FAQ: Facilities & Administrative (F & A) Costs on Sponsored Projects

The federal government recognizes that it is not possible to accurately capture all costs of an organization that are allocable to a particular grant. Guidelines in OMB Circular A-21 (2 CFR, Part 220), Cost Principles for Educational Institutions, define a process for grouping costs into specified cost pools, which are then distributed to appropriate activities in a cost allocation process. Once the cost allocations are made, negotiations take place between the university and its cognizant agency, an agency designated to negotiate federal indirect cost rates. The University of Nebraska–Lincoln negotiates with the Department of Health and Human Services. Rates are generally renegotiated every three to four years. More than one rate has been negotiated by UNL. Rates cover organized research, instruction, Agricultural Research Division, Cooperative Extension Service and other sponsored activities.

Federally negotiated F & A costs are charged against modified total direct costs (MTDC). Modified total direct costs exclude equipment, capital expenditures, charges for patient care and tuition remission, rental costs, scholarships and fellowships, as well as the portion of each subgrant/subcontract in excess of $25,000. It is UNL’s practice to exclude the total amount of any subgrant/subcontract to its sister institutions, UNK, UNO & UNMC.At UNL, equipment is defined as an item having an acquisition cost of $5,000 or more and a useful life of more than one year. Please note that on projects whose budgets include F & A rates other than our federally negotiated rates, F & A is generally charged against total (all) direct costs.

You should be aware of the effect of rebudgeting on the F & A costs charged to a project. F & A costs are based on actual award expenditures, which may differ from expenditures originally budgeted in the proposal.

In the example shown below, equipment expenditures (non-F & A bearing) were $5,000 more than the budgeted amount, while other direct expenditures were $3,390 less than budgeted, resulting in a $1,610 reduction in F & A costs.

Expenditure	Budgeted	Expenditures
Salaries and Benefits	25,000	21,610
Operating Expenses	5,000	5,000
Equipment*	12,000	17,000
Total Direct Costs (TDC)	42,000	43,610
Total MTDC	30,000	26,610
F & A (47.5% of MTDC)	14,250	12,640
Total (TDC + F & A)	56,250	56,250

*excluded from TDC in calculating MTDC

If you budget for a non-F & A bearing expense but then spend more in an F & A bearing account category, you must reduce the amount you can spend on total direct costs for the correct F & A to post. In the next example, equipment expenditures were $7,000 under the budgeted amount, while other direct charges were $4,746 more than the budgeted amount. The result is a $2,254 increase in F & A costs.

Expenditure	Budgeted	Expenditures
Salaries and Benefits	25,000	29,746
Operating Expenses	5,000	5,000
Equipment*	12,000	5,000
Total Direct Costs (TDC)	42,000	39,746
Total MTDC	30,000	34,746
F & A (47.5% of MTDC)	14,250	16,504
Total (TDC + F & A)	56,250	56,250

*excluded from TDC in calculating MTDC

For the latest F & A rates, visit the Facilities and Administrative Cost Rates page.

It is UNL’s practice to apply only one F & A rate to each sponsored project. The rate most appropriate to the type of activity being performed in the project should be used. In addition, the off-campus rate should be applied only when the preponderance of project activities is performed in facilities not owned by the institution and/or to which rent is directly allocated to the project.

F & A funds are shared with colleges across campus and used to build and maintain infrastructure and facilities, support faculty start-ups, fund required cost-share and fund costs of compliance.

The Office of Research will allocate F & A costs to various campus units each fall based on the F & A costs recovered in the previous fiscal year as follows:

• The first $700,000 recovered is directed to the university’s general operating budget as required by the State Legislature.
• After the general operating budget commitment is met, 20.5% of the remaining recovered F & A costs will be held centrally. The first $2 million of this amount will be used to support the Libraries and the remainder will support future infrastructure and research projects.

Of the remaining net amount:

• One-third will be held centrally for reimbursement of the university’s costs associated with research, such as campus computing, libraries, faculty travel, compliance, research operations, etc.
• One-third will be held by the chancellor and the vice chancellor for research and economic development (VCRED) for strategic research initiatives, including seed grant programs, start-up funding, required cost sharing and bridge funding. In an effort to encourage investigators and investigative teams to propose large projects, the chancellor and VCRED will return an additional five percent of the recovered F & A costs to investigators for those competitive, full F & A-bearing grants with total costs of $1,000,000 or more per year. The five percent incentive calculation will be based on the amount remaining after reductions for the grant’s pro rata share of the $700,000 commitment to the university’s general operating budget and the 20.5% held centrally.
• The remaining third will be distributed as follows:
  • For most individual or multi-investigator grants, the funds will be distributed to the appropriate college/administrative unit(s) indicated on the New Proposal Form in (NUgrant). The dean/director’s office will, at its discretion, provide the departments and/or centers a percentage of those funds. It is anticipated that these funds will be used strategically for research initiatives, faculty start-ups, bridge funding and required cost share, and to provide the necessary administrative support for research projects.
  • For individual or multi-investigator grants proposed through an approved UNL center or initiative (list maintained by the VCR Office), 60% of the funds will be distributed to the college/administrative unit, 20% to the center/initiative, and 20% to the department. This is effective for proposals submitted after January 1, 2002.
  • For large research initiatives (fully-competitive, full F & A-bearing grants, often referred to by agencies as center grants), 70% of the funds will be distributed to the center and 30% will be distributed to the college/administrative unit. These initiatives must be approved in writing by the VCRED prior to proposal submission and usually include projects for three or more years with budgets in excess of $1 million/year.

This policy will be reviewed periodically by the Office of Research to determine its continuing effectiveness in strengthening the growth of research at UNL. Questions about this policy should be directed to the Office of Research (402-472-3123 or UNLresearch@unl.edu). Last rev. 7/22/2008.

Memorandum
To: Deans, Chairs & Center Directors
Subject: F&A Costs and Distribution
Date: September 25, 2018

I would like to share with campus leaders information about how Facilities & Administrative (F&A) costs were reimbursed, distributed and expended at UNL over the past year. F&A funds are intended to cover the costs of research. UNL has a well-established process for distributing recovered F&A. Some of these funds are held centrally for the general operating budget. The remaining portion is divided three ways. One portion supports units in ORED and at UNL to ensure compliance and responsible management of sponsored projects. A second share of these funds is distributed to deans, departments, centers and faculty. The final amount is strategically invested in research at Nebraska to support faculty start-ups, recruitment and retention, facilities, renovation and equipment; to fund opportunities for collaboration, including retreats and education/training programs; and to provide other support in the form of seed grants, bridge funding, travel, cost share, etc. for faculty who are pursuing external funding.

Background: F&A costs, sometimes referred to as indirect costs or overhead, are those actual costs necessary to support research and other sponsored projects, but which cannot be readily assigned to individual projects. F&A costs include support costs related to facilities, libraries, departmental administration and general administration to comply with federal guidelines (procurement services, library services, research compliance and sponsored projects administration). Basic information about F&A costs and the policy for distribution of these funds are available on our website.

Rates: UNL’s F&A rate is calculated in accordance with federal cost principles and is negotiated periodically (usually every 3-4 years) with the federal government. It is important to remember that application of the F&A rate to sponsored projects actually represents a recovery of costs already incurred by the University during the preceding year. UNL is currently in the process of negotiating its F&A rate and expects to have a new rate within the year. UNL’s last F&A rate negotiation was in 2015 and this table outlines the most recently calculated and negotiated F&A rates:

The Office of Research and Economic Development (ORED) allocates funds to various campus units each fall based on the F&A costs recovered during the previous fiscal year.

• The first $700,000 recovered is directed to the university’s general operating budget, as required by the State Legislature.

• After the general operating budget commitment is met, 20.5% of the remaining recovered F&A costs are held centrally.
  – The first $2 million of this fund is used to support the Libraries; this allocation was implemented during the FY2011 budget reduction.
  – $139,532 is used to support Information Technology Services high-speed networking. The remainder is used to support major research infrastructure projects, including new construction, renovation, major equipment, etc. Some of the projects previously funded from the research infrastructure fund include Ken Morrison Life Sciences Research Center, Prem S. Paul Research Center at Whittier School, Voelte-Keegan Nanoscience Research Center, Life Sciences Annex, Diocles Extreme Light Laboratory, East Stadium Research Laboratories, Leverton Hall, Behlen Laboratory, Hamilton Hall, Chase Hall and the Walter Scott Engineering Center.
  – Since there is not sufficient funding to support all of our research infrastructure needs, F&A funds retained by the Chancellor and Vice Chancellor for Research and Economic Development have also been utilized to cover some of these infrastructure costs.

• The remaining funds are distributed equally.
  – One-third of the remaining funds are retained centrally to support various personnel and operating costs related to compliance and the responsible management of sponsored projects. These funds support units in ORED (Sponsored Programs, Proposal Development, Research Compliance, NUtech Ventures and Industry Relations), the division of Business & Finance (Environmental Health & Safety, Procurement Services, Internal Audit and Accounting), University Libraries, and Academic Affairs (for faculty travel for competitive research).
  – One-third of the funds are shared with colleges and divisions to support responsible management of and growth in sponsored projects. The colleges/divisions may choose to share these funds with related departments and/or centers.
  – The remaining one-third is split between ORED (70%) and the Office of the Chancellor (30%). ORED utilizes the funding to drive strategic research programs at UNL, including faculty start-ups; recruitment and retention; competitive seed grants; internal awards and faculty support (bridge funding, travel, stipends, etc.); required cost share; research equipment; and research collaboration-related expenses. The Office of the Chancellor invests its funding in major research projects. As noted earlier, a portion of ORED’s and the Chancellor’s funds have been invested in research infrastructure in the past. Please refer to the attached table, which shows a detailed allocation of the F&A costs at UNL during the most recent fiscal year (FY2018).

FY2018 Expenditures: F&A research expenditures at UNL totaled $23M in FY2018. 30% of these expenditures supported capital research and lab equipment, the library’s permanent collection, or capital construction or renovation of research space on campus; 23% supported compliance efforts and the responsible management of sponsored projects; 19% supported research operating costs primarily related to contracted services; 16% supported personnel costs for various faculty, staff and students working to support research at UNL; 8% supported research, lab and computing supplies; and 4% funded research travel-related costs.

F&A Investments FY2018