Hello Elaine:  Contact your tax/legal offices to evaluate your risk specific to the facts of your situation.  Sponsored research projects need to be careful they don't step out of their 501(c)(3) non-profit tax status.  You do not want to have the project deemed "other business income" and have to pay income taxes.  Work under a service center or technical services agreement may be treated differently.

A sponsor who is asking for this treatment to avoid what they feel is a high indirect cost rate will usually back down and accept the required overhead when you provide them with your rate agreement and campus policy, and stress you don't want to jeopardize your non-profit tax status.

A sponsor or program that requires the budget to these specifications may have risks down the road.  Do they expect you to have a labor hour system they can audit?  If you are a university that has a government approved system of proposing, tracking, reporting and certifying on an effort basis, do you have a shadow system for labor tracking that you can certify to for closeout, payment and audit purposes?

Take care,

Mary

Mary J.  Gibson | Associate Director | Office of Sponsored Research
CALIFORNIA INSTITUTE OF TECHNOLOGY
1200 E. California Blvd., Mail Code 273-6 | Pasadena CA 91125
P 626.395.2494 | F 626.395.3144 | E xxxxxx@caltech.edu

> -----Original Message-----
> From: Research Administration List [mailto:RESADM-
> xxxxxx@LISTS.HEALTHRESEARCH.ORG] On Behalf Of Elaine Brock
> Sent: Thursday, June 25, 2020 6:47 AM
> To: xxxxxx@LISTS.HEALTHRESEARCH.ORG
> Subject: [RESADM-L] Charging Market Rates
>
> Are there situations in which a university can charge "market rates"
> (i.e., institutional base salary converted to an hourly rate than marked up to
> be consistent with what the sponsor would pay to a for-profit company) to a
> federal award either prime or sub?
>
> If yes, what situations?
>
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