Guide · Grant writing
What Are Indirect Costs in a Grant Budget?
Indirect costs are shared overheads, like rent, finance and IT, that support a project but are not tied to it alone. Here is how to include them in a grant budget.
Indirect costs (also called overheads or administrative costs) are expenses that support your whole organization rather than one project: rent, utilities, finance and HR staff, IT, insurance and audit fees. Many funders let you include a share of them in a grant budget, usually as a percentage of direct costs, but rules vary: some cap the rate, some require an approved rate, and some do not fund indirect costs at all.
Direct vs indirect
| Direct costs | Indirect costs |
|---|---|
| Project coordinator salary | Finance manager salary |
| Workshop materials | Office rent and utilities |
| Project travel | IT systems and support |
| Evaluation contractor | Insurance and audit |
How to include them
- Check the funder's rules: allowed or not, maximum rate, what base it applies to.
- Calculate a reasonable rate from your accounts, or use the funder's rate.
- Show the calculation: "Indirect costs at [x]% of direct costs."
- Avoid double counting: do not list a cost as direct if it is also in your overhead rate.
- Explain in the budget justification what the rate covers.
If indirect costs are not allowed
Some shared costs can legitimately be direct when they are specifically used by the project, such as a proportion of a room used only for the program, or a portion of a staff member's time. Only do this when it is accurate and allowed.
Why it matters
Organizations that never recover overheads struggle to stay healthy. Including a fair share, where allowed, protects your ability to deliver.
Frequently asked questions
What are examples of indirect costs?
Rent and utilities for shared space, finance and HR staff, IT, insurance, audit fees and general administration.
Can I include indirect costs in every grant?
No. Some funders cap them, some require a specific rate and some exclude them. Follow each funder's rules.
What is the difference between direct and indirect costs?
Direct costs are tied to the specific project, such as project staff and materials. Indirect costs support the whole organization and are shared across projects.
Keep reading
- How to Write a Grant Proposal: A Step-by-Step Guide for Nonprofits
- How to Write a Letter of Inquiry for a Grant (With Example)
- Nonprofit Impact Report: What to Include and How to Present Results
- Budget Justification for a Grant: How to Write It (With Examples)
- How to Write a Grant Evaluation Plan (Simple Template)
- Grant Goals and Objectives: How to Write SMART Objectives (Examples)
- How to Build a Grant Budget Funders Trust (With Template)
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