Facilities and Administrative Costs (F&A) on Sponsored Projects

SUBJECT: Facilities and Administrative Costs (F&A) on Sponsored Projects		Policy Number: 10.2.5
	Effective Date: 03-08-2023	Renewal Date:
	Supersedes: 12-01-2020 07-01-2018 01-14-2013 01-19-2012 06-01-2011	Page 1 of 5
	Responsible Authorities: Vice President for Research Assistant Vice President for Research, Office of Sponsored Programs

I. BACKGROUND

The practice of providing F&A returns to award recipients originated with the United States government. In recognition that F&A are real costs of doing business, the process of establishing F&A rates was developed as a means to provide reimbursement to grantees for these supportive services.

F&A costs are auditable expenses of operations incurred by an organization for common or joint objectives which are necessary to the general operation of the organization. F&A charged on projects provides reimbursement for actual institutional expenses that cannot be directly charged to a sponsored project.

These costs are deemed “indirect” because they are not easily identified with a specific project and therefore are not included in the “direct” portion of the budget. F&A costs support the conduct of sponsored projects, regardless of the source of funding, and therefore must be applied to all sponsored projects.

Examples of F&A costs include, but are not limited to, utilities to heat, cool and illuminate laboratories, custodial services, occupational safety, hazardous waste disposal, maintenance and repairs and depreciation costs of buildings and equipment, insurances, library resources, general administration (purchasing, payroll, legal services, accounts payable services, and research services such as pre-award, post-award and compliance services, etc.)

When Florida Atlantic University (FAU) does not receive reimbursement for F&A costs from a sponsor, those costs must be paid by another FAU source and funds must be diverted from other FAU objectives to cover these institutional expenses.

In establishing a F&A rate agreement with the federal government, grantee organizational expenditures are grouped into F&A pools and then distributed to appropriate organizational activities in a cost allocation process. This information is presented by the grantee organization to one of several federal agencies empowered to negotiate a federal F&A rate. FAU’s F&A Rate Agreement is negotiated and established with FAU’s cognizant agency, the Department of Health and Human Services (DHHS). The F&A rate is renegotiated to allow for inflation, changes in the operations of the grantee organization, and/or changes in the level of sponsored activity.

FAU’s F&A rate agreement, including the F&A rate is calculated on the “Modified Total Direct Costs” (MTDC) base, which excludes certain expenditure categories such as equipment, capital expenditures, charges for patient care, rental costs, tuition, scholarships and fellowships, participant support costs and a portion of each subaward in excess of $25,000. The base upon which the F&A rate is applied is determined during the F&A rate negotiation with the cognizant federal agency.

Federal agencies who limit the F&A rate on sponsored projects must stipulate the restriction in the request for proposal (RFP), request for application (RFA), or solicitation.

Further, policies on F&A rates vary widely among state, regional, and local governmental agencies and public and private not-for-profit organizations. Often, both large and small foundations will limit the F&A or not reimburse F&A costs. However, they may pay an “administrative fee” to offset some of the F&A costs of the recipient institution. Such “administrative fees” are to be used by the Division of Research to offset the F&A costs.

Industry sponsors (For-profit companies) who are expected to benefit financially from sponsored research should be willing to pay the institution’s full F&A rate.

II. PURPOSE

The purpose of this policy is to establish the formal F&A policy and to provide guidelines in determining which federally approved F&A rate should be applied to the sponsored project, i.e. Organized Research, Instruction, Other Sponsored Activities, or On or Off-Campus.

III. GENERAL STATEMENT

This policy is applicable to all personnel, who are eligible to serve as a Principal Investigator, Co-Principal Investigator, or Co-Investigator on any sponsored project.

IV. POLICY

FAU’s policy is to recover FULL F&A costs for sponsored projects, whenever possible. It is important to collect full F&A costs to cover the real costs of conducting sponsored research.

FAU’s federally approved F&A rate agreement includes various F&A rates to be used, depending on the activities performed. The approved rates include Organized Research, Instruction, Other Sponsored Activities, and On and Off-Campus.

Research is defined as a systematic study directed toward fuller scientific knowledge or understanding of the subject studied.

FAU’s approved F&A rate agreement recognizes that funded Research, Instruction, and Other Sponsored Activities may occur either on-campus or off-campus and that the University’s entitlement to recovery of F&A costs varies depending if the project is conducted on-campus or off-campus.

The following definition was approved as part of FAU’s F&A rate agreement to ensure accurate application of off-campus F&A rates to funded projects, including subawards made to FAU by prime recipients of grants, contracts, and cooperative agreements.

The off-campus F&A rate may be applied to a sponsored project only when the majority of project activities (more than 50%) occur in facilities not owned by FAU and when rent for those facilities is treated as a direct cost in the project budget and reimbursed by the sponsor.

The F&A rate agreement prohibits FAU from charging both on-campus and off-campus F&A rates on the same award.

For assistance determining whether a project qualifies for on-campus or off-campus F&A, please utilize the decision tree linked here.

When a project qualifies for the off-campus rate, a Non-FAU Facility Form for Off-Campus F&A Use which outlines the customary fees for the facility should be completed by a representative of the facility. It is expected that the facility provide and make available to FAU’s investigators the facilities, space, equipment, maintenance, utilities, communications and other resources in the conduct of the sponsored project.

Other F&A Rates

FAU recognizes that some sponsors, especially non-profit organizations, may limit or prohibit F&A rates from being charged to the sponsored project.

When a sponsor limits or prohibits the F&A from FAU’s federal negotiated rate, the sponsor must provide an official company letter or board-approved policy stating their F&A rate for any, and all applicants. The documentation must be reviewed and approved by the Division of Research authorizing official.

The Vice President for Research and the Assistant Vice President for Research in the Office of Sponsored Programs are the only individuals authorized to negotiate a lower F&A rate.

V. DEFINITIONS

Principal Investigator. A “principal investigator” is an individual who has primary responsibility for, and oversees, an externally funded sponsored project.

Facilities and Administrative (F&A) Costs. Also known as “indirect costs” or “overhead”, “F&A” are costs for common or joint objectives and therefore, cannot be readily and specifically identified with a particular sponsored project, instructional activity or any other institutional activity. These costs incurred by the institution cannot be directly charged to individual projects. Examples of F&A costs include, but are not limited to, utilities to heat, cool and illuminate laboratories, custodial services, occupational safety, hazardous waste disposal, maintenance and repairs and depreciation costs of buildings and equipment, insurances, library resources, general administration (purchasing, payroll, legal services, accounts payable services, and research services such as pre-award, post-award and compliance services, etc.)

Total Direct Costs (TDC). “Total Direct Costs” include all costs charged to a sponsored program account, excluding F&A.

Modified Total Direct Costs (MTDC). “Modified Total Direct Costs” consist of salaries and wages, fringe benefits, other direct costs such as materials and supplies, services, publications, travel, and subawards up to the first $25,000 of each subaward (regardless of the period covered by the subaward).

Costs excluded from the Modified Total Direct Cost calculation include: Equipment, capital expenditures, charges for patient care, tuition remission, rental costs, scholarships, fellowships, participant support costs, as well as the portion of each subaward in excess of $25,000.

VI. Policy Review

The Facilities and Administrative Costs on Sponsored Projects Policy will be reviewed and updated as necessary.

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POLICY APPROVAL

Initiating Authority

Dr. Daniel Flynn, Vice President for Research
2023/03/08

Executed signature pages are available in the Initiating Authority Office

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