Facilities & Administrative (F&A) Costs

Overview

Facilities and Administrative (F&A) Costs, also known as “indirect costs” or overhead, are the real costs of university operations which are not readily assignable to a particular sponsored project, university funded research activity, instructional activity, clinical activity, or other activity. Examples include:

• Central services (e.g., Human Resources, Finance), custodial services, data network security, building operations and maintenance
• Depreciation, building and equipment
• Sponsored programs services, including compliance oversight
• Departmental administrative costs in support of research
• Office supplies and general use equipment
• Utilities, internet and telecommunications
• Library services

The University of North Dakota (UND) is dependent upon the recovery of F&A Costs to maintain the infrastructure necessary to support sponsored activities. Faculty, staff, and students involved in research and sponsored programs 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.

The payment of F&A by the federal government underscores the long-standing partnership between universities and the government to conduct research in the national interest and a commitment to reimburse a part of the associated infrastructure.

Facilities and Administrative (F&A) Costs are negotiated with the government by individual universities. UND develops and negotiates an F&A Rate with the U.S. Department of Health and Human Services (DHHS) Cost Allocation Services. The formulas in these negotiated F&A Rate agreements are applied to all externally funded projects, including U.S. government grant-making agencies and non-federal sponsors, to calculate project-specific indirect costs. For most U.S. government-funded grants, UND’s federally negotiated F&A Rate agreements, which are calculated on the assumption of full-cost recovery, will be applied, according to 2 CFR Part 200, Appendix III to Part 200, Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs) Contents.

UND applies F&A Rates to sponsored program budgets (both federal and non-federal sponsors) consistent with the F&A Rate Agreement. F&A Rates are for use on grants, contracts and other agreements and are applicable to the following activities:

• Organized Research – All research and development activities sponsored by federal or non-federal agencies and organizations
• Instruction – Specific instructional activity established by a sponsored award
• Other Sponsored Activities – Sponsored awards, both federal and non-federal, for activities other than Instruction and Organized Research (e.g., health service projects, travel grants, support for university public events)

There are also rates applicable to the Energy and Environmental Research Center (EERC), and the Human Nutrition Research Center (HNRC). Fringe Benefit rates are only applicable to the EERC.

F&A Calculation

F&A Costs are applied on a Modified Total Direct Costs (MTDC) base. The non-F&A-bearing costs in the budget must be identified so that project F&A can be accurately calculated.

The MTDC base excludes the following cost components:

• Tuition
• Capital Expenditures
• Equipment
• Charges for Patient Care
• Rental Costs
• Tuition Remission
• Scholarship and Fellowships
• Participant Support Costs
• Subaward Expenditures in Excess of $25,000

Calculation Example

When preparing a budget, the F&A Rate is applied using the federally defined base using Modified Total Direct Costs (MTDC). The F&A Rate is applied to MTDC, which consists of all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward. MTDC shall exclude equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs. An example would be the NIH limits F&A reimbursement on large purchases of genomic arrays.

To Calculate F&A

Cutting edge science requires appropriate infrastructure and other support and institutions incur these real research expenses in the form of facility operations and compliance activities when conducting research on behalf of the federal government and other sponsors. Equitable reimbursement of those F&A Costs has a significant impact on the financial health of research institutions, and, consequently, helps to ensure that research activities are supported with the best, state-of-the-art laboratory facilities, as well as the highest quality administrative and compliance support mechanisms.

Resources

For more information, view the Cost of Federally Sponsored Research Infographic on the Association of American Universities (AAU) website.

Additional resources include:

• Council on Governmental Relations
• Keeping the Lights On – Health Research Alliance