Overhead Explained
Contents
Overhead Defined...................................................................................................................................................... 2
F & A Structure for Organized Research .................................................................................................................... 3
F & A Structure for Organized Research ............................................................................................................... 3
F & A Cost Rates for Different Types of Projects ....................................................................................................... 4
Indirect Cost Rates ................................................................................................................................................ 4
Overhead Calculations ............................................................................................................................................... 5
Overhead Distribution ............................................................................................................................................... 6
Standard Overhead Distribution .......................................................................................................................... 6
Northern Capital Region (NCR) Overhead Distribution ....................................................................................... 7
Virginia Bioinformatics Institute (VBI) Distribution ............................................................................................. 7
Center for Advanced Engineering Research (CAER) Distribution ........................................................................ 8
Institute for Advanced Learning and Research (IALR) Distribution .................................................................... 9
Virginia Tech Carilion Research Institute (VTCRI) Distribution ......................................................................... 10
Instructions for Proofing Overhead ......................................................................................................................... 13
Updated April 8, 2011
Overhead Defined
Facilities and Administrative (F&A) charges, commonly referred to as indirect costs or overhead, are the least
understood component of sponsored programs. Indirect costs are often viewed negatively by sponsors and
faculty alike. Indirect charges are simply costs that cannot practically, or in a cost-effective manner, be directly
tied to a single project. Often used illustrations of F&A costs are electricity, water, sewer, general
equipment/building depreciation and administrative support. Rarely explained are the administrative support
costs, which include salaries and benefits for departmental, college and university personnel involved in the
central administration of the institution.
Every institution accepting federal funds negotiates an F&A rate through their cognizant federal agency. The
cognizant agency for non-profit organizations is determined by calculating which Federal agency provides the
most grant funding. Virginia Tech’s cognizant agency was DHHS but this changed to ONR in December 2006.
Approved rates must be accepted by other agencies, unless specific program regulations restrict the recovery of
indirect costs. The Controller’s Office negotiates F & A and fringe benefit rates with VT’s cognizant federal
agency.
Updated April 8, 2011
F & A Structure for Organized Research
Institutions are required to negotiate different rate structures based upon location of the project (on-campus or
off-campus) and based upon the type of project performed (research, instruction, or extension/public service).
The true administrative costs to operate the University exceed the negotiated amount. However, the federal
government forces a cap on the administrative component limiting it to the maximum of 26%. The chart below
details Virginia Tech’s FY 2010, FY 2011 and FY 2012 negotiated F&A research rate structure.
F & A Structure for Organized Research
Virginia Tech F&A Rate Negotiations
Organized Research
Components
G&A
DA
DA Allow
SPA
FY2010
FY2011
FY2012
ONR Final
Rates
ONR Final
Rates
ONR Final
Rates
8.88%
15.07%
3.60%
3.50%
8.78%
14.67%
3.60%
3.38%
8.95%
14.54%
3.60%
3.48%
subtotal
admin cap adj
total Admin
31.05%
-5.05%
26.00%
30.43%
-4.43%
26.00%
30.57%
-4.57%
26.00%
Bldg Depr
Equip Depre
Interest
O&M
UCA
Library
4.16%
5.15%
3.56%
17.10%
1.30%
1.30%
-0.02%
32.55%
4.55%
5.01%
3.86%
16.99%
1.30%
1.26%
-0.40%
32.57%
5.00%
5.01%
4.32%
16.89%
1.30%
1.26%
-0.18%
33.60%
58.60%
63.60%
58.60%
63.00%
59.60%
64.20%
26.00%
31.10%
26.00%
30.40%
26.00%
30.60%
27.30%
32.40%
27.30%
31.70%
27.30%
31.80%
(rounding/adjustments)
(rounding/adjustments)
total Facilities
On Campus Capped
On Campus Uncapped
Off Campus Capped
Off Campus Uncapped
Adjacent Capped
Adjacent Uncapped
Updated April 8, 2011
F & A Cost Rates for Different Types of Projects
Institutions are required to negotiate different rate structures based upon location of the project (on-campus or
off-campus) and based upon the type of project performed (research, instruction, or extension / public service).
This information is captured on the Sponsored Programs Approval form. The table below shows the overhead
rates for the different types of projects. You can find our signed rate agreement on our website at
http://www.osp.vt.edu/rates.html.
Indirect Cost Rates
Type
FY 10
FY 11
FY 12
Research On-Campus *
58.6%
58.6%
59.6%
63.6%
63%
64.2%
Research On-Campus **
27.3%
27.3%
27.3%
Research Adjacent *
32.4%
31.7%
31.8%
Research Adjacent **
26%
26%
26%
Research Remote *
31.1%
30.4%
30.6%
Research Remote **
51.7%
51.7%
51.7%
Instruction On-Campus
26%
26%
26%
Instruction Off-Campus
32%
32%
32%
Other On-Campus
23%
23%
23%
Other Off-Campus
47.3%
47.3%
47.3%
Ag Exp Stat On-Camp
21.5%
21.5%
21.5%
Ag Exp Stat Off-Camp
*Applies to all DoD contracts awarded or issued before 11/30/1993, all non-DoD instruments and all DoD
grants. (Capped rate)
**Applies to all DoD contracts awarded or issued after 11/30/1993 in accordance with and under the authority
of DFARS 231.303(1). (Uncapped Rate)
Updated April 8, 2011
Overhead Calculations
On the last working day of each month, the General Accounting section of the Controller’s Office executes the
month end overhead program. This program uses three major attributes from FZMFNDA to perform the
calculation of the overhead to charge sponsored program funds.
1. Overhead Rate – this code specifies the overhead rate (percentage) to be applied to the fund.
2. Overhead Basis – this code specifies the various bases that can be used to calculate overhead (modified
total direct costs, total direct costs, no indirect charged).
3. Overhead Status – this code indicates the type of recovery allowed on this fund (full, partial, hand
calculate, etc.)
Virginia Tech uses two methods to calculate overhead
1. Modified Total Direct Costs (MTDC)
a. Excludes account code 1244D (conference services)
b. Excludes account codes 14210 through 14260 (scholarships)
i. Account codes 14130 (honorariums) and 14137 (human subjects) roll up under awards on
the summary account statement and indirect is assessed on both account codes. So you
need to look at FRIGITD in concert with the summary account statement.
c. Excludes account codes 15210 – 15270 and 15310 – 15370 (rental costs)
d. Excludes amounts which exceed $25,000 on each 19xxx and 2xxxx object code (subawards)
e. Excludes 21000 – 21990 (site improvements, etc)
f. Excludes 22000 – 22990 (equipment)
g. Excludes 23000 – 23990 (capital outlay constructions and renovations)
2. Total Direct Costs (TDC) - indirect is taken on every expenditure.
Account code exclusions are housed on FTMBASI screen in Banner. Click on “Basis Definition Code” to select
the overheard basis, then perform a next block function.
Updated April 8, 2011
Overhead Distribution
Another common misconception, as related to overhead, is the distribution of earned indirect. Indirect is only
distributed once it is earned, after expenditures post to the fund in Banner (FRIGITD). Sponsored project funds
are charged (debited) to overhead account codes according to the distribution appropriate for the project.
Overhead distributions which vary from the standard state, central capital and capital 2 distributions must be
approved by the budget office and the Controller’s Office. Below is a summary of approved distributions.
Standard Overhead Distribution
This distribution gives the receiving college/department discretionary funds to offset costs related to the
conduct and enhancement of research and research-related requirements. It is the flexibility of these funds
that is so important to our research enterprise. Therefore, it is imperative that the University attempt to collect
the maximum indirect allowed. Any waiver or reduction of indirect impacts the colleges and departments the
most.
Standard Overhead Distribution
Component
Commonwealth of Virginia (OH120)
OVPR (OH130)
College/Department (OH140)
Central Capital Account (OH150)
Capital 2 (OH170)
Description
Distributed to the state whereby it is returned to the
University as part of the annual educational and general
funds.
Supports research administration and operations.
The largest portion of distributed indirect goes to the
college. The college distributes to department. OSP nor
OVPR has control or knowledge regarding the amount
distributed to PIs/departments.
Used by the University to acquire, repair, renovate, or
improve buildings or equipment used directly for organized
research.
Used to pay for the construction of new research space at
the Corporate Research Center (CRC)
Updated April 8, 2011
Percentage
30%
8.57%
40.29%
11.14%
10%
Northern Capital Region (NCR) Overhead Distribution
The PI/department will indicate the project is being conducted in the NCR on the Sponsored Programs Approval
form. For Banner to distribute overhead to NCR accounts the overhead status selection on FZMFNDA must have
“NCR” in the description. Also, on FRAGRNT the literal SI and value NCR attribute must be entered under the
user defined tab.
NCR Overhead Distribution
Component
Commonwealth of Virginia NCR (OH121)
OVPR (OH130)
College/Department
(OH140)
Central Capital Account NCR (OH151)
Capital 2 - NCR (OH171)
Description
Distributed to the state whereby it is returned to the University as
part of the annual educational and general funds. This code
ensures the NCR receives the appropriate allocation for projects
conducted in the NCR.
Supports research administration and operations.
The largest portion of distributed indirect goes to the college. The
college distributes to department. OSP nor OVPR has control or
knowledge regarding the amount distributed to PIs/departments.
Used by the University to acquire, repair, renovate, or improve
buildings or equipment located in the NCR used directly for
organized research.
Used to pay for the construction of new research space at the
NCR.
Percentage
30%
8.57%
40.29%
11.14%
10%
Virginia Bioinformatics Institute (VBI) Distribution
VBI Overhead Distribution
Component
Indirect Costs Bioinformatics (OH160)
Description
Standard overhead distribution returns funds to the state and
university to pay for fringe benefits and building construction and
maintenance. One-hundred percent of overhead is returned to VBI
as VBI pays the mortgage on buildings and fringe benefits for state
employees. Departments following the standard distribution
receive state funding to pay for fringe benefits and building
construction and maintenance.
Updated April 8, 2011
Percentage
100%
Center for Advanced Engineering Research (CAER) Distribution
The CAER is a Region 2000 initiative to develop an industry-focused regional research and development center
that drives the development of innovative products and processes by providing local access to university and
federal research and inventions. The CAER is dedicated to the creation of an industry-based research hub in
Region 2000 that will bring together private and public money, talent and resources to foster knowledge
creation, facilitate technology transfer and improve the scientific and engineering workforce to benefit local
industry.
When CAER is the sponsor, the CAER the overhead status 17 must be selected on FZMFNDA. This allows Banner
to automatically post 70% of the overhead to CAER and 30% of the overhead to the State.
CAER Overhead Distribution
Component
Commonwealth of Virginia
(OH120)
Collaborative agreement –
CAER (OH161)
Description
Distributed to the state whereby it is returned to the University as
part of the annual educational and general funds.
Distributed to CAER
Updated April 8, 2011
Percentage
30%
70%
Institute for Advanced Learning and Research (IALR) Distribution
When the PI is conducting work at IALR, they must indicate the percentage of work completed at IALR on the
Sponsored Programs Approval form. Based on this, the percentage work completed at IALR will be taken from
the overhead generated each month. The remaining overhead balance will be distributed according to the
standard overhead distribution.
When the Institute for Advanced Learning and Research is the sponsor an overhead status code with IALR needs
to be in the title on FZMFNDA (Codes 18-27). Banner will automatically post the overhead to the correct
accounts.
IALR Overhead Distribution
Component
Commonwealth of Virginia
(OH120)
Description
Distributed to the state whereby it is returned to the University as
part of the annual educational and general funds.
OVPR (OH130)
Supports research administration and operations.
College/Department
(OH140)
The largest portion of distributed indirect goes to the college. The
college distributes to department. OSP nor OVPR has control or
knowledge regarding the amount distributed to PIs/departments.
Used by the University to acquire, repair, renovate, or improve
buildings or equipment used directly for organized research.
Central Capital Account
(OH150)
Collaborative agreement –
IALR (OH162)
About the only department using IALR overhead distribution is
Mechanical Engineering. The PI will indicate on the Sponsored
Programs Approval form what percentage of the work is being
completed at IALR.
Banner take the percentage of work completed at IALR and
distributes the percentage of indirect each month to OH162. The
remaining balance of indirect for that month follows the
distribution for the remaining accounts.
Capital 2 (OH170)
Used to pay for the construction of new research space at the
Corporate Research Center (CRC)
Percentage
30% after
IALR
portion
8.57% after
IALR
portion
40.29%
after IALR
portion
11.14%
after IALR
portion
Indicated
on
Sponsored
Programs
Approval
Form
10% after
IALR
portion
For example, if 60% of the work was completed at IALR and the overhead for that month was $100.00. The split
would be as follows.
Banner first calculates $100.00 *.6 = $60 which goes to OH162
The remaining balance is $40 and distributed according to the usual percentages.
Updated April 8, 2011
IALR Overhead Distribution
Account Code & Description
OH120 – State
Calculation
Amount
$40 *.30
$12.00
OH130 – OVPR
OH140 – College/Department
$40*.0858
$40 *.4029
$3.43
$16.12
OH150 – Central capital
OH162 - Collaborative agreement –
IALR
OH170 – Capital 2
$40*.1114
$100.00 *.6
$4.45
$60.00
$40-.10
$4.00
Virginia Tech Carilion Research Institute (VTCRI) Distribution
VTCRI Overhead Distribution
Component
Commonwealth of Virginia
(OH120)
Collaborative agreement –
VTCRI (OH163)
Description
Distributed to the state whereby it is returned to the University as
part of the annual educational and general funds.
In Dr Friedlander’s startup package, the University pledged to
allocate 70% of the overhead generated by VTCRI extramural
funding to VTCRI.
Percentage
30%
70%
Waived college and/or OVPR portion
The college and/or OVPR may waive their portion of the returned overhead. When this occurs, the percentage
charged must be adjusted. When the overhead status codes referenced below are on FZMFNDA overhead will not
generate for the waived portion.
Overhead Status on
FZMFNDA
04
Description
Waive all but State percentage & Capital percentage
05
Waive college percentage
06
Waive administrative percentage (OVPR)
Updated April 8, 2011
Form C - Special Indirect Agreement
When departments have worked out special overhead distributions for the college or OVPR portion, Form C
needs to be completed and signed by authorized authorities. OVPR is automatically notified when a fund is
established that has Form C associated with it. OVPR is responsible for adjusting Banner overhead distribution to
reflect the approved allocation. If retroactive adjustments are necessary OVPR completes the journal entry.
Updated April 8, 2011
Offsetting Overhead Clearing Fund Codes
The fund credited depends on the type of program and source of funding. An offsetting credit is posted to the
respective clearing fund that matches the program and funding source on the sponsored project fund.
Offsetting Overhead Clearing Fund Codes
Overhead Clearing Fund Number
Program Code*
Predecessor Fund**
324882
01-Instruction
23030-23048 Federal
324883
02-Research
23030-23048 Federal
324884
03-Extension
23030-23048 Federal
324888
01-Instruction
23184-23196 State
324889
02-Research
23184-23196 State
324890
03-Extension
23184-23196 State
324894
01-Instruction
23285 Local
324895
02-Research
23285 Local
324896
03-Extension
23285 Local
324913
01-Instruction
23380-23398 Private
324915
02-Research
23380-23398 Private
324916
03-Extension
23380-23398 Private
324885
01, 02 & 03 Inst. Research & Ext.
23032R & 23053R ARRA
425935
01, 02 & 03 Inst., Research & Ext.
23055R ARRA
429272
01, 02 & 03 Inst., Research & Ext.
23065R & 23071R ARRA
451002
01, 02 & 03 Inst., Research & Ext.
23069R & 23072R ARRA
324886
01, 02 & 03 Inst., Research & Ext.
23036R & 23054R ARRA
429277
01, 02 & 03 Inst., Research & Ext.
23073R & 23088R ARRA
429265
01, 02 & 03 Inst., Research & Ext.
23057R & 23075R ARRA
450000
01, 02 & 03 Inst., Research & Ext.
23059R ARRA
426653
01, 02 & 03 Inst., Research & Ext.
23067R & 23083R ARRA
451014
01, 02 & 03 Inst., Research & Ext.
23080R ARRA
451016
01, 02 & 03 Inst., Research & Ext.
23077R & 23078R ARRA
416181
01, 02 & 03 Inst., Research & Ext.
23063R ARRA
416178
01, 02 & 03 Inst., Research & Ext.
23061R ARRA
429279
01, 02 & 03 Inst., Research & Ext.
23082R ARRA
429282
01, 02 & 03 Inst., Research & Ext.
23084R ARRA
429285
01, 02 & 03 Inst., Research & Ext.
23086R ARRA
*This number represents the first 2 digits of program
**This represents the type of funding (federal, federal flow through, commercial)
Sponsored project funds with purpose 04 (academic support), 06 (institutional support), or 07 (operation &
maintenance of plant) use the Instruction clearing funds.
Updated April 8, 2011
Instructions for Proofing Overhead
You can determine F&A rates for an award by reviewing the proposal, final budget, binding agreement, Award
Acceptance Sheet or FZMFNDA. It is important to note the approved indirect rate at the proposal stage is used.
Frequently the current rate at award is slightly different from the proposed rate. The approved rate at time of
award should be used. Frequently PIs/departments will submit supplemental proposals and indicate the current
rate on the Sponsored Programs Approval form. Pre-award should inquire with post-award regarding the rate
being used. In most cases, OSP should continue to use the approved rate at the time of the award unless the
proposal was competitive. Cases where the sponsor continues to modify the award versus issuing a new
contract may allow the university to apply higher rates for non-competitive proposals.
Basis of Proofing: Although BANNER automatically calculates F&A monthly, there may be occasions where the
indirect does not show on the monthly financial statement, or the amount may actually be incorrect. Five
situations occur which could cause Banner to incorrectly calculate overhead.
1. If the project has expired F&A will stop calculating 30 days after the expiration date. Often credit card
purchases will post to the account in the 31 – 60 day window, which requires the post-award
administrator to manually charge indirect costs. Indirect may need to be manually removed from the
fund if the department reverses charges 30 days past the end date.
2. If there is a cost overrun (overdraft) F&A will stop calculating 30 days after the month the project was in
deficit.
3. If the project is on a LOG (Letter of Guarantee) F&A may not calculate depending if there was a budget
for indirect costs under the LOG.
4. If the indirect budget “maxed out”, Banner will not charge above the budgeted amount. If incremental
funding arrives the post-award administrator needs to proof the overhead to retroactively charge
indirect using the new indirect available budget.
5. Banner has incorrect information on FZMFNDA
*** OVERHEAD PROOFING SHOULD BE DONE, AT A MINIMUM, ON AN ANNUAL BASIS***
Instructions:
1.
2.
Check the F&A rate to determine what rate is being applied, and also check to see if the project is MTDC
or TDC.
To proof overhead you will need access Banner form FZRGRBA to run reports.
Then run “Fund by Account” report for each fiscal year end. For example, if the project is near closing and is a
three year project from 2003-2005, for each time the project extends beyond June of each year you will need to
run a report to proof the overhead
Updated April 8, 2011
You will need your June 30 Monthly Financial Printout for Annual Proofing. If you are proofing more frequently
than on an annual basis, any current monthly printout will work.
3.
Under the FISCAL YEAR TO DATE column, take the DIRECT EXPENDITURES that is showing under this column and
subtract overhead exception described above for MTDC projects. For TDC base, use the Direct Expenditure (no
subtraction necessary).
4.
Multiply the amount by the F&A rate that is assigned for the period that you are proofing. EXAMPLE: If the F&A
Rate is 51%, Multiply by .51
5.
After you have multiplied the base times the rate, the amount showing is your true F&A amount for the period.
The amount should correspond with the Indirect Costs – Overhead Budget on the financial printout for that
period. If there is a major difference between your amount and the printout, repeat the steps again. If there is
still a major difference, prepare a Journal Entry Transfer form to correct.
(NOTE: It is preferred to keep overhead calculations on a spreadsheet. An example is provided in Scholar. Please keep all
project proofing documentation in the file folder for back up.
Updated April 8, 2011