Watering Down the F&A Rates The VERY Basics

1. Watering Down the F&A RatesThe VERY Basics Presenters: Ann Holmes Pat Holmes

2. FACILITIES AND ADMINISTRATION (F&A) COST CALCULATION DIRECT COST POOLS These become the denominator (base) in the rate calculations MODIFIED TOTAL COSTS Depreciation of Building & Equip Instruction Operations & Maintenance Library Organized Research General & Administrative Departmental Administration Other Sponsored Activities Sponsored Project Administration Other Institutional Activities F&A COST POOLS After cross-allocations – these become the numerator in the rate calculations Student Services Administration

3. Sample Rate Schedule - Research F&AMTDC % GeneralAdmin 12,195180,6486.75 Department Administration 32,940180,64818.28 Sponsored Programs Admin 6,405108,6483.64 Administration:28.67 Building Use Allow 5,035127,3433.95 Equipment Use 2,822127,3432.22 Building Interest 850127,343 .67 Operating & Maintenance 25,445127,34319.98 Library 2,822161,6691.75 Facilities28.57 Total on Campus Rate (as calculated) 57.24 Total Off Campus Rate (as calculated) 28.67 26.00 54.57 26.00

4. Simplified F&A Rate Calculation Numerator Expenses: Library Building Depreciation Operation & Maintenance (Utilities) General Administration (Payroll) Department Administration (Dean, Business Mgr.) Sponsored Projects Administration = F & A Rate Denominator Expenses: Sponsored Agreements Non-Sponsored Dept. Research Cost Sharing/Matching

5. F&A Costs Are Real! • F&A cost recovery is the reimbursement for actual costs incurred by the institution in support of sponsored projects • A significant portion of F&A costs are not recovered • When an external sponsor pays less than the full F&A rate, the unrecovered F&A costs must be absorbed by the institution (it’s an institutional decision) 5

6. F&A Rate vs. Recovery • The rate of recovery is much lower then the actual rate implies. Reasons include: • F&A not recovered on all costs (MTDC) • Many sponsors limit the F&A rate allowed (USDA) • F&A is sometimes waived by institutions • States often refuse to pay the full-rate

7. Modified Total Direct Costs (MTDC) consists of: • All salaries and wages • Fringe Benefits • Materials and Supplies • Services • Travel • Subgrants/subcontracts up to the first $25K of each regardless of the period covered • Rental costs up to the first $25K of each agreement regardless of the period covered • Participant support costs

8. What is excluded from F&A when using an MTDC base? • Equipment • Capital Expenditures • Charges for Patient Care • Portion of each subgrant/subcontract in excess of $25K • Rent • Renovations • Stipends • Tuition

9. Top Ten F&A Facts Every Departmental Administrator Should Know • “Real” Costs incurred to support research • Cost recovery mechanism for expenses already incurred – NOT a “Tax” on Grants • All costs are generally not recovered (admin cap, negotiated rate, waived F&A, etc.) • Space Survey is the major driver to allocate Facilities (uncapped) related costs • Why we care….extremely large dollars the institution is entitled to • Impact of cost sharing on the F&A rate • What costs are allowable, what are unallowable (Section J, OMB Circular A-21) • Consistent costing treatment • Ensuring costs are charged to the proper object code is extremely important • Life of the Award regulation • Credit: Cathy Snyder, Vanderbilt University