Understanding F&A
Presented by
THE RESEARCH ADMINISTRATION IMPROVEMENT NETWORK
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Facilities & Administrative (F&A) Costs
F&A (or Indirect Costs) are costs that are incurred for common or joint
objectives of the University and therefore, cannot be identified specifically
with a particular sponsored project.
F&A costs are broad categories of costs:
-
"Facilities" is defined as depreciation and use allowances, interest on debt
associated with certain buildings, equipment and capital improvements,
operation and maintenance expenses, and library expenses.
-
"Administration" is defined as general administration and general expenses,
departmental administration, sponsored projects administration, student
administration and services, and all other types of expenditures not listed
specifically under one of the subcategories of Facilities (including cross
allocations from other pools).
Refer to OMB Circular A-21, Section F: http://www.whitehouse.gov/omb/circulars_a021_2004#f
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How is the F&A Rate for the University Determined?
The University negotiates the rate with the federal
government. USF’s cognizant agency, the federal agency
with which our rate is negotiated, is the Department of
Health & Human Services (DHHS).
To determine that rate, a base period is selected where all
costs are divided into cost pools.
Refer to USF’s Facilities and Administration (F&A) Agreement: http://www.research.usf.edu/sr/IndirectRates.pdf
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F&A Rate – Base Period Example
Unallowables
Direct Cost Pool - Instruction
Direct Cost Pool - Organized Research
Direct Cost Pool - Other Sponsored Activities
Direct Cost Pool - Other Institutional Activities
Indirect Cost Pool - Depreciatation of Buidlings &
Equipment
Indirect Cost Pool - Operations & Maintenance
Indirect Cost Pool - Library
Indirect Cost Pool - General & Administrative
Indirect Cost Pool - Departmental Administration
Indirect Cost Pool - Sponsored Project
Administration
Base Period Example
Indirect Cost Pool - Student Services Administration
Source: NCURA ‘09 TV, F&A Rates for the Non-Accountant aired June 9, 2009.
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Examples of Unallowable Expenses
-
Advertising (J1)
-
Alcoholic beverages (J3)
-
Bad debts (J6)
-
Entertainment (J17)
-
Fines and penalties (J19)
-
Fundraising / Alumni Activities (J20)
-
Lobbying (J28)
-
Donations (J15)
Refer to OMB Circular A-21, Section J: http://www.whitehouse.gov/omb/circulars_a021_2004#J
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Examples of Direct Cost Pools
-
Instruction:
The teaching and training activities of an institution, including departmental research that is not separately
budgeted (Professors salaries, Teaching Assistants, training).
-
Organized Research:
Research and development costs that are separately budgeted and accounted for, including sponsored
research from the federal government, state governments, foundations, etc. Also includes research activities
sponsored by the University that is separately budgeted and accounted for. (PI salaries, Post-docs, Research
Assistants, lab supplies).
-
Other Sponsored Activities (OSA)
Programs and projects financed by federal and non-federal organizations that do not meet the definition of
instruction or organized research. (Community service projects, workshops, health service projects, nonfederal drug studies).
-
Other Institutional Activities (OIA)
Athletics, dining halls, dorms, theaters, student unions, hospitals and clinics.
Refer to OMB Circular A-21, B: http://www.whitehouse.gov/omb/circulars_a021_2004#b
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Examples of F&A (Indirect Direct) Cost Pools
Depreciation - Buildings, capital improvements.
Operations & Maintenance (O&M) - Utilities, janitorial, repairs, security, grounds.
Library - Purchase of books and materials, Librarian salaries.
General & Administrative (G&A) – President’s Office, Controller, HR, General Counsel, etc.
Departmental Administration (DA) – Academic Dean’s offices, department chairs, administrative
and clerical staff, phones (local), postage, office supplies.
Sponsored Project Administration (SPA) – Central research offices and staff salaries.
Student Services Administration (SSA) – Admissions, registrar, counseling and placement
services, student advisers, student health services, catalogs, and commencements.
An institution’s cost groupings are determined on a case by case basis.
Refer to OMB Circular A-21, Section F: http://www.whitehouse.gov/omb/circulars_a021_2004#f
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Unallowables
Direct Cost Pools
Student Services Administration
Sponsored Project Administration
Departmental Administration
General & Administrative
Library
Operations & Maintenance
Depreciatation of Buidlings &
Equipment
Other Institutional Activities
Other Sponsored Activities
Organized Research
Instruction
F&A Rate – Cost Pool Examples
Indirect Cost Pools
Source: NCURA ‘09 TV, F&A Rates for the Non-Accountant aired June 9, 2009.
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USF Organized Research F&A Cost Pools
Administrative Component
Library
Operations & Maintenance
Interest
Equipment - Depr/Use Allow
Bldg & Improv - Depr/Use
Allow
Cost of Research @ USF
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USF F&A Rate Calculation
F&A Costs (Overhead)
Organized Research Base
49.5%
F&A Costs (Overhead)
Organized Research Base
=
F&A Rate
(expressed as %)
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The F&A Rate Can be Increased Through the
Numerator or the Denominator
F&A
=
Rate
Description
Methods to
modify
Facilities and Administrative
Cost of Organized Research
Modified Total Direct Cost (MTDC)
of Organized Research
Cost pools include:
Facilities
- Building depreciation
- Equipment depreciation
- Interest on debt
- Operations and maintenance
- Library
Administrative
- Sponsored projects administration
- General administration
- Departmental administration
MTDC include Total Direct Costs minus:
- Cost of equipment,
- Buildings,
- Patient care,
- Off-campus rents,
- Training,
- Tuition, and
- Sub-contracts over $25,000
-Includes cost sharing in Organized Research
• Place “Organized Research” activity in high
cost space
• Place OR equipment in high cost space
• New construction to increase depreciation
• Careful classification of Organized Research
• Minimize cost sharing
• Reduce subcontracting where appropriate
Source Huron Consulting Group, Presentation to the Research Advisory Board, October 4, 2010.
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USF’s Current F&A Rate (49.5%) is Somewhat Low
vs. Benchmarks
70.0%
59.5%
58.5%
60.0%
57.0%
53.5%
55.0%
F&A Rate
54.0% 52.5%
49.5% 52.7%
51.5%
50.0%
Avg. F&A = 52.3%
57.0%
51.3%
49.0%
46.5%
45.0% 45.0%
40.0%
30.0%
20.0%
10.0%
0.0%
A 1% point increase in USF’s rate would translate into over $370K on the 2010 fully-funded federal MTDC
expense base.
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Cost Sharing (a.k.a. In-Kind, Matching)
In general, Cost Sharing is the portion of allowable costs contributed to the project that
are not paid for by the sponsor. In other words, it is the portion paid by USF and/or a
third party.
Cost sharing can be mandatory or voluntary:
-
Mandatory - Required by the sponsor and must be included in the proposal.
-
Voluntary - Resources offered which were not required for proposal consideration.
Proposed cost share should be limited to the cost share requirements mandated by the
sponsor and at the minimum level required. Voluntary cost sharing, other than salary cap
related cost share, is highly discouraged and requires approval of Sponsored Research.
Refer to USF System Policy 0-313, Sponsored Research Cost Sharing:
http://generalcounsel.usf.edu/policies-and-procedures/pdfs/policy-0-313.pdf
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Impact of Cost Sharing on F&A –
Example Without Cost Sharing
F&A Costs (Overhead) = $20M
Organized Research Base (Without Cost Sharing) = $40M
50%
$20M F&A Costs (Overhead)
$40M Organized Research Base
(without Cost Sharing)
=
F&A Rate
(expressed as %)
Source: NCURA ‘09 TV, F&A Rates for the Non-Accountant aired June 9, 2009.
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Impact of Cost Sharing on F&A –
Example With Cost Sharing
F&A Costs (Overhead) = $20M
Organized Research Base (With Cost Sharing) = $42M
47.6%
$20M F&A Costs (Overhead)
$42M Organized Research Base
(With Cost Sharing)
=
F&A Rate
(expressed as %)
The amount of cost share contributed by an
institution has an inverse impact on its F&A cost
recovery rate!
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“Organized Research” is Narrowly Defined by
USF and Cost Sharing Makes Up a Small Portion
-
The Organized Research base is strictly delineated at $56 million, of which $2.5
million was cost sharing.
-
Cost Sharing: Huron reviewed a sample of 15 project files containing cost sharing
commitments.
• Some commitments were mandated by the sponsor.
• Some mandates were appropriately fulfilled by non-federal sponsored funds, often from
USF Connect Hi-Tech Corridor matching funds.
• Some “cost sharing” was for salary over the cap.
• In other cases:
o PIs offered part of their time.
o Sponsor encouraged but did not require cost sharing. USF shared almost half of the total
cost.
-
The opportunity to reduce cost sharing in Organized R esearch appears
lim ited, although efforts to create a consistent review process for cost
sharing of any type should be encouraged.
Source Huron Consulting Group, Presentation to the Research Advisory Board, October 4, 2010.
TRAIN® at the University of South Florida
Why Projects Pay F&A Costs
The University incurs costs to support research. The sponsor reimburses the
University for operating costs - infrastructure services including:
-
Facility costs (operating, utilities, communications, etc.).
-
Support of central research units.
-
Clerical/administrative personnel.
-
General purpose supplies (pens, paper, photocopies, printer cartridges).
-
Subscriptions.
-
Institutional memberships.
-
Individual memberships.
-
General purpose equipment (computers, calculators, furniture, file cabinets,
fax machines).
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Determining a Project’s F&A Rate
The following information is critical in determining an
accurate F&A rate:
– Funding source (federal, state, local, etc.).
– Federal flow through (is any portion of the funding from the
federal government?).
– Work being performed; research, training/instruction, other
sponsored activities (OSA).
– Location of the work.
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F&A Rate Resources
The following resources are available to assist in determining F&A rates:
What’s My F&A Rate?
Chart of Indirect Cost Rates (a.k.a. F&A)
Indirect Cost Rates (a.k.a. F&A) Agreement
Refer to the Sponsored Research Facilities and Administrative Cost Rates website:
http://www.research.usf.edu/sr/indirectcost.htm
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F&A Cost Rates
F&A costs are calculated on a percentage of the direct costs of the project.
All proposals must use one of USF’s negotiated indirect rates.
- The appropriate USF negotiated F&A rate is applied to all federal or federal-flowthru awards using a Modified Total Direct Cost Base (MTDC).
- For all awards other than federal and federal-flow-thru, the appropriate USF
negotiated F&A rate is applied to the Total Direct Cost (TDC) base.
- If a sponsor has formal guidelines indicating a lower rate, USF will accept the
lower rate.
- Letters indicating a sponsor's refusal to pay our negotiated rate is not
acceptable. We must have reference to an official rule or published guideline.
Contact Sponsored Research for assistance.
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Modified Total Direct Costs (MTDC)
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Total Direct Cost (TDC)
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MTDC Example
Modified Total Direct Cost (MTDC) consists of:
Salary & Fringe
$
100,000
Material and Animal Costs
$
1,100
Travel
$
1,500
Subcontract (1st 25,000)
$
25,000
Subtotal $
127,600
Subcontract (amount over $25,000)
$
1,000
Laboratory Equipment
$
2,000
Tuition Remission for Grad Research Assistant
$
1,510
Alternations and Renovations
$
1,900
Patient Care Costs
$
1,200
Space Leasing
$
900
Utilities
$
890
Scholarships
$
1,000
Fellowships
$
1,000
Stipends
$
1,000
Subtotal $
12,400
Total Direct Costs $
140,000
•
A budget of $140,000 for direct costs
and a negotiated 50% F&A rate would
equal $70,000 F&A costs.
•
However, MTDC excludes $12,400
from the direct cost base which F&A is
applied. F&A is applied to the MTDC
base of $127,600.
•
50% F&A rate does not mean that
50% of the total costs of research
represent F&A costs.
•
The Effective F&A rate is 46%.
($63,800 divided by $140,000).
Excluded from the MTDC calculations are:
*F&A on applicable cost items - $127,600 X 50%
$
63,800
Total Direct and F&A Costs of Research
$
203,800
*Without MTDC exclusions F&A costs $70,000
**Effective F&A Rate 46%
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TDC Example
Total Direct Cost (TDC) consists of all:
Salary & Fringe
$ 100,000
Material and Animal Costs
$
1,100
Travel
$
1,500
Subcontract
$
26,000
Laboratory Equipment
$
2,000
Tuition Remission for Grad Research Assistant
$
1,510
Alternations and Renovations
$
1,900
Patient Care Costs
$
1,200
Space Leasing
$
900
Utilities
$
890
Scholarships
$
1,000
Fellowships
$
1,000
Stipends
$
1,000
•
A budget for a non-federal
sponsor with a published
F&A rate of 10%. There
are no exclusions with
TDC.
•
The F&A rate of 10% is
applied to the total direct
cost amount of $140,000.
•
The Effective F&A rate is
10% ($14,000 divided by
$140,000).
Total Direct Costs $ 140,000
F&A on applicable cost items - $140,000 X 10%
$
14,000
Total Direct and F&A Costs of Research
$ 154,000
Effective F&A Rate 10%
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MTDC Example on the Grant Budget Release
(GBR)
TDC
$133,000.00
MTDC
(after exclusions)
$ 25,000.00
F&A Amount
(47% of $25,000)
$ 11,750.00
TDC
$133,000.00
F&A Amount
$ 11,750.00
Total Project Costs $144,750.00
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TDC Example on the Grant Budget Release
(GBR)
TDC
$133,000.00
F&A Amount
$ 62,510.00
(47% of $133,000)
Total Project Costs $195,510.00
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Impact of Budget Transfers on F&A -MTDC
If the F&A base is MTDC and involves both F&A bearing and F&A non-bearing budget amounts
(such as tuition, equipment, etc.), one side of the transaction may have F&A while the other
does not:
The formula for MTDC: Transfer amount divided by 1.”F&A Rate” (2500/1.10) = $2272.73 decrease + $227.27 F&A on decreased amount.
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Impact of Budget Transfers on F&A - TDC
If the F&A base is TDC, there is no impact to F&A (The F&A section need not be completed).
The total amount of a budget transfer must be equal on both sides of the transaction.
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Determining On-Campus vs. Off-Campus
On-Campus = the preponderance of the program is conducted in University
buildings using University facilities and resources.
Off-Campus = 51% or more of the research will occur at off-campus
locations.
-
The off-campus rate is lower than the on-campus rate because the
cost of doing research off-campus is lower.
-
The off-campus rate should not be used merely to lower the overall
cost of a project.
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Off-Campus Adjacent vs. Off-Campus Remote
- Off-Campus, adjacent includes locations within the
commuting distance of Tampa, Florida.
- Off-Campus, remote includes locations outside the
commuting distance of Tampa, Florida.
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Off-Campus Training, Data Collection or Other
Sponsored Activity
- If the majority of the effort and resources for a project are done oncampus, the project must be charged the on-campus rate.
- If work is performed off-site, one must consider:
• Where was the prep work done?
• What resources were used?
• Where was the material prepared and printed?
• What effort and how much effort is being done at the office?
• Is there additional work to be done on-site?
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Impact of Equipment Thresholds
The University’s equipment threshold complies with
Florida state law (equipment over $5,000).
- Sponsor equipment thresholds vary. Check the sponsor
guidelines. For federal sponsors, the threshold is $5,000.
- The threshold to be used is always the more restrictive.
Refer to CCHIP #018, Purchasing Equipment on Sponsored Awards :
http://usfweb2.usf.edu/UCO/research/CCHIP018_Purchase_Equipment_on_Sponsored_Awards_final.pdf
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Rental Space and F&A
- If the project is MTDC based, rental space does not
incur F&A.*
- If the project is TDC based, rental space incurs
F&A.
*OMB Circular A-21 – J.43 – indicates rental costs of buildings and equipment are
allowable - 43. Rental costs of buildings and equipment.
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F&A on Subprojects
- The F&A rate for subprojects should be the same rate
as the primary project.
- When budget is transferred from the primary project
into a subproject, the applicable F&A is also moved to
the subproject.
Refer to ResearchCCHIP #015, Assignment of Contract and Project Numbers and the Sponsored Research
Guidelines for Subawards and Subaccounts: http://www.research.usf.edu/sr/Subawards-%20final%20draft.pdf.
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GL Expense Account Codes for Subcontracts
For subcontracts, there are two General Ledger (GL) expense
account codes that are used:
- 51900 for each subcontract up to and including the first $25k (F&A
bearing).
- 51800 for each subcontract after the first $25k (non-F&A bearing).
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Fixed Price vs. Cost Reimbursable Projects
- Fixed Priced Projects:
The awarded F&A amount is booked as an expense at the
beginning of the budget period.
- Cost Reimbursable Projects:
F&A is assessed daily on all F&A bearing direct costs.
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Is There an F&A Rate Exception Process?
It is imperative that the F&A rate be sufficient to support
the University goals and mission.
- If a project’s F&A costs limit the ability to perform the proposed
tasks, the PI and his or her supervisor must determine whether or
not the project is appropriate to pursue.
- If appropriate, the PI may request a reduced F&A rate.
- Reduction requests must be sent, with the proper rationale, to the
Sponsored Research, Sponsored Research Administrator who will
seek a decision from the Associate Vice President for Research &
Innovation.
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F&A Recovery
-
F&A recovery is based on the dollars invoiced and collected
from the sponsor.
-
A portion of the recovered F&A is distributed to the colleges.
-
Each college has the ability to determine the allocation of
funds to the Department /Principal Investigator (PI).
Our research infrastructure is supported by the recovered F&A!
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Recovered F&A
According to Florida Statute 1004.22(5), Divisions of sponsored research
at state universities:
Moneys received for overhead or indirect costs and other moneys not
required for the payment of direct costs shall be applied to the cost of
operating the division of sponsored research. Any surplus moneys shall
be used to support other research or sponsored training programs in any
area of the University.
At USF, these “surplus moneys” are deposited into accounts—Research
Initiatives—which may include other funds such as those received for
internal awards or start-up commitments, as well as residuals from fixedprice contracts.
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USF System’s effective F&A recovery based on
direct expenses has grown slightly since 2007
Project Research Expenditures by Fiscal Year,
with Effective F&A Recovery Rates
Direct Expense
Indirect Expense
Expenditures in Millions
$250
$200
16% F&A
14% F&A
15% F&A
17% F&A
16%
F&A
$150
$100
$50
$0
2007
2008
2009
2010
One reason behind the effective F&A increase is that federal and state F&A rates have increased in recent years.
Note: Project research expenditures do not include convenience accounts
Source: USF data, “Research Expenditures FY2007-FY2010”.
Source: Huron Consulting Group, Presentation to the Research Advisory Board, October 4, 2010.
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Spending Recovered F&A
To ensure that recovered F&A is expended according to Florida law, USF
developed the Office of Research & Innovation Guidelines for Allowable
Expenses on Research Initiative Accounts (RIAs):
http://www.research.usf.edu/files/sr/AllowableExpenses.pdf
-
Recovered F&A is distributed to Research Initiative Accounts (RIAs).
-
USF provides guidelines related to allowable expenses on RIAs.
-
Simply said, all expenses must be “research related.”
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Unallowable RIA Expenses
Funds in Research Initiatives may not be used to pay for the following:
-
Costs related to instruction (class materials, instructor salaries, teaching
assistants)
-
Extra Compensation
-
Bonuses
-
Alcohol
-
Flowers
-
Gifts
-
Food & Beverage
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TRAIN® F&A Project Team
Special thanks to the following for their time and support in creating this workshop:
Matthew Anderson
College of Medicine
Sandra L. Justice
College of Arts & Sciences
Benjamin Chang
College of Engineering
Michael Melanson
College of Education
Lynn Cooil
Office of Research & Innovation
Rebecca Miro
College of Medicine
Jennifer Du
College of Behavioral & Community Science
Mary Parrish
College of Arts & Sciences
Kimberly Finch
College of Medicine
Elida Porro
College of Behavioral & Community Sciences
Patricia Geisler
Talent Management
Janet Reyes
College of Behavioral & Community Sciences
Maricel Hernandez
College of Behavioral & Community Sciences
Doreen Shockley
Research Financial Management
Adam Tobias
College of Medicine
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Congratulations
You have completed this module!
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