This brief clarifies the U.S. system for indirect cost reimbursements to universities for research. In Canada the system of research support derives from historical decisions on federal-provincial roles, and the responsibilities and mechanisms for funding indirect costs is less than clear. When this issue is raised, comparisons with the U.S. system are inevitable, but there are many misconceptions about how the U.S. approach actually works. Although the federal government reimburses the real costs incurred by institutions in conducting federally sponsored research, universities carry substantial financial responsibilities. The rate of reimbursement is negotiated by each institution with one of two government agencies, and this rate is applied to all federal grants received by the institution. As a result, each institution has a different rate. These rates are applied to modified total direct costs, which exclude some to the admissible direct costs such as equipment and subcontracts. The average rate of indirect cost reimbursement in 1997 was 52.3%. Rates have been very consistent during the 1990s despite numerous policy changes. The administrative portion of reimbursements was capped at 26% in 1991, but there is a growing realization that this limit should be revised. (SLD)