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FACILITIES AND ADMINISTRATIVE COSTS
1. Definition
Facilities and administrative (F&A) costs, formerly referred to as indirect costs, are real costs of doing research, instruction and other sponsored activities that are not easily identifiable with a particular sponsored project. F&A costs are expenses incurred by the institution for joint or centralized activities such as building and equipment use and depreciation, operation and maintenance costs, central and departmental administrative costs, sponsored projects administrative costs, library expenses, and student administration and services. Looking at it another way, F&A costs are those costs that are not classified as direct. Direct costs can be identified specifically with particular cost objectives such as a grant, contract, project, function or activity.
The institution's recovery of funds for F&A costs is based on its negotiated rates with a federal agency, which are applied to part or all of the direct costs on sponsored projects. When the University does not recover F&A costs from a sponsor, it must cover these costs from other University funds.
The University has a negotiated agreement with the federal government through its cognizant audit agency, Department of Health and Human Services (DHHS). The latest agreement is dated August 4, 2004, and provides rates for F&A costs on proposals submitted on or after October 1, 2004, through September 30, 2007, and provisionally from October 1, 2007 until amended.
Principal investigators should consult with OSP for assistance with determining appropriate categories and for current rates.
2. Rate Categories
Organized Research: applicable to basic, applied and developmental research projects, and to conferences, colloquia and seminars whose principal purpose is to disseminate, exchange or share research findings.
Instruction: used on instructional and training projects and activities involving for-credit or non-credit programs. In reality, most sponsors of instructional and training grants have mandated lower rates, reflecting their expectation that the institution will subsidize instructional grants.
Other Sponsored Activity: used for programs that primarily benefit the community through training of or service to a non-university, non-registered constituency.
Off-campus: applicable to all activities that are conducted in facilities that are not owned or operated by the University and for which charges of facilities, utilities, and/or janitorial services are direct expenditures. A project will also be considered off-campus if more than 50% of the project expenditures are for off-campus activity (excluding subagreements). Projects may be either on-campus or off-campus during a given project period but not both during the same budget period.
Project-related work conducted in a location of convenience such as home, vacation site, or other work site not owned or operated by AU does not qualify a project for the off-campus rate. To qualify for the off-campus rate, either the project must be direct-charged for the non-AU facility’s use, maintenance and utilities; or the performance of the project can only be accomplished by spending a significant portion of the time associated with the total project budget at another location and the project work is the primary reason to be located off-site (e.g., specialized equipment access, field work, specialized library access, extended collaboration with colleagues, and research or training in off-site laboratories). Travel to meetings or conferences does not count toward meeting the criterion of >50% project expenditures for an off-campus rate.
These negotiate rates are effective October 1, 2006 - September 30, 2009, and provisionally October 1, 2009 and thereafter until amended; Current Rate Agreement is dated 4/19/07.
Organized Research - on-campus 46%
Organized Research - off-campus 26%
Instruction – on campus 50%
Instruction – off campus 26%
Other Sponsored Activity – on campus 40%
Other Sponsored Activity – off campus 20%
Rates are applied to a modified total direct cost base (MTDC); that is, all direct costs excluding 1) capital expenditures (alterations, renovations, and equipment),
2) student support and participant costs (tuition, fees, stipends, fellowships and scholarships, etc.), 3) patient care costs, 4) rental costs for space, and 5) that portion of a subgrant or subcontract in excess of $25,000, regardless of the period covered by the subaward.
[Note: Equipment is defined as an article of nonexpendable, tangible personal property having a useful life of more than one year, and an acquisition cost of $2,500 or more per unit.]
For the purpose of estimating budgets for future years not covered by the current negotiated agreement, use the last negotiated rate applicable to the project being proposed. Resubmissions of revised proposals and competing continuation applications (renewal applications) must use the current negotiated rate at the time of submission.
The standard distribution of recovered F&A is as follows:
Department 20%
Dean 20%
Vice Pres for Research 10%
AU General Fund 50%
Certain campus divisions have recovery distributions that vary from the standard formula (i.e., Extension, Agricultural Experiment Station, etc.). Please contact OSP if you have questions regarding the distribution formula for your division.
Some funding sources (such as private foundations) impose a restriction on F&A costs or overhead, by rate or dollar amount, or disallow these costs entirely. Written documentation of such a policy must accompany proposals throughout the proposal clearance process. Exceptions to using one of the federally-negotiated rates, other than those imposed by a funding source, must be approved by the Vice President for research. An exception must be requested in writing and submitted to the Vice President for Research at least one week prior to proposal clearance.
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