Indirect costs are costs for activities that benefit more than one project and for which it is difficult to determine how much each project should pay. Developed to provide the staffs of foundations and their nonprofit grant applicants with a basic understanding of the issues associated with indirect costs, the guide is based on more than two dozen interviews both with representatives of foundations and with grant recipients. The report does the following: (1) examines the range of foundation and nonprofit concerns, practices, and policies regarding indirect costs; (2) develops a common conceptual framework for understanding indirect costs; and (3) provides guidelines for presenting and reviewing indirect costs in proposal budgets. Following a summary and introduction are sections that: (1) examine the organizational policies that define and aggregate indirect costs; (2) explain two common methods of allocating such costs among projects; (3) examine the use of indirect cost rates; and (4) illustrate how indirect costs are typically presented in proposal budgets. The last section examines foundation and grant applicant perspectives on the support of indirect costs and presents checklists that may be used to guide the presentation and review of indirect costs in proposal budgets. (MLF)