Five Keys to improving research costing and pricing in LMICs 2nd edition 2020 - ESSENCE Good practice document series

Five keys to improving
research costing and
pricing in low- and
middle-income countries
ESSENCE Good practice document series
Second edition
2020

The Five Keys offer research institutions and funders pointers and guidance on
the processes involved in calculating, managing and recovering research costs.
It is particularly useful for:
Institutional leaders, including chief executive officers and other executives,
deputy vice-chancellors for research.
Program directors and program officers, including research directors and
funder program leaders.
Research managers, including grants managers, finance managers/officers,
project accountants, project coordinators, learning and development
managers/officers.
Researchers, including principal investigators, mid-career and emerging
researchers.

Five keys to improving
research costing and
pricing in low- and
middle-income countries
ESSENCE Good practice document series
2020
Second edition

The Five Keys To Improving Research Costing and Pricing in Low-and Middle-Income Countries
(2020) by ESSENCE on Health Research is licenced by the African Academy of Sciences
(AAS), Canadian International Development Research Centre (IDRC) and the Special
Program for Research and Training in Tropical Diseases (TDR) at the World Health
Organization (WHO) under a Creative Commons Attribution-Non Commercial-Share Alike 3.0 Unported License. Based
on work documented at https://www.who.int/tdr/partnerships/essence/en/, this publication may be copied and
redistributed for non-commercial and academic uses only, provided ESSENCE on Health Research is referenced and
this publication is cited as:
ESSENCE on Health Research (2020) The Five Keys To Improving Research Costing and Pricing in Low-and Middle-Income
Countries. Available at https://www.who.int/tdr/partnerships/essence/en/
ESSENCE Steering Committee
Canada’s International Development Research Centre (IDRC); European and Developing Countries Clinical Trials
Partnership (EDCTP); Special Program for Research and Training in Tropical Diseases (TDR) at the World Health
Organization (WHO); Special Program of Research, Development and Research Training in Human Reproduction (HRP)
at the World Health Organization (WHO); South African Medical Research Council (SAMRC); Swedish International
Development Cooperation Agency (Sida); United States National Institutes of Health - Fogarty International Center (NIH/
FIC) and the Wellcome Trust.
For further information on this document and the ESSENCE initiative please contact:
ESSENCE Co-Chair: Professor Hannah Akuffo, Swedish International Development Cooperation Agency (Sida) at
hannah.akuffo@sida.se and Dr Linda Kupfer, United States National Institutes of Health - Fogarty International Center
(NIH/FIC) at linda.kupfer@nih.gov
or
ESSENCE Secretariat Coordinator: Dr Garry Aslanyan, Special Program for Research and Training in Tropical Diseases
(TDR) hosted at the World Health Organization (WHO) and co-sponsored by the United Nations Children’s Fund
(UNICEF), the United Nations Development Program (UNDP), the World Bank and WHO at aslanyang@who.int

Contents
Preface 4
Acknowledgements 4
Introduction 5
Clarifying the ‘what’, ‘why’ and ‘how’ of research costing and pricing 6
Key 1: Improving relations between funders and research institutions 9
Factors that influence research funding 9
Different types of funders 11
Different kinds of research institutions 12
Interest-based negotiations and relationship building 13
Recommendations for good practice 14
Key 2: Defining terms and clarifying values 15
Technical concepts in research costing and pricing 15
Three useful terms related to research management 18
Values that underpin effective research funding 19
Key 3: Enabling transparent research costing and pricing 21
Why transparency matters 21
Institutional enablers 22
Key 4: Optimizing the recovery of indirect costs 31
Categorizing costs 31
Approaches to determining indirect cost recovery 32
How funders see indirect costs 38
Distributing recovered indirect costs 42
Key 5: Strengthening capacities for grants management 45
Roles and responsibilities involved in grants management 46
Building skills and capacity linked to grants management 49
The evolution of the Five Keys, 2012 to 2020 53
First edition (2012) 53
Training modules (2014) 53
Second edition (2020) 53
Recommended reading 54

FIVE KEYS TO IMPROVING RESEARCH COSTING AND PRICING IN LOW- AND MIDDLE-INCOME COUNTRIES: 20204
Preface
ESSENCE (Enhancing Support for Strengthening
the Effectiveness of National Capacity Efforts)
on Health Research is an initiative by funding
organizations to improve the coordination
and harmonization of research capacity
investments. ESSENCE members embrace
the principles of donor harmonization and
country alignment expressed in the 2005 Paris
Declaration on Aid Effectiveness and in the
2008 Accra Agenda for Action. According to
these principles, donors align and harmonize
their activities and procedures with the
priorities of the countries in which they work.
To achieve this goal, ESSENCE members
agreed to jointly develop and produce good
practice documents that would incorporate
current knowledge and best practices on
health research and development issues.
The first of these, Planning, monitoring and
evaluation framework for capacity strengthening
in health research, was published in 2011 and
updated in 2016. The second, Five keys to
improving research costing in low- and middle-
income countries, was published in 2012. This
document is a revision of the 2012 edition.
Two other good-practice documents, Seven
principles for strengthening research capacity in
low- and middle-income countries: Simple ideas in
a complex world and Six practices to strengthen
evaluation of research for development, were
published in 2014 and 2016 respectively.
In addition, a good-practice document on
implementation research will be published
in 2020.
Acknowledgements
ESSENCE thanks all the institutions,
organizations and individuals who responded
to surveys, participated in focus groups
and consultation sessions, and willingly
dedicated time to follow-up discussions and
the sharing of case studies that all helped
to shape the content of this publication.
Karin Dyason, Gerard Ralphs, Garry Aslanyan
and Kemi Oladapo provided invaluable
support in finalizing the document at its
various stages. ESSENCE particularly thanks
the African Academy of Sciences (AAS), the
Research Management Programme in Africa
(ReMPro Africa), the Canadian International
Development Research Centre (IDRC) and the
Special Program for Research and Training in
Tropical Diseases (TDR) at the World Health
Organization (WHO) for funding various
aspects of this project. We acknowledge
ESSENCE members for their participation
in and support for the project, and thank
members of ESSENCE’s Steering Committee,
particularly the members of the Research
Management Working Group, for their
leadership and dedication.

FIVE KEYS TO IMPROVING RESEARCH COSTING AND PRICING IN LOW- AND MIDDLE-INCOME COUNTRIES: 2020 5
Introduction
Research institutions and funding agencies
have a shared interest in high-quality research
outcomes that effectively address global
challenges. This kind of research requires
a range of infrastructure and resources
that institutions can develop and sustain
if they have access to sufficient funding.
Unfortunately, many research institutions in
low- and middle-income countries (LMICs) face
at least four broad challenges when it comes to
securing research funding.
Minimal government and local investment
Although many national governments have
made commitments to invest in research,
public institutions in many LMICs face declining
subsidies and escalating economic pressure.
As a result, institutions are compelled to
seek other funding to support their research
agendas. In regions such as Asia, the Middle
East and North Africa, commercial funding
opportunities contribute significantly to
supporting research. However, in many other
LMICs, commercial opportunities are rare.
Institutions therefore access most of their
funding from international sources where
budgets are largely funder-driven and thus
not necessarily aligned with local research
needs. The scarcity of funding for longitudinal
research programs is another challenge to the
sustainability of research in LIMICs.
Constrained research systems
Many institutions struggle with meagre
facilities, outdated equipment and
infrastructure, poor procurement practices,
ineffective research strategies and policies,
complex bureaucratic obstacles, and
limited professional support for research. In
some instances, political instability and/or
overwhelming teaching loads limit researchers’
time and enthusiasm for research activities.
These systemic factors make it difficult for
institutions to attract sufficient funding and
retain skilled research staff.
Limited professional support for research
A lack of professional support leaves
researchers with limited information about
funding modes and opportunities. Similarly,
a lack of experience in writing high-quality
grant applications leaves institutions
at a disadvantage in an increasingly
competitive funding environment. In
addition, funders’ varying requirements
related to financial due diligence create
heavy administrative burdens for institutions.
Systems and processes that should support
proposal development, project budgeting
(including indirect costs), grants management
and financial reporting are inadequate.
While professional support for research is
increasingly seen as essential, positions for
full-time staff are limited and retaining staff
after projects end is difficult. The gradual
professionalization of the field means that
institutions still struggle to recruit experienced
staff and have to invest in developing staff
skills and capacities. This, in turn, requires
institutional commitment and funding,
neither of which are guaranteed.
Difficulties recovering the full cost
of research
In many LMICs, declining government subsidies
means that research institutions have limited
or no access to unrestricted or other core
funding. In this context, the constraints
and restrictions on the reimbursement
of indirect costs is a major concern.
Requirements for co-funding, and caps on
budget items that misalign with institutional
needs, add to this challenge. In addition, the
risk related to exchange-rate fluctuations is
often carried by research institutions rather
than funders, and this can pose another major
challenge to the recovery of research costs.
On the other hand, institutions, particularly
in the university sector, have yet to create
transparent indirect cost recovery policies
or mechanisms to manage recovered indirect
costs. This limits their ability to engage with
funders on the reimbursement of research costs.

Clarifying the ‘what’, ‘why’ and ‘how’
of research costing and pricing
As the requirements for access to research
funding increase, the competitiveness and
compliance of research organizations has to
improve. In this booklet, we aim to provide
clear guidelines and practical tips on improving
research costing and pricing.
Based on feedback obtained from users of
the first edition, we have changed the order
of the keys, cited some new references and
added some ‘notes from the field’. These notes
are drawn from responses to a survey as well
as a series of consultations and focus-group
meetings we conducted. In particular, this
edition:
Addresses funder–institution relationships
(Key 1), clarifies the terminology related
to research costing and pricing (Key 2),
and offers guidance on the development
and implementation of a research costing
and pricing policy (Keys 3 and 4) as well as
on enhancing the support for research,
specifically the grants management function
(Keys 3 and 5).
Focuses on indirect costs as a component
of research costing and pricing, while
acknowledging that many other factors
impact on research costing.
Anchors research costing and pricing within
institutional systems, thus addressing issues
beyond the purely functional calculation of
indirect costs.
Offers guidance, case studies and examples
to help readers consider their options and
adopt strategies that are appropriate to
their own contexts. Besides the examples
included in this booklet, a set of case studies
is available at https://www.who.int/tdr/
partnerships/essence/en/.
What?
The full cost of research includes direct and
indirect costs.
Research institutions have to be able to create
transparent and appropriate project budgets
that include both direct and indirect costs.
This allows them to assess the extent to which
funds raised will cover their costs and decide
how to address any shortfall. Without this,
institutions risk underestimating the costs of
their research, running projects at a loss and
being unable to sustain their research work.
Why?
Research costing, pricing and the effective
recovery of research costs ensures:
Sustainability – full research costing
ensures wider awareness of the real costs
of research and this helps institutions to
acquire enough funding to secure their
financial sustainability. As such, research
costing is a strategic management tool
that can help institutional decisionmakers
decide whether or not to invest in a research
project, thus allowing for robust management
of the internal resources needed to support
research in the longer term.
Transparency – being clear about all the
costs involved in a research project allows
for accountability and provides a solid basis
from which to engage with funders on what
they will cover.
Efficiency – knowing the full research costs
helps institutions to budget effectively
and streamline systems.
How?
Moving towards full research costing and
pricing requires institutions to:
Choose a methodology to accurately
calculate their institutional indirect cost
recovery rate.
Develop and implement a policy to
recover their indirect costs from research
grants in a transparent and consistent way.
Manage recovered indirect costs
strategically to ensure institutional
sustainability.
Identify or recruit capable staff and
strengthen their skills.

This, in turn, requires:
Institutional leadership who recognize
the value of accurate research costing and
pricing to institutional sustainability and
commit to supporting the implementation of
the necessary processes, systems, skills and
capacity.
Funder rules which accept that institutions
have to recover indirect costs and
reimburse these at an appropriate level.
Accordingly, research costing and pricing
requires that both institutions and funders
acknowledge both the size and impact of
indirect costs related to research.
In the Five Keys that follow, we focus specifically
on research costing and pricing for research
institutions in LMICs and their funders. We
outline some of the challenges involved in
research costing and offer recommendations
for addressing these.
The Five Keys have the potential to play a
strong catalytic role in:
Deepening awareness of the importance of
making provision for indirect costs.
Steering research institutions and funders
towards more accurate costings.
Improving policy on grants management
and systems of accountability.
The ability of institutions to accurately
determine research costs has much do with
the technicalities of accounting systems.
However, capacity building must focus first on
developing the strategic and the operational
skills that pre- and post-award grants managers
require – that is, ensuring widely held and real
comprehension of the value of indirect costs
and the necessity of recovering these.
For funders, the need to harmonize policies
and practices on the reimbursement of indirect
rates remains relevant. This applies to the
grant-application process in general, where
the standardization of templates, reporting
procedures and financial requirements could
substantially decrease the time and effort
required of institutional administrators.
However, until funders commit themselves
to supporting appropriately calculated and
justified indirect costs, accurate research
costing and pricing will remain a costly and
time-consuming exercise with limited value
for research institutions.
Ultimately the focus must be on enhancing the
coordination and impact of research. Ongoing
dialogue between institutions and funders will
be vital in clarifying costing issues and finding
ways to unlock the barriers to greater efficiency
and impact.
We hope that this publication will serve as a
useful and inspiring resource for institutions
and funders who wish to ensure that these
issues feature frequently on the agendas of
meetings within and between their organizations.
Figure 1 provides an overview of each key. For
each key, lists of recommended reading are
included at the end of the booklet.

Key 1
Improving
relations
between funders
and research
institutions
Narrowing the gaps
in understanding
between institutions
and funders,
and promoting
relationships
based on shared
interests.
Key 2
Defining terms
and clarifying
values
Defining the key
concepts and
values in research
costing and pricing
and clarifying those
that can cause
confusion in grants
or contracts.
Key 3
Enabling
transparent
research costing
and pricing
Affirming the
importance of
transparency, as
well as institutional
policy and support
in enabling
research costing
and pricing.
Key 4
Optimizing the
recovery of
indirect costs
Exploring cost
categories and
securing support
for the recovery
and distribution
of indirect costs
from funders and
research institutions
to support
sustainability.
Key 5
Strengthening
capacities
for grant
management
Highlighting the
importance of
skills and capacity
at individual and
institutional level
and how these can
be supported by
institutions and
funders.
Figure 1: An overview of the Five Keys

Key 1: Improving relations between funders
and research institutions
Every year a substantial proportion of public
and private investment goes into supporting
research on problems facing human
populations worldwide. From fighting disease
to enhancing human health or protecting
other species and the environment, many
organizations – funders, universities, think
tanks, businesses and governments – play
vital roles in the ever-evolving global research
system.
A persistent barrier to better cooperation
between these institutions is a perceived
misalignment of their interests. Challenges
between grantmakers and grantees tend to
arise if they differ on policies and practices
related to financial and program management.
Encouraging these organizations to deepen
their understandings of each other and their
different mandates can help bridge this barrier.
However, bringing about a closer alignment
of their interests can be both a risk and an
opportunity for development. Developing
cooperative policies and programs can help
these organizations to have more impact.
Conversely, however, if narrow public or private
interests prevail, systemic change can be
limited or delayed.
The focus of Key 1 is therefore to enhance
mutual understanding and encourage win-win
negotiations by:
Outlining factors that influence research
funding.
Clarifying the different types of research
funders and different kinds of research
institutions.
Comparing the mandates of research
funders and research institutions.
Explaining the basis of win-win or interest-
based negotiations.
Factors that influence research
funding
The urgency of global challenges
Contemporary global challenges cut across
all kinds of borders and, as national priorities
shift and new technologies emerge, innovative
research agendas are needed. Indeed, the
limited resources accessible to most governments
to address the global challenges we all face
has considerably increased the demand for
research that can drive positive change.
Although they tend to represent diverse
constituencies from shareholders to citizens,
or marginalized social groups, funders and
grantees all play critical roles in helping to
identify and support impactful research, using
specific criteria, decision-making, and program-
evaluation strategies. Among the key criteria
that are used in many evaluation strategies
are accountability and value for money
(see Key 2).
Limited funds for research
Many countries promote science, technology
and innovation in their national policies.
Many governments are committed, in
principle at least, to investing in research
and strengthening the systems it relies on.1
Similarly, in the high-growth Asian economies,
as well as some economies in the Middle
East and North Africa, private companies are
driving research investments to meet the
fast-changing human and technological needs
of their populations. However, in many LMICs,
stark socioeconomic and developmental
challenges mean that few resources are
available for research. Indeed, in sub-Saharan
Africa for example, declining national funding is
making many research institutions increasingly
dependent on international funders.
1 See UNESCO (2015)
Science Report: Towards
2030; Global Research
Council (2017) Statement
of Principles: Capacity
Building and Connectivity
Among Granting Agencies
Worldwide; and UNESCO
Institute for Statistics (2019)
Global Investments in R&D.
Fact Sheet No. 54.
All available online.

Funder collaborations
Funders are increasingly choosing to work
collaboratively to improve the applicability
of their research and/or increase the impact
of their investments. Values such as aid
effectiveness and impact are important
here, although they are not the only factors
driving funder partnerships. Funders are
also interested in sharing risks, costs, and
benefits with partners, in order to advance new
research agendas.
Several high level coordinating initiatives have
been established. Two useful ones to know
about are:
The Global Research Council (GRC) is a
virtual organization, comprised of heads of
science and engineering funding agencies
from the Americas, Asia-Pacific, Europe,
Middle East and North Africa (MENA) and
sub-Saharan Africa. See http://www.
globalresearchcouncil.org/
ESSENCE on Health Research is a global
initiative that allows donors/funders to
identify synergies, establish coherence and
increase the value of resources and action
for health research, especially in LMICs.
See http://www.who.int/tdr/partnerships/
essence/en/
NOTES FROM THE FIELD
On funding sources
Many grantees reported that foreign
governments and international non-
proft organizations (NPOs) are still their
primary sources of research funding.
Although national research funding
agencies have been established in
some LMICs, their budgets and funding
priorities tend to be limited. For
researchers, this means an increasing
reliance on foreign funding and being
subject to organizational pressure to
diversify their sources of income.
Funders reported that researchers in
LMICs now have more opportunities
to apply for funds, particularly through
collaborative international research
programs. However, ensuring that
the interests of different partners are
equitably balanced is critical to the
success of these programs.

Different types of funders
Research funders or grantmakers are a diverse
group of organizations with varying mandates
and goals. Some, such as foundations, are private
philanthropic entities while others are state-funded
agencies that rely on national budgets and respond
to shifts in foreign policy. A third category are
intermediaries that collect funds from one or
more entities and direct these to grantees. The
character of research funding is changing rapidly
as the boundaries between traditional competitive
and non-competitive grants become increasingly
blurred.
In addition, some funders, such as Canada’s
International Development Research Centre (IDRC)
derive their mandates from their government.
Others, like the Bill & Melinda Gates Foundation,
take their lead from their founders. Based on their
mandates, these entities set goals that align with
the requirements of their constituencies.
Given this variety, grantmaking policies and practices
differ widely and this can make accessing research
funding quite complex. That is, the range of activities
and infrastructure that different grantmakers are
willing to fund is wide and the mechanisms they
use to allocate funds can be very different. For
example:
Single funder calls are issued by a single
organization in a given programming cycle.
Funded items can vary widely, from travel
grants to multi-year project grants.
Funder partnerships occur when two or
more funders pool their funds to increase
the scale of response to a particular issue.
The negotiation of funder partnerships can
be intricate, as different policies and goals
must be observed in the management and
disbursement of funds.
Bilateral funding refers to transfers of funds
from one country to another for specific projects.
Multilateral funding is provided by a
collective of sovereign institutional actors. A
good example is the European Union’s (EU’s)
Framework Programme for Research and
Innovation.
Institutional funding is sometimes called
‘core funding’ and is provided to research
institutions for their general operations as
well as specific research programs.
Examples of funder mandates and
constituencies
The IDRC was established in 1970 by an Act of
the Canadian parliament. The Act mandates
the organization to ‘initiate, encourage, support
and conduct research into the problems of
the developing regions of the world and into
the means for applying and adapting scientific
technical and other knowledge to the economic
and social advancement of those regions’. The
IDRC’s constituencies are Canadian citizens/
taxpayers, its board and its grantees.
The United Kingdom (UK) based Wellcome
Trust is a politically and financially independent
foundation founded by Sir Henry Wellcome.
The Trust has two main purposes, according
to its constitution: ‘to protect, preserve and
advance all or any aspects of the health and
welfare of humankind and to advance and
promote knowledge and education’. The trust’s
constituencies are its board and its grantees.
The National Institutes of Health (NIH) is over
a hundred years old and now forms part of
the United States (US) Department of Health
and Human Services. Its mission is to ‘seek
fundamental knowledge about the nature and
behavior of living systems and the application
of that knowledge to enhance health, lengthen
life, and reduce illness and disability’. Its
constituency is American citizens.
The Alliance for Accelerating Excellence in
Science in Africa (AESA) is an initiative of the
African Academy of Sciences (AAS) and the
African Union Development Agency (AUDA). The
organization is an agenda-setting and funding
platform established to address Africa’s health
and development challenges. AESA’s mission
is to catalyze investments, strategies and
programs that promote the brightest minds
in Africa, foster scientific excellence, inspire
research leadership and accelerate innovation
in ways that improve lives and shift the center
of gravity for African science to Africa. AESA’s
constituencies are its members and funders.

On harmonizing funder
policies and practices
Funders noted that, while their mandates
and constituencies limit their flexibility,
they can do more to coordinate with
one another to harmonize their policies
and practices. Strategies they suggested
for this include: developing common
funding standards; sharing learning
through a knowledge bank; supporting
a minimum set of core research
management activities; and striking
agreements on rules and policies. They
also want grantees to communicate
early and clearly if research costs are
not fully covered.
Grantees agreed that greater coordination
and harmonization of funder policies
and practices is necessary. Items
mentioned include: grant application
and reporting systems; costing policies
(including terminology, rates, and
allowable items, especially salaries); and
governance procedures. Grantees also
said funders could do more to engage
with, and try to understand, institutional
needs at the pre-award stage. Ideally,
funders should try to facilitate more
open negotiation processes, and
include organizational training and
strengthening in the investments they
commit to. As one grantee put it:
I like harmonization but I am
also wary of it. Instead of being
enabling and fostering active
professional and context-based
negotiations, harmonized
mechanisms tend to be used
to enforce compliance. Funders
and grantees require capacity
to understand that harmonized
policies and practices are
actually important to allow
for comparability.
Public–private partnerships enable state
and corporate funders to share the costs,
risks and rewards of funding research.
Private R&D contracts are a way that
companies access expertise or research
infrastructures in research institutions to
try to solve specific problems within their
businesses.
Different kinds of research
institutions
Research institutions in LMICs can be situated
on a wide spectrum of institutional development
and sustainability – from public universities and
government departments to corporate R&D
units, not-for-profit organizations, think tanks,
and research councils. Public–private partner-
ships that bring two or more organizations
together to work on a common goal are
increasingly common.
Funding sources can be local (state and
corporate) or foreign (philanthropic, bilateral
or multilateral) and the types of research
they conduct range from basic to applied.
All research institutions enjoy greater or
lesser degrees of connection to national
and international systems of research and
innovation, with a host of related micro-,
meso- and macro-systemic factors impacting
on them. However, despite decades of funding,
almost all research institutions in LMICs
still experience major challenges linked to
institutional capacity and sustainability. These
challenges can be exacerbated by economic or
political ‘shocks’ or by a sudden loss of skilled
personnel.
Nevertheless, it is increasingly clear that
research institutions in LMICs are better
positioned and more likely to conduct research
that is relevant to the development problems
and trajectories of their own countries or
regions. Thus, while the sometimes unstable
and fragile nature of research systems in LMICs
means that continuous capacity building is
essential, funders are beginning to insist that

local knowledge and understandings are seen
as important drivers of research investments
in LMICs.
Interest-based negotiations and
relationship building
The idea behind interest-based or win-win
negotiations is that when two parties have
different interests, but share a need or wish
to cooperate, they can find common ground
if they try to understand each other’s goals
(rather than thinking mainly about their own
position on issues).2
Even those of us who are not professional
diplomats know that understanding ‘the
space for negotiation’ is essential in any kind
of partnership. As organizations with specific
mandates and goals, funders typically call
for research proposals after a long process
of planning and program design. Funders
also work within specific budgets that must
be allocated within specific timeframes and
according to specific financial guidelines. While
some flexibility at the contracting stage might
be possible, often funders are tightly bound
by fixed policies. And, like all organizations,
funders are subject to routine financial and
other audits. For all these reasons, requests
for funders to amend their policies on indirect
costs can fall on deaf ears.
By the same token, research institutions can
be constrained by a multitude of national
policies on public procurement or corporate
governance, which require these institutions
to enter into contracts in particular ways.
In situations where specific institutional
requirements are misunderstood or ignored
by funders, a promising research program
can be derailed.
However, when both funders and research
institutions position their expectations within
the context of their shared interests, new
forms of cooperation often become possible.
2 See I Rahwan, L Sonenburg
and F Dignum (2003)
Towards Interest-Based
Negotiation. Paper
presented at AAMAS 03,
14–18 July, Melbourne,
Australia. Available online.
Shared
interests
=
space for
negotiation
Funder
interests
Research
institution
interests
Key requirements for
institutional sustainability
For research organizations, achieving
institutional sustainability relies on a
combination of factors. The key ones
are: strategic leadership and research
management; institutional capacity and
ongoing capacity development; and
resources such as funding, infrastructure,
effective research policies and skilled
researchers. As one grantee put it:
Institutional research
sustainability is about much
more than winning grants. No
amount of financial support
can generate long-term internal
growth unless an organization
has identified and is aligned with
what it wants to grow into.

On dialogue between
funders and institutions
Funders tend to engage in dialogue with
high-level international or governmental
structures when developing programs.
However, grantees expressed a strong
request that funders engage more
closely with their specific national,
institutional and local needs. Grantees
stressed that funder commitment to
strengthening institutional capacity
is vital and noted that a good flow of
communication between funders and
grantees enhances cooperation.
Collaborate with other funders to learn
from experience and harmonize policies
and processes in ways that minimize the
duplication of administrative effort for
grantees, thus enhancing the impacts of
research investments.
Prior to and during grant cycles, work
towards deeper understandings of the
unique goals, strategies and challenges
of grantee countries and institutions,
and align these with the allocation of
grant funding.
Participate in grantee conferences
and bring institutional leaders and/or
research managers together to enhance
the dialogue between funders and
institutions on research management
and research capacity development.
Develop appropriate science diplomacy
forums to tackle the challenges faced by
grantees based on program evaluation
and other feedback loops.
Before applying to a particular program
call, ensure that your institution has
an understanding of the funder’s
institutional policies as well as the
political constraints imposed on funders
by their mandates and constituencies.
Identify the most appropriate channels
for negotiation on aspects related
to funding and, where possible, use
governmental science diplomacy
channels and forums to build mutual
understandings of shared institutional
or country interests.
Try to engage with funders outside of the
urgencies of specific funding calls. For
example, participate in funder-hosted
events and training opportunities and
join networks or forums that funders are
part of. Use these as opportunities to
network, engage and build relationships
with funders.
Communicate openly with funders
on specific challenges that impact on
research, including the implications of
funders not meeting full research costs.
For funders For research institutions
RECOMMENDATIONS FOR GOOD PRACTICE
It is also important to acknowledge that
negotiations take place at different levels
of research governance, from institutional
and national to the bilateral or multilateral
domains. In fact, science diplomacy is a
growing area of foreign policy. In some LMICs,
successful science diplomacy has given rise to
substantial multi-country investments, such
as the European and Developing Countries
Clinical Trials Partnership (EDCTP) or the
Square Kilometre Array (SKA), which benefit a
wide range of research institutions.
Increasingly, the developing world sees science
diplomacy as an avenue to access existing
science. This is helping some countries improve
their infrastructure, invigorate their educational
systems and even treat their sick.3
3 S Treacy (2015) Science
Diplomacy: A View from the
South. TWAS News, 4 May.
World Academy of Sciences.
Available online.

Funders and grantees agree that achieving
more consistency in terminology will facilitate
better understandings of research costing
and improve grants management. While a full
alignment of terminology might not be possible
at this time, clarity at the level of budget
itemization and key concepts must be achieved
to avoid confusion and missed opportunities.
In addition, much progress is possible within
research institutions if all the research
managers, support staff and researchers who
participate in proposal development strive to
achieve consensus and clarity on the terms
they use. Let’s start with the two basic ones:
Research funders, sometimes called
‘grantmakers’ or ‘donors’, represent a diverse
group of possible funding sources, including
national or regional public funding (directed
either through government or funding agencies),
national private funding from different sources
and international public and private funding.
Research institutions is used here to refer to
the range of public universities, government
departments, research hospitals, private R&D
organizations, not-for-profit organizations,
think tanks, and research councils.
In Key 2, we define three types of terms.
The first are key technical concepts in research
costing and pricing that often cause confusion
in grants and contracts. The second are terms
related to research management. The third
are the values that underpin effective research
funding.
Technical concepts in research
costing and pricing
Activity-based costing*
Activity-based costing is a methodology that
assigns resource costs (such as staff and
equipment) to activities (including research)
and then links these activities to outputs (such
as projects and publications) using cost drivers
(defined below).
Allowable and non-allowable costs
Allowable costs (also known as eligible costs)
are costs that can be claimed from a grant
according to the relevant funder’s criteria. Non-
allowable costs (also known as disallowable,
unallowable or ineligible costs) may not be
claimed against a grant allocation. Allowable
and non-allowable costs are usually specified in
funder guidelines and still tend to change from
funder to funder or even from program to
program within a single funder’s output.
Co-funding and in-kind contributions
Co-funding is when a funder requires a grantee
to cover part of the project cost. Grantees
cover the amount from their own budgets or
raise additional income from another funding
source. Co-funding is also known as ‘matching
funding’ or ‘cost sharing’.
Some funders see in-kind (non-financial)
contributions as a legitimate form of co-
funding. For example, this might include time
spent on a project by staff members whose
salaries are not covered by the funder. It can
also include the use of available equipment or
space or, in some instances, the indirect costs
that are not covered by the funder.
Cost center
A cost center is an accounting term that
describes an entity, function, project or
program that generates costs, and to which
direct and indirect costs are allocated.
Cost drivers
A cost driver is any factor that causes the
cost of an activity to change. For example,
maintenance costs associated with high-tech
research laboratory equipment, the use of
institutional utilities and space and student
numbers are all cost drivers that can impact on
the cost of doing research.
Direct and indirect costs
Direct costs are easily identifiable and
attributable to a specific research project.
These are costs that are directly incurred for
a project and for which there is a clear audit
Key 2: Defining terms and clarifying values
* Activity-based costing
in the UK: UK universities
use what they call the
Transparent Approach to
Costing (TRAC) when it comes
to calculating activity-based
costs. In this approach,
academic time and space are
used as drivers to allocate
costs to specific activities.
Each institution runs an
annual TRAC process to
obtain the data that is
used to create budgets for
research and other projects
on a full-cost basis (see
https://www.trac.ac.uk/).

record, for example the cost of staff who are
employed to work on one specific project only
or consumables bought for a specific project.
Some costs that are directly allocated to
a project can still be based on an estimate.
For example, principal investigators (PI) may
work part-time on several projects at once. To
calculate their salary cost, the time they devote
to a specific project has to be estimated and
recovered by applying the estimated time to
the total cost of the PI’s salary. Examples of
costs that are commonly categorized as direct
costs are provided in Key 4.
Indirect costs are more difficult to define
and calculate. They cover the facilities and
administrative support necessary for research,
including ensuring regulatory compliance.
These are expenses that would be incurred
irrespective of whether a specific research
project is undertaken. These costs can be
substantial and are often underfunded.
Examples of costs that are commonly
categorized as indirect costs are provided in
Key 4.
Several different terms are used for indirect
costs, which highlights the need for more
discussion on how the concept should be
defined. The use of different definitions and
lists of what is and is not allowable makes it
very difficult for research institutions to work
with more than one funder and to optimally
recover indirect costs.
Full costing or full economic costing
Full costing is an accounting methodology used
to identify and calculate the total costs (direct
+ indirect costs) that need to be considered to
accomplish a project or activity, expressed as an
equation: Full cost = direct costs + indirect costs.
Full economic costing (fEC) is a costing
methodology developed by UK universities
based on the concept of activity-based costing
(see above). The full cost of research, calculated
using this method, is used to determine the
amount to be requested from funders.
Other terms for indirect costs
Overheads is a term that is often used
interchangeably with indirect costs.
Facilities and administration costs
or ‘F&A’ is mostly used in the US where
indirect costs cover facility costs (such
as building maintenance and equipment
depreciation as well as the purchase
of library books, journals and other
materials) and administrative costs
(including financial management,
research management, human
resources (HR), etc.).
Non-project attributable costs
(NPAC) is used by UK’s Department
for International Development (DFID)
to describe ‘costs that are not feasibly
allocable to a single project’. Examples
they list include administration and
support, equipment, space and
premises costs, and activities that relate
to the whole organization and partly
support the project, but also support
other projects.4
Core costs or central costs are
terms used in the non-profit sector to
refer to costs incurred to meet ‘core’
organizational and administrative
requirements, including salaries, rent,
equipment, utilities, communications etc.
Research management and support
costs is used by the Wellcome Trust
to cover costs including building and
premises, non-project dedicated
administrative and support staff and
administration, such as finance, library,
and room hire.5
4 DFID (2019) DFID
Programme Expenditure:
Eligible Cost Guidance
for Accountable Grant
Arrangements (Version 2.3).
Available online.
5 Wellcome Trust (2019)
Overheads Policy. Available
online.

Generally accepted accounting principles
Generally accepted accounting principles
(GAAP) is a cluster of widely accepted
accounting standards and procedures that
have been developed over many years. The
principles are used by institutions to organize
and summarize their financial records plus
certain supporting information into financial
statements. The use of GAAP allow the financial
statements of different institutions to be
compared with one another.
It is worth noting that other accounting
standards exist as well; these include the
International Financial Reporting Standards
(IFRS), the International Public Sector
Accounting Standards (IPSAS) and country
specific accounting standards.
Indirect cost rate
An indirect cost rate, also referred to as the
‘indirect cost recovery rate (ICRR)’, is typically
calculated as a percentage of direct costs.
This rate is applied as a method of ‘charging’
individual projects/programs for their share of
the institution’s total indirect costs.
In some cases, costs specified by an institution
or a funder are subtracted from the direct
costs to obtain a modified total direct cost
(MTDC). The MTDC can then be used as the
basis for calculating an ICRR.
Internal and external auditing
The typical purpose of an internal audit is
to provide independent assurance that an
institution’s risk management, governance
and internal control processes are operating
effectively. Internal auditors deal with issues
that are fundamental to the survival and
prosperity of an institution. Unlike external
independent auditors, internal auditors
look beyond financial practices and balance
sheets to consider wider factors such
as an organization’s reputation, values,
environmental impact and working conditions.
Research pricing
Calculating the full cost of research enables
institutions to provide a basis for pricing
projects (that is, deciding on the amount to
request from a funder). The type of project,
the funder, and the reasons for doing the
project can all influence the price. Accordingly,
research projects can be priced in three ways:
On a breakeven basis (price = full cost).
To earn some income for the institution
(price > full cost).
At a loss (price < full cost).
Negotiating an indirect cost
rate agreement
A Negotiated Indirect Cost Rate
Agreement (NICRA) is a formalized and
written agreement between a US federal
agency and an institution. It specifies the
final negotiated indirect cost rate and
other details related to the rate such as
the base(s) to which the rate(s) apply and
the period(s) for which the rate(s) apply.
US institutions are required to calculate
their ICRR using national guidelines
and, through a proposal, negotiate
the reimbursement rate with a federal
funding agency to recover the indirect
costs incurred by the organization in the
conduct of federal-funded research.6
Some US agencies allow institutions
in LMICs to propose and negotiate an
ICRR. These institutions can then claim
indirect costs at the agreed rate. The
rate is audited annually and adjusted for
the following year.
6 See USAID’s Negotiated
Indirect Cost Rate
Agreement. Available online.

Restricted and unrestricted funds
Restricted funds refer to funds that may be
used only for purposes specified in legally
binding terms by the funder. Research grants
usually fall into this category.
Unrestricted funds refer to funds that are
typically used at the discretion of the institution
for its primary mission/s. Recovered indirect
costs fall into this category.
Under-recovery
When funders refuse to cover indirect costs
or reimburse them at much lower than the
institutional rate, under-recovery occurs. Faced
with this problem, institutions can choose not
to accept such grants, allocate internal funds
to cover the difference, or write off the costs
based on a strategic decision.
Three useful terms related to
research management
Research management
In the literature and in the field, terms used
for research management include: research
administration, research support, research
and innovation management or research and
development (R&D) management.
Several different definitions of the role exist
too; here are two:
Research management embraces
anything that universities [and other
research institutions] can do to
maximise the impact of their research
activity. It includes assistance in
identifying new sources of funds,
presenting research applications
and advice on costing projects and
negotiating contracts with external
sponsors. It incorporates project
management and financial control
systems. It also involves help in
exploiting research results – through
commercialisation, knowledge exchange
and dissemination to wider society.7
A research administrator is someone
whose role (or a significant part of it) is
devoted to support some part of the
research lifecycle, including, but not
limited to: identifying funding sources
and customers, preparing proposals,
costing, pricing and submitting funding
proposals, drafting, negotiating and
accepting contracts, dealing with project
finance, employing staff on research
contracts, reporting to funders, advising
on research impact, knowledge exchange,
technology transfer, supporting short
courses, postgraduate research student
administration, research strategy and
policy, research assessment, ethics and
governance, information systems, audit,
statutory returns, and research office
management. Research administrators
mostly work in universities and research
institutes but many also work in hospitals,
charities, government and funding
organizations.8
What the different definitions make clear is
that the aim of research management is to
facilitate and advance research in a sustainable
way. Grants management is a component
of the broader research management role
and refers specifically to the process and
methods an institution harnesses to manage
its research grants. The pre-award phase
includes identifying appropriate funding
options, submitting applications, and reviewing
applications. Post-award management
includes implementing the grant, reporting
on progress, and completing the closeout
requirements. Grants management plays a vital
role in research costing and pricing.
Capacity strengthening
Capacity strengthening refers to processes
through which individuals, organizations and
societies develop their abilities to function
effectively, efficiently and in sustainable ways.
In the context of the Five Keys, it refers to
efforts to enhance the ability of individuals and
institutions to effectively and efficiently manage
and administer research resources in order to
produce quality research in a sustainable way.
7 Stackhouse J (2008) Profiling
the Profession. Research
Global, London, ACU: June
8–9
8 See https://raaapworldwide.
wordpress.com/research-
administration/

Competency
A competency is a combination of skills,
knowledge, abilities and/or characteristics
that are required to perform specific activities
within a professional role to the standard
expected.
Values that underpin effective
research funding
Accountability
This is a core value, which essentially means
that both funders and recipients have to
be able to justify their allocation and use of
research funding in the context of global
needs. Funders see accountability as ensuring
that they support grantees that efficiently
conduct relevant research and produce useful
scientific, social or economic interventions.
Grantees see accountability as the appropriate
stewardship of resources that are entrusted
to it to help them carry out their organization’s
vision and mission.
Aid effectiveness
This notion was mainstreamed through the
Paris Declaration on Aid Effectiveness (2005),
the Accra Agenda for Action (2008), and the
Busan Partnership for Effective Development
Cooperation (2011). It was refined at the
Fourth High Level Forum on Aid Effectiveness
(2012). Its principles include:
Ownership of development priorities
by LMICs: that is, grantee countries should
define the development model that they
want to implement;
A focus on sustainable results (such
that creating an impact is the driving force
behind all investments and efforts in policy
making on development);
Partnerships for development:
development depends on the participation
of all actors and the diversity and
complementarity of all are recognized; and
Transparency and shared responsibility:
development cooperation must be
transparent and accountable to all citizens.
Cooperation
This is an important value in underpinning
efforts to address shared societal challenges
through research. Cooperation emphasizes
shared responsibility and ownership but
it is not without its pitfalls. For this reason,
guidelines for ensuring fair and equitable
cooperation have emerged since 2010.9
Given
the global nature of the challenges facing
the planet, recognition of the value of cross-
regional research cooperation is growing.
Even if funders and institutions have different
mandates, they share an interest in producing
research that solves societal challenges.
Impact
The UN’s Sustainable Development Goals
(SDGs) pinpoint key global challenges facing
all countries. From health and well-being to
environmental protection, finding solutions
to global challenges is being prioritized. In the
field of health, for example, the concept of
impact for research funders and institutions
is evolving away from traditional measures,
such as citations and publication counts, to the
application of innovative treatments or services
that respond to the specific needs of target
populations. This heightened attention to
impact is echoed in a transformative science-
policy paradigm in which the question of how
to use science and technology policy to meet
social needs is prioritized. Here, issues of
sustainability and inclusiveness are addressed
as well as economic growth. Transformative
science policy encourages the co-production of
social, behavioural and technological change in
an interrelated way.
Sustainability
Sustainability is the ability to maintain an activity
into the future with the appropriate resources
and without loss of quality or relevance.
Sustainability is also one of the primary drivers
behind full cost recovery for research institutions.
Another way of ensuring sustainability in the
research sector is through capacity strengthening.
9 Dodson, J (2017) Building
Partnerships of Equals:
The Role of Funders in
Equitable and Effective
International Collaborations.
Swindon: UK Collaborative
on Development Science.
Available online. See also
the useful sets of resources
made available by the
Research Fairness Initiative
at https://rfi.cohred.org/
evidence-base/.

The GRC Statement on capacity building
and connectivity among granting agencies
worldwide affirms that capacity strengthening
activities and efforts to increase connectivity
should benefit individuals and organizational
structures over the long term.10
For proposed
actions, GRC participants should establish
plans and mechanisms that are self-sustaining,
adaptive and results-based. Likewise, members
of ESSENCE on Health Research encourage
funders and recipients of funding to share
knowledge and work in partnership to
maximize the benefits of sustainable research
capacity strengthening.
Value for money
Some aid agencies, such as DFID,11
use the
concept explicitly in their programming. The
term is closely linked to concepts such as
return on investment and fiscal accountability.
According to a study by the IDRC,12
it has become
the ‘term of choice when the public and private
sectors wish to demonstrate (to the electorate
or stakeholders respectively) that they are
working to reduce risk, curtail unnecessary
spending, and avoid the waste of funds’. The
concept has four main components: economy
(a careful use of inputs and resources);
efficiency (or productivity); effectiveness (a
clear relationship between intended and actual
outcomes); and equity (transparency on how
interventions reach different groups).
11 DFID (2018). DFIDs
Approach to Value for
Money in Program and
Portfolio Management.
Available online.
10 Global Research Council
(n.d.) Statement of
Principles: Capacity
Building and Connectivity
among Granting Agencies
Worldwide. Bonn: DFG.
Available online.
Compare definitions and concepts used
and, where possible, work towards a
consistent approach to terminology,
especially in relation to research costing.
Use plain language in program calls
and policy statements and provide
opportunities for grantees to seek
clarification on concepts.
Openly communicate with funders
about confusing or ambiguous
definitions and concepts.
Clearly define research costing and
pricing terms and concepts in policies
and help ensure consistency of
understanding within the institution.
For funders For institutions
12 IDRC (2013) The Value-for-
Money Discourse: Risks
and Opportunities for R4D
(Partnership Practices
3b). Ottawa: International
Development Research
Centre. Available online.

Indirect costs may be hard to figure
and even harder to recover – but they
should never be overlooked.13
In Key 3, we first explore why funders expect
research institutions to be transparent about
research costs and describe some of the
institutional systems that enable effective research
costing and pricing. We then examine the
contribution of policymaking and implementation
to improving the management of research. We
also offer a framework for the development of
a research costing and pricing policy.
Why transparency matters
Transparency, underpinned by honesty and
accountability, is fundamental to research
integrity and applies to all aspects of
research work – be it collecting and analyzing
data, research collaboration, scholarly
communication or securing, allocating and
managing research funding.
When institutions accept research funding,
they also become financially accountable to
their funders and have to report on how the
money is spent in ways that demonstrate
sound financial management. Transparency
in calculating the full cost of research is one
of the seven principles of the Good Financial
Grant Practice (GFGP) (see below) because
transparency allows institutions to prepare
accurate budgets and forecasts, it increases
funders’ trust, and it offers a sound basis for
discussions about the recovery of research
costs. These issues all impact on institutional
sustainability and research competitiveness.
Transparency also has other benefits including:
Ensuring a consistent approach to the
costing and pricing of research.
Determining the strategic value of research
projects to an institution and hence guiding
investment in that project.
Making sure that direct and indirect costs
are considered when pricing projects.
Funders also subscribe to transparency. They
too are accountable to their stakeholders and
have to be transparent about the allocation
and impact of their funding decisions. However,
the transparency and accountability that funders
have to demonstrate to their stakeholders often
results in increasingly complex compliance
requirements related to due diligence and audit
processes being imposed on grantees. It is
important for research institutions to manage
these pressures in ways that ensure that they can
adequately recover costs linked to compliance.
Key 3: Enabling transparent research costing
and pricing
13 H Flood and R Phelps
(2003) Understanding
Indirect Costs. Los Angeles:
Grantsmanship Center.
Available online.
Why research costing and pricing matters
Three funders we surveyed put it this way:
All indirect costs should be listed. We then assess
if they are eligible or not. The issue is that we
need to have transparent budgets and know
what we are paying for.
Indirect costs must be fully justified as to why
these costs are being requested and how they
will contribute to the proposed research.
Even if we can’t change our funding policies
immediately, research institutions should work
out what their true costs are, identify inefficiencies
and gaps, and develop plans and arguments to
move this issue forward. It’s important to bring
governments into the conversation so that
emerging science councils can develop sound
indirect cost policies from the start.
Meanwhile grantees typically see things like this:
The key is that researchers understand what the
cost of their research will be. Without understanding
what costs are involved, they can’t take informed
decisions, especially when the funds raised are
less than the cost of the project.
It is important for sustainability that strategic
decisions are made regarding the types of projects
(discipline, cost threshold, transdisciplinary, country’s
needs) that can be hosted or not pursued.

Winning buy-in for policy
on indirect costs
Over 60% of grantees reported that
their institutions have an indirect cost
policy. In many cases, the policies are
documented but some have little more
than a tacit understanding that guides
the ICRR applied to research budgets.
When it comes to the distribution of
recovered indirect costs, over 40% of
respondents said their institutions have
rules or guidelines. Funds are typically
shared across institutional units or
departments and used to mobilize
further resources and support research.
Many respondents noted that policy
development and implementation is
challenging: some researchers see the
inclusion of an ICRR as a kind of ‘tax’ on
‘their grants’. This lack of understanding
and buy-in for policy can be major hurdles.
Overcoming these hurdles takes
significant effort, as one respondent
reflected:
We have worked hard to have
public forums and task teams,
and to secure buy-in from
researchers with every step we
take. There will always be those
who do not want to understand
reason but I find that making
lots of information available,
and being willing to discuss the
matter openly, assists with the
acceptance of these policies.
Institutional enablers
Institution-wide research costing and
pricing policies
Research costing and pricing in many institutions
in LMICs are fairly new additions to the suite of
research management policies. While many factors
can have an enabling effect, conducive policy
and institutional support for research are vital.
A generic research costing and pricing policy
framework is provided in Table 1. This is based
on a review of institutional policies that are either
publicly available or were shared with us. The
framework is not meant to be prescriptive, but it
can help institutions benchmark existing policies
or it can form the basis for the development of
a new policy.
A research costing and pricing policy
framework
Successfully implemented full costing policies
typically include the sections shown in Table 1.
In general, such polices are:
Endorsed: Institutional leadership openly
affirm the value of full costing to financial
sustainability in that it allows for more
efficient resource allocation and better
strategic decision-making.
Inclusive: Policy formulation involves
key stakeholders to establish shared
principles. This can overcome obstacles
such as leadership commitment and
resistance from staff. Raising awareness
and extensive communication throughout
the implementation stage is vital.
Relevant: The policy supports the goals
of the institution, and is both relevant and
clear for those who have to comply with and
implement it. The policy supports rather
than contradicts other institutional policies.
Feasible: The infrastructure and capacity
necessary for successful implementation are
available.
Enforceable: The policy is in writing and
there are administrative or other controls in
place to monitor compliance.
Flexible: The policy is reviewed periodically
and can accommodate change and as such
can guide future planning and action. It
is sensitive to different types of research
performed by the institution and to the
diversity of funders supporting research.

Table 1: Features common to most institutional research costing and pricing policies
SECTION DESCRIPTION
Name of the policy
Policy details/notes
List of contents
Abbreviations/
definitions/terms
Values
Policy statement
and background
Policy principles
Roles and
responsibilities
Policy scope
Accurately describes the nature of the policy and its intent.
Policy version number, summary of the revision history, including the date of the
last revision, and other vital details such as policy owner, date of approval and
commencement date and date of review.
Summary outline of the policy content.
Explains the terminology used in the policy (see Key 2 for terms and definitions).
The institution’s values with respect to research costing and pricing are clearly
stated, for example:
It is expected that all research and/or consultancy projects funded by
external funders will meet the highest standard of ethics as set by the
institution. The full cost of such projects should be the point of departure
for negotiations with funders/sponsors/grantors/clients.
Explains the purpose of the policy and what it aims to achieve. It also provides
the background and context for the policy.
Explains what full costs are, what an institution considers as direct and indirect
costs, and how an institution’s ICRR should be applied. This section provides
information on support services and tools available to assist with budget
development as well as guidance on the pricing of projects and guidance on
how to charge indirect costs as direct costs when allowed by the funder. Other
country-specific issues such as taxes can also be addressed.
Sets out the roles and responsibilities of all role players (for example, legal
services/contract management, finance department, other research support
functions, cost recovery committee).
Explains to whom the policy applies/on whom it is binding, what falls under
the policy and what exceptions are allowable.
Examples of inclusions:
Research contracts.
Diverse research/research
without contracts.
Consulting services.
Sponsorships.
Other products and
services (including short
courses and conferences).
Examples of exceptions:
Consulting below a specified amount.
Government subsidies and funding for
training, infrastructure and capacity
development.
Merit-based prizes.
Donations/endowments.
Bursary income.
Membership fees.
Limitations to the ICRR based on funder
policies. A pre-approved list of funders
and the ICRR that should be applied could
be provided to avoid delays with approvals
of variations of the institutional ICRR.
Continues overleaf...

SECTION DESCRIPTION
Approval of
variations
Distribution of
recovered indirect
costs
Appeals process
Non-compliance
statement
Other support
tools
Explains the process that should be followed if a funder policy does not support
recovery of the full institutional ICRR. For example:
Charging a reduced rate has to be approved at senior management level
i.e. either by the Unit director or director of operations. It involves writing
a justification for the reduction or waiver outlining strategic benefits for
the Unit to undertake the research.
Explains the distribution model for recovered indirect costs.
Depending on the institutional structure an appeals process may be included
in the policy, making provision for a researcher to appeal to a higher authority if
he/she disagrees with the outcome of the decision.
States why compliance is encouraged and outlines consequences for
non-compliance.
Includes any additional FAQs, guidelines, worked examples, etc. that support
uptake and use of the policy.

CASE STUDY
A journey to policy implementation
Stellenbosch University (SU) in South
Africa aims to be Africa’s leading research
university, globally recognized for advancing
excellent, inclusive and innovative knowledge
in service of society. Here is the story of
how it arrived at and implemented its full
cost recovery policy.
2004: With no clear methodology to
calculate indirect costs, the university
management implemented a research levy
of 12% on all research contracts.
2010: National legislation requires South
African universities to calculate the full
cost of research as a basis for regulating
intellectual property transactions with
funders. To comply with this legislation
while a sector-wide methodology was
developed, SU reviewed the 12% levy and
added a space levy, calculated on hourly
usage of floor space per m2
. Allowances
were made for cost differences between
desktop studies vs laboratory services
or clinical trials. SU then adopted its first
official policy on cost recovery.
2013: SU adopted a full-cost approach
not only to comply with the legislation but
also to ensure financial sustainability. The
adoption of a sector-wide methodology
caused SU to increase its ICRR to 17%
but, before implementation, in-depth
consultation took place with faculties and
other stakeholders. At this time, approval
processes for the waiving or application of
lower indirect costs were also introduced.
SU anticipated the emotional impact that
the adoption of a full-cost approach might
have on the institution and applied the
principles of David Rock’s SCARF (Status,
Certainty, Autonomy, Relatedness, Fairness)
model throughout the process.
2019: Based on 18 months of work by a
30-person internal task team and a process
of internal consensus building, some gaps
were identified in how the sector-wide
method applies to SU and the ICRR was
increased to 20%.
Post-2019: Researchers are expected
to calculate the full cost of all research
projects and use this as the basis to
price their research. For funders with
capped ICRRs (such as NIH), the price will
be lower than full cost while for certain
industry-funded research projects, the
price could be slightly higher than full
cost to make provision for a loss in
academic footprint due to restrictions on
publications, etc. A key success factor in
the smooth implementation of the policy
is the availability of tools such as budget
templates, and of qualified accountants
working with the Research Contracts
Management Office to support budget
development. These accountants are
seconded from Finance to the Research
Contracts Office. Having the finance staff
in the direct environment where research
contracts are processed has proved to be
highly effective.
SU is also working towards an integrated
reporting approach that will enable the
institution to do forecasts on committed
income and expenditure based on signed
research contracts.
Although it took time for SU to work
towards a full-cost approach, the intention
from the outset was to ensure that they,
as a research-intensive university, would
be financially sustainable. This required
a disciplined approach to the recovery
of indirect costs and in the long term
it assisted them to keep the ICRR at a
reasonable level.
This is a summary of a longer case study;
the full text is available with a set of other
relevant cases at https://www.who.int/tdr/

Supporting research
As access to research funding has become
increasingly competitive and compliance-based,
most research projects require information
and assistance from a range of support units
within their institutions. The development of
project proposals, including the transparent
costing and pricing of the research project and
the management of grants, typically involves
the HR, facility and procurement, library, legal
and finance departments. Dedicated units
that manage and support research, which can
vary widely in size and structure, have become
essential in research institutions. These focus
on developing research strategies and policies,
facilitating research partnerships, overseeing
research ethics and integrity, managing
research proposals and funding, managing
research data and information and supporting
the uptake, utilization and impact of research.
The functions involved in efficiently securing
and managing funding, ensuring value for
money and delivery of outputs are essential
to maximizing the benefits that can be derived
from funder relationships and ensuring
compliance and institutional sustainability.
The roles, responsibilities and competencies
related to pre- and post-award grants
management are outlined in Key 5.
There could be inefficiencies in the management
and support system causing higher than
necessary indirect costs. Using technology
is one way to improve efficiency. Grants
management software, for example, can be
used for funding opportunity searches, tracking
of grant applications, storing and sharing of
documents/information, real-time updates
on project financials, data and metrics for
reporting and decision making. It provides
for a single, centralized system for the effective
administration of grants and the reduced
paperwork and labor required can decrease
the indirect costs.
International standards for grants
management
In 2018, the GFGP was developed as an
international standard (ARS 1651:2018) for the
financial governance of grants. It is a portal-
based assessment system which measures and
reports grantee compliance using the GFGP
standard. The standard has been divided into
four tiers – Bronze, Silver, Gold and Platinum
– to cater for organizations that vary in size
and scope. The standard addresses seven
principles of good financial grant practice
(accountability, stewardship, compliance to
standards, transparency, viability, integrity,
consistency) and sets out four areas of work
that organizations should strive to manage
(finances, human resources, procurement and
governance).14
As one funder noted:
We believe that the appetite for
the GFGP is a good indicator of the
interest by institutions in the overall
strengthening of grants and research
management.
Standardizing grants
management processes
and systems
Around 50% of grantees reported that
their institutions have templates and
standard procedures for drawing up
budgets and applying for grant approval
but noted that some researchers don’t
yet appreciate how useful these can
be. Over 80% of grantees reported
that their institutions have a grants
management system. Where a small
number of grants were managed,
standard spreadsheet software was
used. In other cases, spreadsheets are
combined with contract management
software. A few respondents reported
using fully automated systems. Of these,
some were developed in-house, others
used proprietary software such as
Converis, Oracle Projects, IDU, Microsoft
Dynamics Navision and Quickbooks.
14 The development of
the GFGP is one of the
platforms of the Alliance
for Accelerating Excellence
in Science in Africa (AESA),
which is in turn an initiative
of the AAS and the African
Union Development Agency
(AUDA). See https://www.
globalgrantcommunity.org/

CASE STUDIES
How some institutions tackle grants management
Oxford University’s Clinical Research
Unit (OUCRU) is embedded in two
government-run tertiary referral hospitals
in Vietnam – one in Hanoi and one in Ho Chi
Minh City – as well as in Kathmandu, Nepal
and Jakarta in Indonesia. A memorandum of
understanding between Oxford University
and the local institutions sets out OUCRU’s
operational parameters.
Grant applications from research sites
in Vietnam, Nepal and Indonesia are
managed centrally in Ho Chi Minh City
to ensure consistency but the grants team
works collaboratively with researchers
to develop project budgets. Researchers
enumerate their expected requirements,
and the grants team help them to
calculate detailed cost estimates.
They have found that if researchers are
unable to specify their needs in detail, they
generally require clearer project plans.
Inflation forecasts include the minimum
annual 5% pay increment specified in
their employment contracts as well as
price increases related to insurance and
government fees. As they work with
multiple currencies, the grants team are
careful about exchange rates. They prefer
funders to make awards in the currency
of expenditure as they find that this
reduces potential losses.
It is a challenge to ensure that researchers
follow the standard operating procedures.
However, the grant management team
add so much value that researchers
can see that engaging with them is to
their benefit. The grants team provides a
list of funding opportunities on a monthly
basis, offers regular training for staff and
local collaborators, and provides support
on a one-on-one basis. They also provide
guidance on funders’ conditions, on project
costing, on managing collaborations,
and on managing awarded grants.
Sociedade Beneficente Israelita
Brasileira Albert Einstein (SBIBAE) is an
NPO in São Paulo, Brazil, seeking to improve
the health system and to develop new
ways of tackling current problems related
to education and training, innovation,
research and social responsibility in the
health sector. The Instituto Israelita de
Ensino e Pesquisa Albert Einstein (IIEP),
established in 1998, houses the research
and education activities of SBIBAE.
Its research support office (RSO) was
established in 2014 to offer services and
platforms that support the administration
of IIEP’s research and can advise on
specific aspects of project planning and
budgeting. The RSO also helps with data
collection, storage and statistical analysis
as well as assisting with the reporting and
dissemination of results. Demand for its
grants management services is high.
This includes funding searches, help with
proposal writing and submission, as well
as procurement, compliance, reporting
and project close-outs.
The RSO uses I.Search™ (proprietary
database software for the management
of documents, processes, costs, resources,
and scientific outputs) to factor in the
RSO’s own contribution to projects’
indirect costs. All RSO employee expenses
are allocated to a single ‘cost center’ and
the costs are shared between all cost
centers within the institution that have
active projects. This method does not
quantify the time spent on each project,
but it does indicate the time spent on each
department, thus ensuring that costs of
the service are shared between all SBIBAE’s
departments.

CASE STUDIES
How some institutions tackle grants management (continued)
The Makerere University School
of Public Health (MakSPH) is one
of the schools that comprises the
Makerere University College of Health
Sciences. MakSPH established a Grants
Administration Secretariat (GAS) in
2013, which falls under the school’s
Finance Management Unit. GAS offers
a ‘one stop’ point of information for
researchers submitting proposals to local
and international agencies and sponsors.
Its services include identifying funding
opportunities, budget development,
proposal submission, responding to donors’
due diligence checks, as well as compliance
management for contracts, grants and
sub-awards. MakSPH also has a Grants
Committee that guides GAS’s activities and
operations, and GAS is funded through
overheads recovered from externally
funded research grants.
GAS has developed a grants procedures
manual to assist everyone at MakSPH who
is involved in grant writing or management.
This provides clear guidelines on programs
and projects sponsored by external entities.
It aims to enhance communication, as well
as to increase collaboration, accountability
and proper donor stewardship while
ensuring that management is fully informed
of commitments made on behalf of the
institution.
All research budgets have to be
approved by GAS before submission to
a funder. As part of the approval process,
researchers are required to declare any
financial or other conflicts of interest so
that these can be effectively managed prior
to implementation.
GAS has also developed budget templates,
standard rates for items such as per diems,
fuel for fieldwork, etc. and a checklist of the
critical items that must be considered in the
development of research budgets. These
items include annual inflation rates, salary
increases, fringe benefit rates, and the
institutional ICRR.
Nevertheless, some researchers still
try to act independently instead of
working through GAS. It has been
difficult to enforce utilization of
the service without a firm directive
from management. However, grants
management is still a relatively new
phenomenon at the university, and
buy-in should increase as its value is
demonstrated.
The University of Ghana’s School of
Public Health (SPH) in the College of
Health Sciences, has a strong track record
of training, community outreach as well
as cutting-edge research on critical public
health issues.
The university has a central Office for
Research, Innovation and Development
(ORID) that is responsible for developing
the university’s research policy, fundraising
for research, grants management,
setting standards for ethics as well as
the dissemination of research output,
and the commercialization of intellectual
property. ORID is currently funded
through government subvention
and employs full-time staff. The SPH’s
finance department is also available to
assist with budget support on short notice.
Budgets are reviewed by the finance
department to ensure that all costs are
included and costed correctly before
proposals are submitted to funders.
ORID’s Pre- and Post-Award Services Unit
assists with the development of budgets
for research projects. When developing
budgets, actual (rather than projected)
costs are used to reduce the risk of
under-recovery of research costs.

CASE STUDIES
How some institutions tackle grants management (continued)
They run internal due diligence checks
at every stage of the funding cycle.
Grant funding is released based on the
results of these checks, and in line with
approved budget lines and deliverables
as agreed with the funder. Reports can
be generated at short notice and these
serve as an invaluable resource for tracking
budgets and managing grant compliance.
* These are summaries of longer case studies;
relevant cases at https://www.who.int/
tdr/partnerships/essence/en/.

Recognize indirect costs as a real cost
of doing research, and acknowledge
institutional research costing and pricing
policies that are transparent, fair and
justified.
Encourage the use of internationally
recognized tools such as the GFGP to
help grantees reduce the administrative
burden of funders’ financial and
grants management due diligence
requirements.
Publish clear and transparent policies
on indirect costs and allowable/
non-allowable costs. Make clear where
expectations on a specific program
differ from the organizational policy.
Engage with appropriate national and
international forums to understand the
challenges faced by research institutions
and the approaches taken by different
funders.
Recognize the strategic value of
research costing and pricing at
leadership level to guide investment,
improve efficiencies, promote financial
sustainability, and raise the institution’s
research profile even if indirect costs
are not fully recovered from all funders.
Develop and implement clear and
transparent polices to justify indirect
cost requirements and use.
Be inclusive by consulting leaders,
implementers and end-users in the
policy development process to ensure
institutional buy-in, flexibility and
transparency and allow sufficient time
for this.
Support policy implementation by
providing effective structures, processes
and systems for grants management,
backed by management and, where
appropriate, use technology to improve
the accuracy and efficiency of grants
management.
Facilitate engagement between
researchers and staff supporting
research in the early stages of budget
and proposal development to improve
the accuracy of research costing.
Create processes and platforms for
regular communication and information
sharing between administrative and
research staff to encourage mutual
learning and improvements in research
costing.
Critically assess international standards
to benchmark institutional compliance
and identify gaps in financial and grants
management practices.
Use appropriate national and international
forums to lobby government and
funding agencies to recognize the
indirect costs of research.
Funders Institutions

Key 4: Optimizing the recovery of indirect costs
The practice of research costing and
pricing is as much about understanding
the real costs of research as it is about
recovering these costs from funders.
As research activities increase, so too
do the demands on infrastructure,
operating costs and the costs of
research management and support.
These expenses are seldom fully
covered by project budgets. Over
time, the ongoing under-recovery
of these costs undermines the upkeep
of essential research infrastructure,
equipment and research support
services. For institutions in LMICs, this
means they might never afford to fill
current voids in infrastructure and
support services.
Therefore, in Key 4 we aim to
assist readers to:
Accurately categorize direct and
indirect costs.
Consider approaches to
determining ICRRs.
Understand how different funders
approach indirect costs.
Work out how recovered costs
can be allocated to support
institutional sustainability.
Categorizing costs
Direct and indirect costs are defined
in Key 2. However, different funders
categorize items differently, and
institutions, too, tend to differ in how
they allocate costs depending on how
well they can track these costs within
their own processes and accounting
systems. For institutions to match
their cost categories with those of
their research funders, especially
when multiple funders are involved,
can be a major challenge.
Examples of research costs and their
usual categorization is presented in
Table 2.
Table 2: Some examples of research costs and how they are usually categorized
Salaries
and related
employment
benefits and
recruitment costs
Subcontractors
and consultants
Bursaries
Communications
Travel
Facilities
Equipment
Consumables
Other costs
Remuneration for research staff as well as administrators,
project managers/coordinators. Institutions often provide
guidance on how, and at what level, salary and related costs
should be charged to projects. For multi-year projects, allow a
percentage for salary increases as per the institutional policy.
Costs for services outsourced to external organizations or
consultants.
Salaries/bursaries/stipends for graduate and
undergraduate students working on the project.
Telecommunications, postage and courier expenses.
Project-related travel, visa, accommodation and per diem costs.
New facilities required, such as a new field clinic or laboratory,
etc. Alterations to make existing facilities fit for purpose.
The purchase or upgrading of equipment as well as the
cost of accessing specialized equipment if necessary.
All consumables needed by the project (include reagents,
electronic components, stationery, etc.)
Reporting costs; printing and other distribution costs;
patient-care costs, including clinical trials insurance, clinical
monitoring; animals and animal-care expenses; data
management; statistical analysis; reference materials
(books, subscriptions); training or professional development;
funder-required audits; import- and export-related costs;
additional insurance (for items not covered by the
institution’s existing insurance policy, and which are not
included in indirect costs), ethics and other regulatory
approvals that are not included in the indirect costs.
Direct costs
Infrastructure
Management
and
administration
Research
resources
Maintenance and repairs of buildings; rental and/or
utility costs associated with premises used (heating,
cooling, electricity, water, cleaning, waste removal);
technical support for laboratories; depreciation of
infrastructure and equipment; insurance; leasing;
security and protection.
Governance (such as management support, board
activities, audit services, legal services, international
office), procurement services, financial management and
accounting, research management (including pre- and
post-award grants management), intellectual property
management; information management; human resources
management, health and safety compliance; general
administration, bank charges; administration of students
engaged in research; human subject protection.
Library services; information and communication services
(databases, telecommunications, information technology).
Indirect costs

Consistency
Consistency refers to the application of a
particular accounting method and the allocation
of a specific accounting item in the same way
over an extended period of time. It is also one
of the principles of GAAP mentioned in Key 2.
What this means for research institutions
is that once consensus is reached on the
categorization of direct and indirect costs
according to type and circumstances, these
costs should be allocated consistently
throughout the institution.
Research funders use the principle of
consistency in their policies and practices to
emphasize different objectives. For example,
the NIH Grant policy states
Costs may be charged as either direct
costs or F&A costs, depending on
their identifiable benefit to a particular
project or program, but all costs must
be treated consistently for all work
of the organization under similar
circumstances, regardless of the source
of funding.15
The Gates Foundation note that
We seek consistency across funding
mechanisms and thus we reserve
the right to apply this philosophy and
principles to contracts.16
Approaches to determining
indirect cost recovery
An ICRR is the ratio obtained from dividing
the indirect costs (grouped together) by a
cost base. Many universities and non-profit
research institutions use one of the following
models for calculating their ICRR:
Activity-based costing uses specific cost
drivers (such as staff and space) as the
allocation base. This approach produces
a high level of transparency and accuracy,
but it requires intensive data collection
and preparation as well as accounting
systems that can attribute costs to individual
research projects. This is the basis of the
TRAC method used in the UK.
Using direct costs as the base, the ICRR is
expressed as a percentage of the total direct
cost or the MTDC. Individual projects are
then charged for their share of the indirect
costs. The actual service/benefit provision
or usage will vary per project but this should
balance out at an overall institutional level.
This method is common in Europe and the US.
Often a single ICRR is applied across a whole
institution but in large institutions, different
units/faculties sometimes apply different rates.
A distinction between the rates of research
performed on-site and off-site is sometimes
also made. The actual ICRR usually differs from
institution to institution due to differences in
the costs and complexity of research (with its
associated infrastructure) carried out across
institutions, regions and countries.
There is no single rate that ‘fits all’. However,
institutions can benefit from sharing experiences,
defining principles and having opportunities to
benchmark their progresses. Experience has
shown that coordinating efforts to implement
full-cost recovery can increase the efficiency
of the process; it saves costs and deepens
levels of transparency, accountability and
compliance. Coordination can be facilitated
at national level, as occurred among publicly
funded universities in the US, UK, and South
Africa. Other efforts involve regional or sector-
led networks of institutions.
15 National Institutes of Health
(2019, December) Grants
Policy Statement. Available
online.
16 Bill and Melinda Gates
Foundation (2017, February)
Indirect Cost Policy. Available
online.

Calculating indirect cost recovery rates
All the grantee survey respondent institutions are subject to annual external financial audits.
Only 46% of respondents reported that their institution had an ICRR. In terms of calculation
methods:
Some institutions use the previous year’s audited financial statements to calculate the
total costs and then set the ICRR as a percentage of the total direct costs or the total
modified direct costs.
Other institutions agreed on an ICRR after consulting with other institutions in their country.
A third set use estimates or use the ICRR set by their funders.
In addition, respondents reported seeing changes in their institutions’ approaches to indirect
costs over time. For example, research policies and research management offices are
established; ICRRs are revised regularly; indirect cost levies are charged on all institutional
services; indirect costs are reclassified as direct costs based on funder guidelines; and
recovered indirect costs are distributed in line with an institutional policy.
Respondents reported challenges with the calculation of ‘realistic’ ICRRs; not knowing how
to place value on or disaggregate specific indirect-cost items; acceptance by researchers of
the need to recover indirect costs; and the lack of an ICRR to begin with.
CASE STUDIES
Institutional approaches to determining ICRRs
Colombia’s International Centre for Medical Research and Training (CIDEIM), is an NPO
located in Cali, Colombia, with the objective to improve the quality of life of vulnerable
populations by reducing the impact of infectious diseases. CIDEIM receives research funding
from national and international sources and uses the audited financial statements from the
previous calendar year to calculate the actual indirect costs. Direct costs represent the total
expenditure on research and research capacity strengthening for a fiscal year. Indirect costs
include those expenditures that were incurred in the fiscal year to support the operations of
the Center, providing services across all projects. The institutional ICRR is calculated as follows:
The resulting rate usually ranges between 30% and 36%. Consequently, the indirect costs
recognized by funders (between 7% and 8%) are lower than the real indirect institutional costs.
The recognition and recovery of only a fraction of indirect costs constitutes a major
challenge to the sustainability of the research and training program, and the institution.
Allowances for an amount based on a predefined percentage of the direct costs for
unforeseen situations (Flexible Funding Allowance) and for inflation (Inflation Allowance)
are uncommon yet highly important. CIDEIM grants administration reviews funder policies
to identify costs generally classified as indirect by the institution, such as ethical committee
review, that are permitted and recognized as direct costs by some funders.
x 100 = Institutional ICRR
Indirect costs
Direct costs

CASE STUDIES
Institutional approaches to determining ICRRs (continued)
The African Population and Health Research Center (APHRC) in Kenya is an
independent think tank that generates evidence to drive policy aimed at improving health
and well-being in Africa. Its work centers on three programs: Research, Research Capacity
Strengthening, and Policy Engagement and Communications. National government funding
contributes 22% of APHRC’s total income while foreign foundations and NGOs contribute 71%.
APHRC splits its costs into program and indirect costs. Administrative and support costs
as well as other expenses that fall within the routine services normally provided across the
organization are treated as indirect costs. The indirect costs are broken down as per the
audited annual accounts. The ICRR is reviewed annually and is determined as shown below.
APHRC allows for administrative expenses to be charged as direct costs when, for example,
the nature of the work performed under a project requires administrative support that is
significantly greater than the level of services routinely provided by the administration office.
While funder philosophies on indirect costs are diverse, APHRC seeks to recover their full
indirect costs – either as a percentage of direct project costs or above the line as specific
allocated costs. Where a maximum allowable percentage is lower than APHRC’s published
annual ICRR, overhead items are charged as direct costs. Where funders require indirect
costs to be itemized, APHRC have categorized these into four areas namely, facilities or
occupancy costs; information and communication costs; governance costs and other
administration costs.
Initially, APHRC experienced some challenges from staff who did not understand the
importance of full cost recovery. However, by having a clear policy and constantly building
awareness about why and how it must be implemented, this slowly changed. Research
and support staff have become more careful about factoring indirect costs into proposals
and negotiating with funders accordingly. The organization now accepts low ICRRs only if it
stands to benefit from the funding in ways that will contribute strategically to organizational
sustainability.
APHRC believes that the efficiency of their systems help to keep their indirect costs at a
reasonable level. For example:
They streamline organizational needs from various units/departments and combine core
activities wherever possible.
They use an integrated enterprise resource planning system that helps identify and
reduce operational costs that could otherwise have been duplicated.
In this regard, APHRC has benefited from the Hewlett Foundation’s Organizational
Effectiveness grants. One of the areas they focused on was strengthening their business
processes to support organizational sustainability. With the support of the grant they were
able to recruit consultants who assessed their business processes, identified gaps and
developed recommendations for them to consider.
x 100Institutional ICRR =
Annual indirect costs
Annual program costs

CASE STUDIES
The Eastern Mediterranean Public Health Network (EMPHNET) is a regional network
that focuses on strengthening public health systems in the Eastern Mediterranean Region
with its headquarters in Amman, Jordan. EMPHNET works in partnership with government
ministries, non-government organizations, international agencies as well as the private
sector and other public health institutions in the region and globally to promote public
health and applied epidemiology.
EMPHNET developed its indirect cost policy by involving staff members such as the program
manager, the grant manager, the finance director and the finance officers. The policy
was then presented to the executive director and approved by the board. The ICRR is
determined using actual financial data and is applied in line with the requirements of
different funders. EMPHNET’s financial processes result in comprehensive records for
daily transactions. The inflow and outflow of indirect costs are recorded so that EMPHNET
can accurately trace the forecasting versus the allocation of indirect costs. Indirect costs
are generally directed towards non-program activities such as administrative, managerial,
logistical and other support costs, including costs relating to staff recruitment, financial
control, ICT support, and activities related to procurement, transport and warehousing.
The indirect cost charge on non-program-related activities represents a reimbursement
of program budget expenditures. This seeks to ensure that non-program activities do not
place a financial burden on the agency’s regular budget. In accounting terms, indirect costs
represent an inflow into the program budget and an expense for non-program activities.
As part of liquidity planning, the agency closely monitors and forecasts its program budgets
and cash flow. This ensures that timely action is taken if undesirable cash levels are projected.
The indirect cost forecast (done by the budget division) is an important part of the cash-
flow planning.
The National Intellectual Property Management Office (NIPMO) is a specialized unit
within the South African Department of Science and Innovation. The University of Cape
Town (UCT) is a research-led university that took part in a task team that developed a
research costing and pricing methodology for all of South Africa’s public universities. In 2008,
South Africa passed the Intellectual Property Rights from Publicly Financed R&D Act which
meant that South Africa’s universities and other publicly funded research institutions had
to change how they costed and priced research. A national task team was set up to review
existing practices and explore international approaches. Through a process of consultation,
NIPMO approved a method for calculating indirect costs that is now being used by all the
universities. The direct cost method (also known as the expenditure apportionment
method) is used to derive the universities’ institutional ICRRs. Research projects then apply
the institutional ICRR to calculate the indirect cost recovery for each project. This is then
added to direct project costs to arrive at the full project cost. The sector chose this route for
the following reasons:
Despite its benefits, an activity-based approach is more expensive to implement and maintain.
The expenditure apportionment approach is simpler and more manageable for all
universities, given their existing accounting and reporting obligations.

CASE STUDIES
The information requirements, especially at a high (university and major support
department) level, should be met by the current audited reports and underlying
management accounting records.
The standard formulas used to determine the full costs are:
The institutional ICRR is calculated as follows:17
Full cost = direct costs + indirect costs
Full cost = direct costs + ICRR x (modified) direct costs
17 NIPMO (National Intellectual
Property Management
Office, South Africa) (2019)
Guideline 5.1 of 2019:
Guidance For Determining
the Full Cost of Research
and Development as Per
the Intellectual Property
Rights from Publicly
Financed Research and
Development Act.
Available online.
Indirect Cost Recovery Ratio (ICRR) calculation, Calculation Item Source of
using the Expenditure Apportionment Basis expenditure
amount
Recurrent Unrestricted expenditure A AFS*
excluding residences
Recurrent Restricted expenditure (B1 + B2) B AFS
excluding residences
- Research related costs B1 MA*
- Non-research related costs B2 MA
Total expenditure A + B C
Indirect cost allocation ratio (ICAR) (%) B/C or B1/C D
Determine expenditure from institutional E MA
support departments less exclusions/
modifications (to be motivated)
Indirect cost attributable to research D X E F
Direct research support costs G MA
Total indirect research cost F + G H
The indirect cost recovery rate (ICRR) (%) H/B or H/B1 I
* Annual Financial Statements (AFS), Management Accounts (MA)
Notes
(A & B) is university-wide information obtained from the audited annual financial statements
(AFS); B1, B2, E & G are research specific and support department expenses obtained
from the management accounts (MA) that are reconciled to the AFS.
First the deemed portion (F) of the cost of support provided by support departments
(including finance, HR, ICT, libraries, properties and services, executive offices, internal
audit, risk management, registrar, legal services, etc.) is calculated. To this is added the
cost of units or offices (G) dedicated solely/largely to research support (such as the
research office, deputy vice chancellor for research, etc.) to arrive at the total indirect
research costs (H).
H is then reflected as a percentage (I = ICRR) of the total research costs at university level
(B or B1).

CASE STUDIES
The ICRR can be used to calculate the indirect cost recovery for each project – how much
each project should contribute to cover their indirect costs. This is calculated by modifying
the direct cost base by excluding amounts for bursaries, as well as major equipment and/
or work done by subcontractors that costs more than a threshold determined by each
university.
Every second year, each university updates its ICRR and submits this to NIPMO for re-approval.
Although all the universities use the same approach, each institution’s ICRR is based on
their own specific cost structure, accounting system and the scope of research support.
UCT adopted this full-cost approach after extensive consultations within the university. For
UCT, it was important that the approach meet most (if not all) of the needs of the research
community while enhancing financial sustainability. Being part of a sector-wide approach
helped to dampen complaints from some staff who saw full costing as unfair when other
universities did not apply this. NIPMO is now in a position to benchmark the performance
of different universities in terms of research costing and pricing as well as identify
institutions that might require support to enhance compliance.
In response to funder queries, and when negotiating indirect costs, UCT explain that their
ICRR is certified by a statutory body. This provides assurance to funders that the ICRR is
neither arbitrary nor unaudited. Being both transparent and defendable, this approach is
also useful when research institutions are deciding whether to invest in a research project;
making internal stakeholders aware of the full costs of a project; evaluating the cost (and
quality) of support being provided by the university; and determining how best to improve
efficiencies in the support system.
The NIPMO guideline also provides a method for non-university public institutions to calculate
their ICRR. In this case the formula ICRR = indirect costs / relevant cost driver (for example,
direct costs or direct manpower costs) is used.
* These are summaries of longer case studies; the full text is available with a set of other
relevant cases at https://www.who.int/tdr/partnerships/essence/en/.

How funders see indirect costs
Some evidence indicates that funders
increasingly see indirect costs as essential
for the delivery of project outcomes, and are
changing their practices accordingly (see the
case studies below). Nevertheless, funders still
vary significantly in how they define and cover
indirect costs. This ranges from not funding
indirect costs at all to reimbursement at very
low rates, reimbursement at institutional rates,
reimbursing a flat rate, or requiring itemized
justifications for all indirect costs.
Given this variety, many research institutions
in LMICs find that recovering indirect costs is
challenging. Where institutions receive most of
their funding from a source that covers indirect
costs at a very low rate, the burden on the
institution to cover the shortfall can, over time,
outweigh the benefits of the funding.
For this reason, the more established
institutions might choose not to pursue certain
grants. However, institutions that are trying
to establish a research culture and profile
find this much more difficult. The catch is that
frequent under-recovery of indirect costs
increases the inability of research institutions
to develop and maintain the necessary
research infrastructure and support.
Through dialogue, funders and research
institutions in LMICs must continue to improve
those practices that help them determine and
recover the real costs of research via fair and
transparent costing and pricing mechanisms.
A study by the European University Association
demonstrated that funder rules can be an
important driver to encourage improved research
costing and pricing practices.18
They found
that the EU’s 7th Framework Programme for
Research and Innovation was a major driver for
the implementation of full costing in European
universities. The possibility of receiving a higher
amount for the reimbursement of costs than
a flat rate would provide was a strong enough
incentive for institutions to start developing
appropriate costing methodologies. In addition,
full costing helped improve the awareness of
institutional leaders and researchers across
most of Europe about indirect costs, and the
full costs of doing research.
18 T Esterman and A Claeys-
Kulik (2013) Financially
Sustainable Universities:
Full Costing Progress
and Practices. European
University Association.
Available online.
Funders and indirect cost rates
Of funders surveyed, 55% used a
percentage of the direct cost or MTDC;
28% negotiated the rate based on
institutional policy and project needs;
and 17% negotiated a rate with institutions,
or required itemized lists of indirect
costs for review, or allowed for indirect
cost recovery in selected programs.
When asked if they had observed changes
in funder practices in relation to funding
indirect costs, several grantees noted
that funders are becoming more flexible.
Several respondents indicated that
relatively speaking, it is becoming easier
to recover indirect costs from newer
funding program/frameworks, such
as the EU’s Horizon 2020 Programme.
However, the general sense is that
while funders are talking about indirect
costs/full cost recovery, many have yet
to change their policies and practices
accordingly.

CASE STUDIES
Foundations improve coverage of indirect costs
Five of the biggest foundations in
the US have joined forces to do more to
cover grantee indirect costs and they are
embarking on a campaign to encourage
other grant makers to join this effort. The
aim is to ‘destigmatize’ overhead expenses
‘and make sure everybody understands
that they are an essential cost not only of
doing business but of growing a business
and making investments in infrastructure
and increasing impact’.
Accordingly, the heads of the Ford, William
and Flora Hewlett, John D and Catherine
T MacAthur, Open Society and Packard
Foundations spent two years studying the
challenges facing their non-profit grantees.
They found that restrictive policies that
do not support the funding required to
effectively run the projects have created
major deficits in both new and well-
established organizations. The study found
that grants typically cover about half of
grantees’ overhead costs.
Although all five foundations had
already allowed for some indirect cost
reimbursement, they realized that they
had not done enough. As a first step to
finding a solution they identified a menu
of six grant-making approaches and
undertook to test some of these and share
their findings.19
The Hewlett Foundation announced its
intention to develop a new grant policy in
August 2019 by inviting grantees to engage
with the foundation in a candid conversation
to assess the true costs of the research. As
part of this process, they hope grantees will
take the lead in determining how best to
allocate the funding to direct and indirect
costs. The Foundation’s Indirect Cost Policy
is available online.
The Welcome Trust’s indirect costs
policy changed in October 2019 to allow
universities outside of the UK and Ireland,
research organizations that do not receive
core funding for overheads, charitable and
not-for-profit organizations, as well as small
or medium-sized commercial organizations
to claim indirect costs at a maximum rate
of 20% of the direct research costs if the
organization is based in a LMIC. Allowable
indirect costs (overheads) include estate
costs (buildings and premises), non-project
dedicated administrative and support staff
and administration costs (such as financial
management and library fees). The policy is
available online.
19 M Di Mento (2019)
Five CEOs of Wealthy
Foundations Pledge to do
More to Help Charities Pay
Overheads. Chronicles of
Philanthropy, 4 September.

CASE STUDIES
How three Northern funders support indirect costs
The IDRC defines indirect costs as
administrative costs that are not directly
related to a research project, including:
Salaries and benefits for personnel who
support and administer the project, such
as secretaries, clerks, accountants, etc.
Stationery and other office supplies.
Telecommunications (unless the project
warrants a specific budget line item for
this).
Computer equipment used to administer
and monitor grant disbursements.
Bank charges (as per the relevant
financial reporting guidelines).
No other overheads are eligible for funding
from IDRC grants. However, research
institutions that have a policy of recovering
indirect costs through applying a levy can
do so, provided the IDRC or its auditors are
satisfied that the levy is fair and reasonable,
and that the rate is not more than 13%
of the total grant. Applicants also have to
track all indirect cost charges in case of a
possible audit. Their Guidelines for Project
Expenditure are available online.
UK Research and Innovation (UKRI)
comprises the UK’s seven research
councils. They established a Global
Challenges Research Fund that supports
cutting-edge interdisciplinary research to
respond to emergencies in LMICs and to
strengthen the research and innovation
capabilities of researchers in both the UK
and LMICs. UKRI allows an overhead rate
to be covered at 20% of salaries and
other staff-related costs to countries
that are classified as LMICs by the World
Bank or as ‘least developed countries’ by
the United Nations. Non-staff related direct
costs (such as equipment, consultancies
and conferences as well as travel and
subsistence) are not covered. More
information about the Global Challenges
Research Fund is available online.
The National Institute for Health
Research (NIHR) Global Health Research
program supports high-quality applied
health research for the direct and primary
benefit of people in LMICs, using Official
Development Assistance (ODA) funding.
For applications including collaborating
partners based in LMICs 100% of those
partners’ direct and indirect costs will
be funded. All indirect costs requested
must be fully justified as to why these costs
are required and how they will contribute
to the delivery of the objectives of the
program. The methodology used to
calculate these costs and how they
represent good value for money should
be clearly stated on the Finance Form
submitted with the application. Indirect
costs should be charged in proportion to
the total amount of staff effort (research
and support staff) requested on the
application for funding. The NIHR GHR
Finance Guidance is available online.

CASE STUDIES
How some multilateral funders support indirect costs
CASE STUDIES
How some LMIC funders support indirect costs
The EDCTP funds clinical research to
accelerate the development of new or
improved drugs, vaccines, microbicides and
diagnostic tools for HIV/AIDS, tuberculosis
and malaria as well as other poverty-related
infectious diseases in sub-Saharan Africa,
with a focus on phase II and III clinical trials.
Their Financial Guidelines for Beneficiaries
are available online.
The European Commission sets the ICRR
and this is applied as a flat rate regardless
of grantees’ own systems. The rate is
calculated automatically within EDCTP’s
budget template and they require no
supporting evidence. As of 2019, the ICRR
was set at 25% and this is calculated as
follows:
The AAS defines indirect costs as overhead
expenses or ongoing operational costs
incurred by the applicant organization
on behalf of the organization’s activities
and projects that are not easily identified
with any specific project; administrative
or other expenses which are not directly
allocable to a particular activity or project,
and expenses related to general operations
of an organization that are shared among
projects and/or functions. The ASS provides
a comprehensive list of examples of indirect
costs and allows a maximum of 15% of
the total project cost. The AAS Cost
Guidelines are available online.
Colciencias is the Colombian government’s
science agency (also known as the
Administrative Department of Science,
Technology and Innovation) and the largest
source of research funding in the country.
Colombia has recently voted to create the
nation’s first Ministry of Science, Technology
and Innovation. The science ministry
will take shape through a restructuring
of Colciencias. In 2020, Colciencias was
reimbursing indirect costs at a rate
of 7%.
The São Paulo Research Foundation
(FAPESP) is a public foundation in Brazil,
with the aim of providing grants, funds
and programs that support research,
education and innovation in public and
private institutions in the state of São Paulo.
Three types of research overheads can be
covered:
Amounts granted to PIs and co-PIs to
enable their participation in scientific
meetings and in short-term research
internships outside of São Paulo. These
amounts are defined in the terms of the
grant.
Research infrastructure – a maximum of
15% of the total initial grant can be spent
on infrastructure directly related to the
research project, including items such
as minor building renovations and data
management.
(Total eligible costs – subcontracting costs) x 25%

CASE STUDIES
How some LMIC funders support indirect costs (continued)
Institutional infrastructure – a maximum
of 10 to 20% (depending on the type
of grant) of the total grant is awarded
for this and funds must be spent
as specified in an ‘Annual Plan for
Institutional Research Infrastructure’, as
approved by the research institution.
The Science Granting Councils Initiative
is a multi-funder initiative that aims to
strengthen the capacities of 15 science
granting councils (SGCs) in Eastern,
Southern and Western Africa. As part of
the initiative, an annual benchmarking
survey is performed by the Association
of Commonwealth Universities. One of
the survey questions seeks to establish
whether the Councils cover indirect costs
on their awards (excluding awards for PhD
and master’s degrees, etc.). Results of the
2018 survey showed that eight of the 13
SGCs (61.5%) that responded do not fund
any indirect costs; one SGC funded indirect
costs on some awards; one funded indirect
costs on all awards, and three selected
‘not applicable’ as they had not disbursed
awards in that year.
Vietnam’s National Foundation for
Science and Technology Development
(NAFOSTED) has been operational since
2008. It is a legal entity affiliated with the
Ministry of Science and Technology (MOST),
funding research and research capacity
development. Grantee organizations can
estimate their expenditure on research
management, costs linked to utilities
required for research activities, and the
costs of staff providing indirect support.
These are covered up to 5% of the total
project cost, but may not exceed a limit
specified in a government guideline. The
guideline is available online.
Distributing recovered indirect costs
Recovered costs represent a reimbursement
of costs already incurred by an institution
and a way that institutions can attain and
ensure their sustainability. Accordingly, every
institution has to develop a cohesive rationale
for the management and reallocation of
recovered indirect costs.
Generally, recovered funds are allocated at
the discretion of institutions’ governing bodies
but the process often becomes contentious.
For this reason, it is now widely accepted
that the best practice is to have a clear
institutional policy that ensures transparency
and understanding. This can form part of
the policy on indirect costing or be kept
separate. Although different institutions
manage recovered indirect costs differently,
the amounts are often recorded in a central
budget, and are distributed to offset ongoing
indirect expenses.

CASE STUDIES
Managing and distributing recovered indirect costs
The University of Botswana distributes
recovered overheads to reward researchers
and encourage them to develop and submit
further grant proposals. The university
has a Special Projects Office that recovers
overheads on grants and contracts within
a month of funds being deposited into the
university’s bank account, and these are
distributed as follows:
45% to the main research account of
the researcher/s involved in the grant or
contract, to be used for any research-
related activity such as conference
attendance, purchase of hardware or
software, hiring research assistants etc.
25% to the university to be used for
internally funded research.
20% to the school/institute/center
involved in the grant for the purchase of
research-related consumables, hiring of
staff, small equipment, teaching aids, etc.
10% to the university’s research and
development office to support capacity
building, statistical databases and
packages, ethics and other discretionary
research-related activities.
At Nigeria’s University of Ibadan
recovered indirect costs are distributed
in accordance with a university-approved
formula and shared between the central
university budget, the faculty and the
department responsible for the research
project. The university also has a
Research Development Fund, the primary
function of which is to develop capacity
in grantsmanship. This fund receives
income from several sources including 1%
of the university’s share of indirect costs
recovered from research grants.
Morocco’s National Agronomic Research
Institute (INRA) is based in the Ministry
of Agriculture, and their ICRR is stipulated
by law. A rate of 20% applies to grants
received from non-state funders, and
recovered funds are managed as part of
an off-budget account.* From here 10%
is used to support research and 10% is
allocated to INRA’s general budget to cover
organizational costs. INRA has a process
to approve indirect costs lower than the
stipulated rate, but they seldom approve
projects where the ICRR is below 5%.
* An off-budget account is part of INRA’s
budgeting system used for non-state
funds. It is separate from the accounting
system used for their general budget as
received from the Ministry of Agriculture.
As such, the account is flexible, not
locked into the government’s financial
year, and can be adapted to meet funder
requirements and project needs.

Recognize indirect costs as necessary to
the sustainable delivery of high quality
project/program outcomes and find
ways to routinely cover these costs.
Discuss this issue internally and with
other funders to find ways to better
support both the direct and indirect
costs of research.
Be aware of the power dynamics
that arise when funding collaborative
cross regional research by institutions
that have radically different access to
infrastructure and other resources.
Be mindful of how your funding policies
can encourage good research costing
and pricing practices at grantee
institutions.
Develop transparent, defendable
research costing and pricing systems
relevant to your context, and use
opportunities to benchmark and share
what is learnt from this.
Calculate an ICRR that covers the cost of
all infrastructure and support necessary
to sustain competitive research.
Periodically review the ICRR in line with
variations in costs.
Create and document fair and
transparent policies on how recovered
indirect costs will be distributed
and used to support institutional
sustainability.
Establish a mechanism to monitor cases
where full indirect cost is not recovered
as data input to sustainability planning.
Seek to improve efficiencies in the
system to reduce indirect costs.
Continue to engage in dialogue with
funders to encourage improvements in
policies and practices related to the full
costing and pricing of research.
Demonstrate to funders what the full
costs of projects are and what the
consequences of underfunding will
be in light of decrease in unrestricted/
discretionary funding.
Optimize cost recovery by negotiating
to include indirect cost items as direct
costs if the funder does not cover the
institutional ICRR fully.

Key 5: Strengthening capacities for
grants management
The benefits of research management in
enhancing the sustainability of research and
of research institutions are increasingly clear.
Globally, research management has evolved
as a professional role within the research
enterprise.
Consequently, every year, more professionals
are being trained and employed to carry out
this work in LMICs. However, the development
of this strategic and niche capability requires
institutions to recognize and value individuals’
abilities so that their contributions can be
optimally integrated and applied.
One funder commented:
We now assess an increasing, if still
modest, number of LMIC-based research
organizations as ‘low-risk’ because
they have stronger administrative and
management capacities.
Even so, there is much room for improvement.
For example, a 2019 study of 200 universities
in Africa showed that around 30% possess
administrative units that manage research
grants and systematically review and approve
grant proposals. In a 2014 study, researchers
in LMICs reported that they spend up to 50%
of their time on research-related administrative
work rather than on the research itself. Another
study from Brazil reports that researchers
there spend, on average, 33% of their time
solving ‘red tape’ issues related to drafting
grant proposals and research management.20
While funders can play a significant role in
strengthening sustainable research management
capacity by expanding allocations for indirect
costs, institutional commitment and investment
is equally crucial. Institutions have to move
beyond awareness of the importance of
research management, and establish consistent
institutional policies and systems, including
those for grants management and research
costing, that are run by well-trained personnel.
Accordingly, in Key 5, the focus is on:
Exploring the responsibilities and competencies
required for grants management. Research
management embraces many other functions
(see definition in Key 2). The focus in Key 5
however is mostly on grants management
because of its role in preparing project
budgets and managing recovered indirect
costs.
Listing some of the funding and training
initiatives that support capacity
development in this field.
20 AT Akindele and S Kerridge
(2019) Benefits of Research
Management and
Administration for African
Universities: The Way
Forward. Paper presented
at the Conference of
Rectors, Vice-Chancellors
and Presidents of African
Universities, 8–11 July,
Cairo, Egypt. Available
online; ESSENCE on Health
Research (2014) Seven
Principles for Strengthening
Research Capacity in
Low- And Middle-Income
Countries: Simple Ideas in
a Complex World. ESSENCE
Good Practice Series.
Available online; FS De
Oliveira and MBM Bonacelli
(2019) Institutionalization
of Research Administration
in Brazil: Some Evidence.
Journal of Technology
Management and Innovation,
14, 2, 1–12. Available online.

Roles and responsibilities involved
in grants management
Research management involves a range of
functions that together can ensure the successful
implementation of research programs and
projects. Grants management is one of these
functions and it is a key enabler of the effective
management of research funding. The research
grant cycle and the support required during
the different stages of the cycle is shown in
Table 3.
Funders do fund research
management
Just 13% of the funders surveyed
reported that they do not support
research management. Those that fund
research management do so in different
ways:
Through allowable indirect costs.
Through direct costs, including
training, salaries for administrative
and support staff, review costs and
data management costs.
Via specific grants such as the NIHR
Financial Assurance Fund (see below).
However, under- and over-costing is
still often evident in grant applications,
and this poses a financial and audit risk
to both funder and grantees. Some
funders have responded to this by
offering to fund skills development or
providing other types of support to
enhance capacity. Grantees suggested
that grant conditions could specify that,
where institutions that do not yet have
transparent research costing and pricing
systems, a portion of the institutional
indirect costs have to be allocated to
fund the strengthening of research
management capacity.

Table 3: An overview of grants management roles, responsibilities and competencies
Pre-award
Post-award
Find funding
Gather and disseminate information about relevant funding
opportunities.
Prepare proposal
Apply standard operating procedures to develop and approve
proposals.
Develop templates and tools to support proposal development and
accurate budgeting.
Assist with and review aspects such as compliance with funder and
institutional policies/guidelines and regulatory requirements.
Submit proposal
Arrange for sign-off, submit the proposal to the funder and assist
with requests for additional submissions or changes from funder.
Finalize award agreements
Support the development and finalization of the grant agreement
and other grant-related agreements.
Set up grant account
Establish and manage a grant account and oversee financial
compliance.
Monitor compliance and reporting
Assist with grants monitoring and compliance and serve as the
liaison between the institution and the funder.
Support financial administration and reporting.
Close-out
Finalize the project account, close it in the institutional financial
system and ensure correct records are retained.

Like most other research management functions,
grants management is a people-oriented
function, in which the ability to engage with
individuals and groups at different levels, and
across cultures and borders, is important. For
this reason both technical and soft skills are
equally important, as seen in Table 4.
Table 4: Competencies required by grants managers
Accuracy – attention to detail in accomplishing grants management related tasks.
Administrative skills – for processing applications, budgets and contracts.
Analytical thinking – to analyse and interpret legislation and policies/guidelines; develop/contribute
to guidelines, templates and tools, identify and access risks; review proposals, budgets and reports.
Conflict management – use relevant approaches to manage and resolve concerns, disagreement,
and conflict.
Creative thinking – construct budgets; embrace new technologies, techniques and working methods;
apply good practice and welcome fresh ideas from inside and outside the organization.
Data and information management –gather, maintain and manage information and data, including
the storage and protection thereof.
External awareness – keep track with the funding and research policy and regulatory landscape and
its relation to the institutional research priorities.
Interpersonal and communication skills – develop and maintain relationships at various levels
inside and outside of the institution; communicate and comment on, verbally and in writing, research
related matters; foster and respect cultural and individual differences.
IT literacy – use relevant systems and software for grants management; use technology to optimize
governance, performance and processes.
Knowledge of the research process – understand the research cycle; appreciate what motivates
researchers.
Negotiation and influencing skills – where relevant negotiate with researchers, managers, funders;
ensure that compliance requirements are met; gain buy-in for institutional policies and processes.
Networking – benchmark and share good practice; develop and maintain professional contacts and
relationships.
Numeracy – basic knowledge of accounting and the principles of research costing and pricing; review
project budgets.
Organizational knowledge and awareness – understand the institution’s business processes,
policies, priorities, research relationships and external influences.
Problem solving – assess situations, identify problems and recommend solutions; deal with
inconsistencies.
Project management – oversee projects; understand the full funded project cycle.
Self-management – prioritize goals and meet deadlines; maintain high work standards even under
pressure; be aware of developments in the area of specialization.
Training and development – design and facilitate grants management training; coach and mentor
early career researchers and grants managers.
(Adapted from A Professional Development Framework for Research Managers and Administrators. London: ARMA
and the Professional Competency Framework, Pretoria: SARIMA.

Building skills and capacity linked
to grants management
While institutional commitment and investment
is essential for developing sustainable capacity,
funders play a significant role through funding
of indirect costs and through various capacity
strengthening initiatives and targeted funding
models. The need for deeper coordination
between funders in these regards is clear.
However, capacity strengthening also has to
be carried out in harmony with institutions’
needs, and with an emphasis on transparent
communication between management,
support staff and funders. The growing
awareness of the importance of research
management within institutions has seen
the emergence of a pool of individuals who
wish to develop their skills and become
professionals, but the lack of training and
career opportunities is a barrier to recruitment
and retention.
In-house training options
Several research institutions with more
established research management services
offer in-house training. Even though research
management staff can benefit from some of
this training, it mostly targets researchers.
To strengthen their research management
capacity, some institutions also pay for staff to
undergo training and mentorship, as well as
consider work exchanges and courses offered
by credible external providers and professional
associations. In LMICs, professional associations
for research management can be found in
Brazil, the Caribbean, Malaysia, and Central,
Eastern, Southern and Western Africa (see
https://inorms.net/membership-directory/).
Funder-linked training opportunities
Some funders also offer training to develop
grantees’ knowledge, skills and experience
particularly related to the funder’s own
regulations, guidelines, processes and
management of their grants. As funders
increasingly recognize the importance of
research management in the research
ecosystem, dedicated initiatives to support
capacity development in this area in a
structured and targeted way. There seems
to be an increasing number of opportunities
to strengthen institutional or system-wide
research management capacity.
Support for training and
capacity development
A small percentage (4%) of grantees
indicated that their institutions do not
support training in grants management.
About half (44%) of the institutions offer
in-house training and 21% encourage
their support staff to attend training
offered by external providers. One
grantee noted that support for capacity
building in finance, procurement
and grants management within her
institution is increasing.

CASE STUDIES
Skills development opportunities in grants management
CASE STUDIES
Institutional or system-wide capacity strengthening initiatives
The São Paulo Research Foundation
(FAPESP), a public foundation in Brazil,
established a Training Program for
Implementation of an Institutional Support
Office for Researchers (EAIP) in 2010.
The four-day program offers training on
FAPESP grants and grants management,
and includes topics such as proposal
preparation and submission, financial
administration, auditing and accountability.
A year after the training the participating
institution is visited by an EAIP program
manager to check on progress that has
been made and to assess the need for
further support.
The EDCTP offers financial and project
management training for financial and
project management staff through
workshops held in Southern, Western,
Central and Eastern Africa.
The US-based National Institute of
Allergy and Infectious Disease (NIAID)
supports the understanding, treatment,
and prevention of infectious, immunologic,
and allergic diseases. NIAID offers workshops
on grants and contract management for PIs,
grant administrators, business managers,
and budget coordinators from various
countries. Issues such as grant and funding
policies, the preparation of progress and
financial reports, and subcontracting are
addressed. While these training events
have helped many, NIAID has realized
that they are often too short and the
cost of travel makes them unaffordable.
Consequently, NIAID now supports the
Global Infectious Disease Research
Administration Development Award.
This provides senior administrators in
LMICs with advanced training in grants
management. On returning to their
institutions, these administrators are
expected to train others and serve as
a resource for other local or regional
institutions that are funded by NIAID.
A wide range of research management
initiatives serve both individual institutions
and the broader research systems in LMICs.
While these vary in size and scope, they all
attempt to strengthen and enhance research
management capacity.
Financial Assurance Fund (FAF) is a
funding mechanism providing existing award
holders with the opportunity to strengthen
capacity in financial and risk management
among collaborating partners. It is funded
by the NIHR through their Global Health
Research Programme.
India Research Management Initiative
(IRMI) facilitated conversations on research
management during a 12-month pilot project
with 31 Indian institutions. Insights from the
pilot guided the establishment of a five-year
program that is running from 2019 to 2024.
While Indian institutions have robust financial
management processes in place for grants,
a small number have made a start with
additional research support. The program
focuses on strengthening research
management services; supporting training,
career development and networking
opportunities for research managers;

CASE STUDIES
Institutional or system-wide capacity strengthening initiatives
(continued)
building national and international
partnerships for knowledge and resource
exchange; and creating a community of
practice for research management in
India. It is funded by the India Alliance, a
partnership between The Wellcome Trust
and the Department of Biotechnology,
Government of India.
Organizational Effectiveness Program
(OE) provides targeted support to grantees
to build capacity in areas such as strategic
planning, succession planning, financial
planning, board development and governance,
and communication strategies. It is funded by
the William and Flora Hewlett Foundation.
Research Management Programme in
Africa (ReMPro Africa) aims to fill critical
gaps in research management to ensure a
strong research ecosystem, and maximize
the quality and output of research. It focuses
on institutional leadership, sustainability,
standards and individual capacity
strengthening. It is funded by the Wellcome
Trust, UKRI, DFID, NIHR and The Royal
Society.
Strengthening national research and
innovation capacities in Vietnam
(ENHANCE) operates at a macro level
targeting the country’s higher education
system, and particularly research and
innovation management. By 2020, about
4 700 academics, researchers, managers
and students had received training on
research management and research
funding. Six research management units
have been set up or strengthened at
participating Vietamese institutions; a white
paper with recommendations to improve
research and innovation management in
Vietnam was produced and a network of
the participating research management
units were formed. It is funded by the EU
Erasmus Plus Programme
Think Tank Initiative (TTI) provided 43
policy research organizations in 20 countries
across Latin America, sub-Saharan Africa
and South Asia with core funding, combined
with capacity development, monitoring,
and advisory support from TTI staff and
external experts, with a focus in a second
phase on think tanks’ financial resilience. It
is funded by the IDRC, the William and Flora
Hewlett Foundation, the Bill and Melinda
Gates Foundation, DFID, and the Norwegian
Agency for Development Cooperation
(Norad).
University Administration Support
Programme (UASP) is managed by IREX,
a global development and education
organization. This program supports the
development of research management
capacity among mid- to senior-level
research managers in 19 countries,
including some in Africa. The program
offers training as well as peer-to-peer
learning and exchange. It is funded by the
Carnegie Corporation of New York.
These are summaries of longer case studies;
relevant cases at https://www.who.int/tdr/

See research management as a
fundamental part of the research
ecosystem and build research
management capacity through
supporting institutions’ indirect costs
and capacity strengthening initiatives.
New programs such as the ReMPro
Africa and IRMI offer context-specific
interventions and foster a community
of practice while creating opportunities
for international networking so that
the impact of the different interventions
can be monitored.
Include the calculation of accurate ICRRs
and the development of supporting
policies for the implementation of ICRRs
in capacity strengthening grants.
Allow an allocation within collaborative
grants that allow for institutions to share
resources and experiences related to
this issue in cost- and time-effective
ways.
Support programs that address context
specific research management capacity
challenges and that encourage local
governments to fund and otherwise
support research management systems
and skills building.
Recognize the value of research
management at the highest level of
leadership, and invest in people, systems
and processes that are fit for purpose
and allow for ongoing skills and capacity
development.
Accept that the skills requirements
for research management include but
encompass much more than general
administrative skills.
Support research management
staff to regularly upgrade their skills
through obtaining relevant training and
participating in conferences and other
networking events.
Institutionalize research management
and create career pathways for
research management staff.
Institute annual professional
development targets for research
management staff to ensure that
capacity is developed in line with the
institutional research strategy.
Explore cost-effective ways to train
staff, and take advantage of training,
fellowships and travel grants offered by
funders for relevant conferences.
Consider working with other institutions
in their vicinity to jointly fund an expert
trainer to develop a customized program
to train several staff members instead
of sending individual staff to training
sessions.
Work with researchers to include support
for different aspects of research
management in their grants as allowed
by the funder.

The evolution of the Five Keys, 2012 to 2020
First edition (2012)
Discussion at the INORMS (International
Network of Research Management Societies)
conference in 2010 highlighted the challenges
of research costing in LMICs. ESSENCE realized
that its objectives put it in an ideal position to
facilitate a dialogue between its members and
research institutions in LMICs and initiated a
study to examine the research costing practices
of funders and grantee institutions. That study
led to the publication of the first edition of this
booklet in English, Spanish and French.21
Training modules (2014)
After its release, the Five Keys was presented
to audiences in many parts of the world and
it became clear that supplementary training
materials would enable ESSENCE to share the
message of the good practice document more
widely. A resource pack was produced to help
trainers give short presentations and run in-
depth workshops. This includes course notes
for participants 22
and video interviews with
funders and leaders of research institutions.23
Second edition (2020)
An update on the first edition was prompted
by the recognition that although research
environments are changing fast, research
costing and pricing remains a burning issue
for both funders and research institutions. As
for the first edition, data was collected via two
surveys. The funder survey yielded responses
from 19 funders, including government
funding agencies, not-for-profit foundations
and multilateral/international organizations.
The grantee survey yielded responses from
67 institutions including universities, research
centers/institutes, science councils and not-
for-profit organizations (collectively referred to
as research-performing institutions or simply
institutions) from 30 different countries in
Southern, Eastern, Western and Central Africa,
South and Southeast Asia, the Middle East and
North Africa, the Caribbean and South America.
The survey data was supplemented by
focus-group discussions, interviews with
respondents, a literature review, and the
development of case studies. Consultations
conducted electronically and at relevant events
helped test and improve the document.
Although the ESSENCE group is health focused,
the study was not limited to institutions that
conduct health-related research.
21 https://www.who.int/tdr/
publications/year/2017/
five_keys/en/
publications/using-five-
keys/en/
partnerships/initiatives/
essence/essence-training-
videos/en/

Recommended reading
Allen Consulting Group (2008) Recognising the
Full Costs of University Research. Report
to the Department of Innovation, Industry
Science and Research, Canberra, Australia.
Available online.
Andersen J, Toom K, Poli S and Miller PF (2017)
Research Management: Europe and Beyond.
London: Academic Press.
Ayyar and Jameel (2019) India Research
Management Initiative (IRMI) – An Initiative
for Building Research Capacity in India.
Available online.
Bestprac WG 2 Finance (2019) Financial
Management of Horizon 2020 Projects:
Guide to Best Practice Based on Bestprac
Members’ Experience. Available online.
Blohm S, Kirkland J and Weir A (2016) Support
for Research Management and Governance
in Malaysia. London: Association of
Commonwealth Universities.
Boum II Y, Burns BF, Siedner M, Mburu Y,
Bukusi E and Haberer JE (2018) Advancing
Equitable Global Health Research
Partnerships in Africa. BMJ Global Health, 3.
Available online.
Campo MA (2014) Leadership and Research
Administration. Research Management
Review, 20, 1. Available online.
Canadian Association of University Business
Officers and the Canadian Association of
University Research Administrators (2013)
Indirect Costs of Research: Results of a Joint
Survey Administered by CAUBO/CAURA.
Available online.
Chataway J, Dobson C, Daniels C, Byrne R,
Hanlin R and Tigabu A (2019) Science
Granting Councils In Sub-Saharan Africa:
Trends and Tensions. Science and Public
Policy, 46, 4. Available online.
Consort (2017a) Scoping Work on Research
Management in India. A Wellcome Trust
Project Report. Available online.
Consort (2017b) Scoping Work on Research
Management in Sub-Saharan Africa. A
Wellcome Trust Project Report. Available
online.
Council on Governmental Relations, USA (2019)
Excellence in Research: The Funding Model,
F&A Reimbursement, and Why the System
Works. Available online.
Council on Health Research for Development
(2019) Research Fairness Initiative
Evidence Base. A directory of publications
on fairness in research partnerships.
Available online.
Derrick G and Nickson A (2014) Invisible
Intermediaries: A Systematic Review
into the Role of Research Management
in University and Institutional
Research Processes. Journal of Research
Administration, 45, 2. Available online.
Dodd R, Ramanathan S, Angell B, Peiris D,
Joshi R, Searles A and Webster J (2019)
Strengthening and Measuring Research
Impact in Global Health: Lessons from
Applying the FAIT Framework. Health
Research and Policy Systems, 17, 48. Available
online.
ENHANCE (2018) Recommendations towards
the Improvement of R&I Management and
Implementation in Vietnam, White Paper,
D5.1.2. Available online.
European Commission (2008) Expert Group
Report: Diversified Funding Streams for
University-Based Research: Impact of
External Project-Based Research Funding
on Financial Management in Universities.
Available online.
Ezeh A and Lu J (2019) Transforming the
Institutional Landscape in Sub-Saharan
Africa: Considerations for Leveraging Africa’s
Research Capacity to Achieve Socioeconomic
Development. Policy Paper 147, Center for
Global Development. Available online.
Fosci M, Loffreda L, Velten L and Johnson R
(2019) Research Capacity Strengthening
in LMICs: A Rapid Evidence Assessment.
London: DFID. Available online.
Franzen SRP, Chandler C and Lang T (2017)
Health Research Capacity Development
In Low- And Middle-Income Countries:
Reality or Rhetoric? A Systematic Meta-
Narrative Review of the Qualitative
Literature. BMJ Open, 7, 1. Available online.
Global Research Council (2019) Statement of
Principles: Addressing Expectations of
Societal and Economic Impact. Available
online.
Grants.gov (n.d.) Grants Terminology. US
Government. Available online.

Green J and Langley D (2009) Professionalising
Research Management. Research Global,
June. Available online.
Hayati M, Hidayati S, Erika C and Patriana E
(2018) Financial Sustainability: Towards Full
Costing Methods in Private Islamic Higher
Education. Dubai: Knowledge E. Available
online.
Kerridge S and Scott SF (2018) Research
Administration around The World.
Research Management Review, 23, 1.
Available online.
Larrue P, Guellec D and Sgard F (2019) New
Trends in Public Research Funding. In
OECD Science, Technology and Innovation
Outlook 2018: Adapting to Technological and
Societal Disruption. Available online.
Olssen Å and Meek L (2013) Effectiveness of
Research and Innovation Management at
Policy and Institutional Level: Cambodia,
Malaysia, Thailand and Vietnam. Paris:
OECD IHERD Programme. Available online.
Salway M (2018) Cost Recovery Tools for
Success: Doing the Right Things and Doing
Them Right. CASS Business School Centre
for Charity Effectiveness. Available online.
SARIMA (2018) Research Management: A
Handbook for Southern African Research
Management Offices. Pretoria. Available
online.
Schot J and Steinmueller WE (2018) Three
Frames for Innovation Policy: R&D,
Systems of Innovation and Transformative
Change. Research Policy, 47, 9. Available
online.
Sida (2014) Transaction Costs and Development
Aid through Sida: A Pre-Study for a Strategic
Evaluation. Sida Studies in Evaluation 2014,
2. Available online.
Struyk RJ (2017) Donors’ Best Financial Practice
in Granting to Think Tanks. On Think Tanks
Best Practice Series. Available online.
Swiss Commission for Research Partnerships
with Developing Countries (KPFE) (2014)
A Guide for Transboundary Research
Partnerships: 11 Principles And 7 Questions
(2nd edition). Bern.
The Global Fund (2017) Financial Management
Handbook for Grant Implementers. Available
online.
Virágh N, Zsár V and Balázs Z (2019) Research
Management and Administration: A
Profession Still to be Formalized. Budapest:
HÉTFA Research Institute and Center for
Economic and Social Analysis. Available
online.

Supplementing
TDR/World Health Organization
20, Avenue Appia
1211 Geneva 27
Switzerland
Fax: (+41) 22 791-4854
tdr@who.int
www.who.int/tdr
TDR/ESSENCE/20.1

Five Keys to improving research costing and pricing in LMICs 2nd edition 2020 - ESSENCE Good practice document series

More Related Content

What's hot (12)

Similar to Five Keys to improving research costing and pricing in LMICs 2nd edition 2020 - ESSENCE Good practice document series (20)

Recently uploaded (20)

Five Keys to improving research costing and pricing in LMICs 2nd edition 2020 - ESSENCE Good practice document series