Oregon State University
AN INTRODUCTION TO
FACILITIES &
ADMINISTRATIVE RATES
Outline of This Presentation
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Background on F&A Rate calculation
How rate is calculated
Cost components used in calculation
How recovered indirect (F&A) monies are
used
How you fit into the process
Summary
What are F&A Rates?
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F&A = indirect cost or overhead
The rate allows recovery of costs incurred
for common joint use that cannot be
readily identified to a specific project
The rate is applied to sponsored projects
Rates are negotiated with the Department
of Health and Human Services (DHHS)
Why Should a Grant pay F&A?
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The F&A rate is calculated by an averaging
concept, as established in OMB Circular A21. Most projects require resources from
all F&A pools
The F&A rate is a recovery of costs
already paid from all OSU fund sources
All projects incur 2 types of costs—those
directly related and those required for
indirect support of the project
OMB Circular A-21
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OMB Circular A-21 guides the F&A
process, stipulates the proposal format,
and addresses both direct and F&A costs
F&A rates are calculated from OSU’s
audited financial statements
Indirect Costs are Assigned to
1 of 9 Cost Pools
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FACILITIES
 Building
Depreciation
 Interest on debt
 Equipment
Depreciation
 Operations &
Maintenance
 Library
The Facilities Components are
not subject to a cap
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ADMINISTRATION
 General
Administration
 Departmental
Administration
 Sponsored Projects
Administration
 Student Services
The Administrative Components
are subject to a 26% cap
Administrative Components
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General Administration costs include:
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President, Provost and OUS Chancellor’s
Offices
Business Affairs (except for Research Acctng.)
Information Services/Computing Center
Budget Office
Purchasing
Human Resources
Administrative Components
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Departmental Administration costs
include:
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Deans’ offices
Departmental chairs
Departmental administrative staff
Other Administrative Components are
Sponsored Projects Administration and
Student Services
A Simplified F&A Rate Calculation
F&A Costs
= F & A Rate
Sponsored Agreements +
Cost Sharing/Matching
(variables)
If any of the variables change (numerator
or denominator), then the F&A rate will
also change. Example: OSU received
$147M in research awards in FY04.
MTDC Base and Allocable F&A Costs
for On-Campus Research Rate*
80.0
70.0
60.0
(millions)
50.0
40.0
30.0
20.0
10.0
0.0
8.2
90
19
Facilities
94
19
Research Base
10.7
10.8
Facilities
00
20
Administration
26% Administrative Cap in Place from 1994 to present
*Source: OSU F&A Rate Proposals
Administration
Research Base
F&A Costs Needed to Maintain or
Increase our Rate
F&A Rates
= Increase over FY00 F&A Costs
44.50%
(3% rate
increase)
40.1 9.2%
43.50%
(2% rate
increase)
39.2
37.3 *
41.50%
(0% rate
increase)
*FY00 F&A costs were $30.9M
0
10
20
30
F&A Costs Required in FY2005 (millions)
Assumes $92.9M in Research Expenditures
40
8.3%
6.4%
How Does Cost Share “Figure” into
this Process?
• Cost sharing has a negative impact on the
F&A rate since it must be included in the
base
• When preparing proposals, cost sharing
commitments that are not mandatory
should be carefully weighed against the
negative effect they have on the F&A rate
Historical View of OSU’s Rates
On-Campus F&A Rates
45
40
(Percent)
35
30
25
Res.
Ext.
OSA
20
15
10
5
0
19
76
77
19
78
79
19
80
81
19
82
83
19
84
85
19
86
87
19
88
89
19
90
92
19
93
96
19
97
00
20
01
6
00
2
-
Agreement Dates (Agreement Start Dates Coincide with OSU’s Fiscal Year Dates)
F&A Cost Calculation
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Step 1: Start With Base-year Audited
Financial Statement and Identify Each
Cost for Inclusion in Either a Direct Cost
Base (the major functions) or an Indirect
Cost Pool (Program Codes are used)
Step 2: Remove Exclusions (tuition,
facility rental, capital expenses, etc.) and
eliminate Federally Funded costs &
unallowable costs
F&A Cost Calculation (contd.)
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Step 3: Identify Any Indirect Costs in
Other Pools by Account Code and
Allocate to the Appropriate Indirect Cost
Pool
Step 4: Allocate the Indirect Cost Pools
to the Major Functions of Instruction,
Organized Research, Other Sponsored
Activities and Other Institutional
Activities (numerator of the formula)
F&A Calculation (with Cross Allocations)
Facilities Portion
Indirect Cost Pools
Interest; Building &
Equipment Depreciation
Operations and
Maintenance
Library
Basis for
Allocation
Allocated from
Space Study &
Financials
Allocated from
Special Study or
Population Usage
Administrative Portion
Allocated from
MTDC in Operating
Ledger, Based on
Supported Function
Sponsored Projects
Administration
Student Services
Cross Allocation #2:
O&M
Cross Allocation #3:
General Administration
General Administration
Department
Administration
Cross Allocation #1:
Bldg. & Equip. Depreciation
Allocated from
Student FTE
F&A Cost Calculation (contd.)
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Step 5: Identify the Direct Costs of
Instruction, Organized Research
(including cost sharing), Other
Sponsored Activities and Other
Institutional Activities (denominator of
the formula)
Step 6: Perform the Calculations to
Arrive at a Proposed F&A Rate for
Organized Research and Other
Sponsored Activities
Computing the F&A Rates
Facilities Portion
Indirect Cost Pools
After Cross Allocations
Interest; Building &
Equipment Depreciation
Operations and
Maintenance
Library
Organized
Sponsored
Research
Other
Sponsored

Activities
F&A
Rate
Distribution
Base
Functions
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÷
MTDC
Organized
Sponsored
Research
=
%
MTDC
Other
Sponsored
Activities
=
%
Administrative Portion
General Administration
Department
Administration
Other
Institutional
Activities
Sponsored Projects
Administration
Instruction
Student Services
Note: Distribution Base
For Instruction and Other
Institutional Activities Are
Not Shown Since F&A Rates
Are Neither Computed Nor
Negotiated for These Functions
FY 2000 Proposal Components –
Research Rate
19.3
6.5
1.5
0.1
2.1
0.7
3.0
Bldg. Use
Eqpt. Use
O&M
Library
GA
DA
SPA
Stu. Ser.
10.7
Facilities Components are shaded orange; Administrative Components are shaded green
How Does OSU Use Returned
Overhead (ROH)?
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OSU must use some of its F&A recoveries,
as described in Section J.14.h of OMB
Circular A-21, to improve research facilities
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Research facilities upkeep (BUC funds -$0.5M in FY04)
Research equipment (RERF fund -$3.18M in FY04)
The remainder can be used at the
discretion of OSU
How Does OSU Use Returned
Overhead (ROH)?
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Returned overhead (ROH) is allocated in OSU’s
budget process for:
 Utilities, security, custodial, general
maintenance, inventory control, risk
management
 Library support
 College accounting & administrative support,
and other uses
How Does OSU Use Returned
Overhead (ROH)?
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Sponsored program and compliance support
Human resources, payroll, purchasing,
accounts payable, and cashiering support
New research faculty start-up support
($1.25M in FY04)
F&A Rates of Peer Institutions
Institution
Rate
Institution
Rate
Cornell Univ.
Univ. Arizona
58.0
51.5
Purdue Univ.
Ohio State Univ.
52.0
49.5
Michigan State Univ.
Univ. Cal., Davis
Univ. Wisconsin
49.5
48.5
45.5
Univ. of Illinois
Texas A&M Univ.
Oregon State Univ.
48.5
45.5
41.5
Why are OSU’s F&A rates low?
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The newer buildings (Ag & Life Sciences Bldg.,
Richardson Hall) received major Federal funding,
which must be excluded
Most buildings are old and have low construction
costs. The last proposal used a 2% use
allowance (50-year life)
Maintenance costs incurred are low
Utilities on west coast are lower than elsewhere
Oregon public institutions have a history of low
debt financing
How Can the F&A Rate be
Optimized?
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Properly code costs in Banner (HRIS and
FIS)
Accurately complete the Space Study. The
space study affects building depreciation,
equipment depreciation, and operations
and maintenance
Accurately complete the Library Study
How Does Capital Equipment
Impact the F&A Rate?
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Depreciation on capital equipment
purchased with sponsored programs funds
and cost share funds must be excluded
from the calculation process
Equipment Purchases for Organized
Research by Source of Funds*
70
(millions)
60
50
40
30
$61.48M
Total
20
10
Total
Amount Excluded
$29.05M
Spon.
Prog. &
CS
0
Equipment Value
*Data from FY00 Proposal
Amount Available for
Equipment portion of
F&A Rate Calculation:
$32.4M
How Program Codes Relate to F&A Rates
Administrative Portion
Facilities Portion
Indirect Cost Pools
(Numerator)
Building &
Equipment Depreciation
11xxx – Ag. Ex. Sta. Res.
12000 – FRL
13000 – Other CIPs
15xxx – Spon. Res.
17xxx – Cost Share, Res.
Operations and
Maintenance
5xxxx – O&M
52500 – Facil. Maintenance
Library
18xxx – Other Spon. Act.
2xxxx – Spon. Pub. Ser.
General Administration
01800 – Dept. Aca. Support
11200 – Ag. Exp. Sta. Admin.
30600, 30800 – Dean’s Office
Department
Administration
Sponsored Projects
Administration
Student Services
4xxxx – Auxiliaries
20600 – Services/Testing
Unallowable Expenses
01100—Instruction
Functions
(Denominator)
Organized
Sponsored
Research
Other
Sponsored
Activities
Other
Institutional
Activities
Instruction
How Costs are Recorded
Do Matter
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The function of an expense should dictate where
the cost is recorded.
Example: A department chair charges travel to
an FS Foundation index. What is the purpose of
the travel?
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Dept. administration expense will go to an F&A cost
pool
Instruction expense will go to a major function (direct
cost activity)
Fund raising/lobbying expense will go to a major
function (direct cost activity)
F&A Cost Pools vs. Major Functions
Facilities Portion
Indirect Cost Pools
(Numerator)
Building &
Equipment Depreciation
Operations and
Maintenance
Functions
(Denominator)
FSxxxD
Expense
(01800)
Other
Sponsored
Activities
Library
Administrative Portion
General Administration
Department
Administration
Sponsored Projects
Administration
Student Services
Organized
Sponsored
Research
FSxxxV
Expense
(30600)
FSxxxN
Expense
(01100)
Other
Institutional
Activities
Instruction/
Dept. Rsch.
Illustration - F&A Pool vs. Function
Cost of travel is $5,000
FSxxxD
FSxxxN
305,000
500,000
300,000
505,000
• FSxxxD index— Puts the cost in an F&A cost
pool
• FSxxxN index—Puts the cost in the instruction
function
O&M Program Code
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Use the O&M Program Code (52500) to
identify Operations & Maintenance costs
Example: A Building Manager’s salary is
currently paid from a Dean’s admin. index
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Change the salary expenses to the index with
O&M program code 52500. This program
code “tracks” to the O&M cost pool rather
than a capped department administration
pool.
Illustration – New Bldg. Mgr. Prog. Code
Facilities Portion
Indirect Cost Pools
Interest; Building &
Equipment Depreciation
Program Code
52500
Tracks Here
Operations and
Maintenance
Library
There is no Cap on
Facilities Components
Administrative Portion
General Administration
Department
Administration
Program Code
30600
Tracks Here
Sponsored Projects
Administration
Student Services
The Administrative Components
are Capped at 26%
The Next Proposal
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The proposal will be based on FY09
financial data (July 2008 – June 2009)
Cost coding and FTE/salary will be
reviewed throughout FY09
OSU will start the F&A proposal at the
close of FY09 (Aug 2009)
The Next Proposal
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Library Study will take place throughout
FY09
Equipment inventory will be completed in
the spring of FY09
Space survey will be completed by the
spring of 2009
New agreement should be negotiated in
the spring or early summer of 2010
How You Fit into this Process
As departmental staff, you are critical to
OSU’s successful preparation of the next
F&A rate proposal.
You are involved in:
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Space Study that will take place in spring ‘09
(appropriate coding of space is critical)
Equipment Inventory that will take place in
spring ’09 (identification of equipment location
and condition is critical)
How You Fit into this Process
You are involved in: (contd.)
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Completion of PAR forms
Processing payments for goods and services
Processing payroll transactions
You can help by correctly
coding and identifying
expenses
Reminders
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Most costs are identified by account code.
Example of allowable vs. unallowable cost:
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24611 is the account code for recruitment
advertising (allowable cost)
24612 is the account code for public relations
and institutional advertising (unallowable cost)
Reminders (contd.)
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Example of properly recording costs:
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23522 is the account code for maintenance
materials (tracks to O&M pool)
20102 is the account code for general
operating supplies (????)
Reminders (contd.)
However, some costs can only be identified
by use of indexes with specific Program or
Org Codes.
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Example: Salary and travel account codes
are not unique to any cost pool (numerator) or
function (denominator). These costs must be
placed in the proper index to correctly identify
their purpose.
Thanks for Your Efforts—It Can’t Be
Done Without You!