
  • Determine a cut-off date to limit the included expense documents for the IDC posting run
  • Determine the parameters for the IDC documents to be generated
  • Monitor the status of the job and check the log for errors
  • Test run flag: if the flag is set, the run produces a result document, but is not posting IDC documents
  • Under Results, the job document shown contains the following details of the IDC postings- Document number of posted IDC document (only if test run flag is not set)- Calculated IDC amounts and already posted amounts for all Sponsored Program, Sponsored Class, and Fund combinations- Cap and usage of cap: overall, and for each sponsored program, and sponsored class combination- All expense or payment postings contributing to IDC calculation; for each posting, the calculated IDC amount and usage of the IDC cap is displayed

Reporting on Indirect Cost

An overview of the posted IDC budget and expense figures can be achieved with standard queries by selecting the relevant sponsored classes.

A detailed overview of how the IDC values are calculated and the usage of caps is currently only available in the result lists of the posted jobs.

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