6.3 Indirect Costs/Facilities and Administrative Costs (F&A)
As mentioned above, the federal government refers officially to indirect costs as facilities and administrative (F&A) costs, sometimes simply called "overhead" costs. Facilities and administrative (F&A) costs are costs that are not readily identifiable with individual projects or, put another way, "those that are incurred for common or joint objectives." In other words, indirect costs cannot be specifically attributed to an individual project. For example, it is difficult to say how much of a PI's lab space is used for a specific research project when multiple projects are being conducted in the same lab. We know the project benefits from the lab space, but it is impractical to accurately calculate the cost associated with that benefit. Accordingly, F&A costs are estimated for each project using a formula that compares all Institutional project expenditures against all the Institutional facility and administrative costs necessary to support all projects. They include such categories as library operations, utility costs, depreciation of buildings and equipment, operations and maintenance costs, grant and contract administration and accounting, and general administrative expenses for central offices.
Whatever we call them, indirect costs are real. The University is dependent upon the recovery of F&A costs in order to maintain the infrastructure necessary to support sponsored activities. Faculty, staff, and students involved in research and sponsored programs experience the benefits of F&A cost recovery every day when they enter a building, turn on the lights, consult with a research assistant, get help from research administration professionals when they write proposals or in managing grants and contracts, or use the telephone, internet or the libraries just to name a few examples.
Current F&A Rates
Fiscal years run July 1 - June 30. The current FY 2017 runs from July 1, 2016 - June 30, 2017.
|Other Sponsored Activity||36.5%||26%|
|Other Sponsored Activity||36.5%||26%|
|Other Sponsored Activity||36.5%||26%|
An off-campus rate can only be used if the administrative structure of the project is relocated from the University of Utah and its affiliates for more than 120 days. Use of this rate requires pre-authorization from Compliance Accounting.
Sponsored projects are generally charged F&A costs, whether identified in the award or not. The rates to be applied will be consistent with the rates negotiated with the federal government by the University.
The Institutional F&A costs that are necessary to support the research and service enterprises of the University are compiled and presented to the Department of Health and Human Services (DHHS) in a proposal submitted by the University and audited by DHHS. The University and DHHS then negotiate a percentage to be added to the direct costs of each project that will cover the University's actual F&A expenditures for all anticipated projects over a specific time period. For these negotiations, the University categorizes all F&A costs as facilities or administrative based on the nature of the cost.
The University's F&A Rate Agreements are fixed for a specific period of time and should be used for all grant or contract applications, unless there is a restriction prohibiting indirect costs or designating another rate for a special program.
Part of the University's agreement with the federal government regarding F&A is that the University will not offer a lower F&A rate to other kinds of sponsors. That means that the University has to use the same rates for commercial sponsors as it does for the federal government. The University would jeopardize its relationship with the federal government (the University's single largest sponsor) if it were to accept lower rates. Further, when conducting sponsored activity, the University strives to be reimbursed for the full cost of that activity. Unfortunately, even when the current F&A rate is added to the direct costs of a research project, a portion of the total costs necessary to support that project may not be recovered by the University because of limitations created by federal allowable cost principles. The University would in effect be subsidizing the actual costs of a sponsored activity when nonstandard F&A rates are applied. While some may perceive that F&A is discretionary, the University could not maintain sponsored activity on campus for long without reimbursement for the costs required to support the research and service enterprise. Even at the current rate the University ultimately only collects a little less than 50 cents on every dollar spent by the University to support sponsored activity infrastructure.
Indirect costs are charged to a project by applying a percentage to the total direct costs (TDC) of the project. In some instances the TDC may be modified to exclude capital equipment, participant support, patient care, and subcontract expenditures in excess of $25,000. This rate is known as the modified total indirect cost rate (MTDC).
Note: The University charges F&A on the first $25,000 of each sub-agreement for a project period. Any amount above $25,000 for each sub-agreement is not subject to F&A for the remainder of the project period.
However, the University as the award recipient or sub-recipient will defer to the written, universal F&A policy of the awarding sponsor, if different from above.
The sponsor's policy will also be flowed to the University sub-recipients.
If a sponsor limits F&A to less than the University's federally negotiated rate, the F&A rate base should be calculated by adding all direct costs (TDC) with no exclusions or exceptions.
If you are calculating TDC using the 22% on total federal funds awarded (TFFA) as required by the USDA, add direct costs with no exclusions or exceptions to TDC. 28.20513% of the TDC would be used to arrive at 22% TFFA.
The F&A being requested can not exceed what would be allowable using the University's negotiated rates and exclusions. Therefore, calculate the F&A using both the sponsor's F&A rate as well as our negotiated rate to ensure we are not requesting excessive F&A. If the indirect costs are excessive, modify the percentage being applied to the TDC until you arrive at indirect costs that are equal to, but not more or less than, what would normally be requested using our negotiated rate.
An F&A waiver request is required in eProposal as part of the document summary sheet creation when there is a difference between the University's approved F&A rate and the sponsor's F&A rate. A waiver request is ALWAYS required when the Sponsor is a for-profit entity. Waivers are rarely given except in exceptional circumstances. Before a waiver can be used, it must be reviewed by OSP, to be sure the project is applicable and follows the guidelines of the waiver, and approved by the Vice President for Research.
Institutional F&A waivers that have been approved by the Vice President for Research include:
Undergraduate wages and research support projects The University returns all collected F&A on undergraduate salary awarded on research projects. Note: The proposal budget to the sponsor should include all applicable F&A. See also Returned Overhead on Undergraduate Salaries.
Project transfers in cases where the prior institutions F&A rate is lower than that of the University.
Written universal policy. "Written and universal" policies of paying a specific Facilities and Administrative (F&A) rate for all similar agreements regardless of which institution or site is the recipient of the funds, the University will accept that rate.
A "written and universal" policy means the Sponsor has as a matter of organizational policy or procedure, a single F&A rate that applies at all times for all similar awards, situations, or conditions.
In these cases, the principal investigator or sponsor will need to supply a copy of the sponsor's policy and/or guidelines at the time of proposal review or agreement negotiation. This policy, if not published in a request for proposal or sponsor guidelines, must be on the sponsor's letterhead and signed by the sponsor's authorized official.
Note: When a Principal Investigator's or the University relationship to a sponsor results in a potential conflict of interest with the University, the University will not be able to deviate from the standard negotiated F&A rates for that sponsored project without specific approval from the Vice President for Research.
Note: Unless otherwise specified & approved by VP of Research, waiver granted F&A applies to TDC rather than MTDC.
OSP has the authority to accept external funding at less than the maximum allowable F&A rate if it is a transfer or falls within the exceptions set forth:
- Non-profit sponsor universal published limitations of F&A (i.e. Muscular Dystrophy Association 10%)
- Exceptions by statute or regulation for federal sponsors (ONR, USDA, NSF participant support, etc.)
In the past, State Entities have been allowed to charge 10% F&A. Per the Board of Regents policy, new requests shall include full F&A. Existing projects and previously submitted proposals may use the previously established rate. OSP maintains wide discretion to accept different rates from state agencies (between the University's negotiated rate and rates cited by state agencies) as necessary with the primary objective being to facilitate the successful initiation and completion of projects.
There are three main F&A activity types under the University's negotiated agreement. They are: (1) "Sponsored Research," (2) "Sponsored Instruction and Training," and (3) "Other Sponsored Activities." It is important to choose the correct activity type for a proposal, since it determines which F&A rate to use. It is also important to remember that the activity is what occurs during the project period and not what might result after the project period. The sponsor is providing support for the activity at the time of the project, and therefore the F&A activity type should reflect what occurs during the project period only. When in doubt, contact OSP for guidance.
"Sponsored Research" consists of "all research and development activities that are sponsored by federal and non-federal agencies and organizations," according to OMB Circular A-21, Section B.1.b.(1). This includes "Activities involving the training of individuals in research techniques" where the activities "utilize the same facilities as other research and development activities and where these activities are not included in the instruction function." Sponsored research is combined with University research under the function of organized research for F&A purposes.
Some examples of "Sponsored Research" activities:
- Basic and/or applied research activities;
- Maintenance of facilities, equipment and/or operation of a facility which will be used for research;
- Training of individuals in research techniques (research training);
- Publishing research results; or
- Data collection, evaluation, analysis and/or reporting.
Sponsored Instruction and Training:
"Sponsored Instruction and Training" consists of specific instructional or training activity established by grant, contract, or cooperative agreement," according to OMB Circular A-21, Section B.1.a.(1).
Some examples of "Sponsored Instruction and Training" activities:
- Instructing University students, faculty, or staff;
- Instructing teachers or students in elementary or secondary schools;
- Instructing the general public;
- Curriculum development projects, including evaluation of curriculum or teaching methods;
- Projects involving University students in community service activities for which they are receiving academic credit; or
- Fellowship support for pre-doctoral and post-doctoral training activities, which may include grants to fund dissertation work and travel in relation to dissertation.
Other Sponsored Activities:
"Other Sponsored Activities" consist of "programs and projects financed by federal and non-federal agencies and organizations which involve the performance of work other than instruction and organized research," according to OMB Circular A-21, Section B.1.c.
Some examples of "Other Sponsored Activities":
- Performing a service (e.g., production of good or materials) for an outside entity, unless the University is a subawardee on the entity's prime award that is primarily for research or instruction/training;
- Travel grants;
- Support for conferences, seminars, or workshops;
- Support for University public events;
- Support for projects involving University students in community service activities for which they are *not* receiving academic credit;
- Support for projects pertaining to museum or library collections, acquisitions, bibliographies, or cataloging;
- Programs to enhance institutional resources, such as computer enhancements, etc.; or
- Health services projects.
If investigators on a proposed project, including the principal investigator, come from more than one college or department, companion projects provides a vehicle for all centers, institutes, departments and colleges represented by project staff contributing significant effort to receive credit and distribute the funding and F&A payments made to the University. See Establish Companion Projects or F&A Distribution in the Procedure Library.