What are Facilities and Administrative Costs?
Facilities and Administrative costs are also known as F&A or overhead or indirect costs. These costs represent the expenses of doing business that are not
readily identified with a particular grant, contract, project function
or activity, but are necessary for the general operation of the
organization and the conduct of activities it performs. In theory, costs
like heat, light, accounting and personnel might be charged directly if
little meters could record minutes in a cross-cutting manner. Practical
difficulties preclude such an approach. Therefore, cost allocation
plans or indirect cost rates are used to distribute those costs to
benefiting revenue sources.
Looking at it another way, indirect costs are those costs that are
not classified as direct. Direct costs can be identified specifically
with particular cost objectives such as a grant, contract, project,
function or activity. Direct costs generally include:
Salaries are wages (including vacations, holidays, sick leave,
and other excused absences of employees working specifically on
objectives of a grant or contract – i.e, direct labor costs).
Other employee fringe benefits allocable on direct labor employees.
Consultant services contracted to accomplish specific grant/contract objectives.
Travel of (direct labor) employees.
Materials, supplies and equipment purchased directly for use on a specific grant or contract.
Communication costs such as long distance telephone calls or telegrams identifiable with a specific award or activity.
An indirect cost is any cost that cannot be easily identified (or it would
not be cost effective to identify) to a specific project, but identified
with two or more final cost objectives. Indirect is, therefore, incurred for a common or joint objective and cannot be readily identified with and specifically charged to a specific project or activity.
In general, the cost groupings (pools) established within a category should
constitute, in each case, those items of expense that are
considered to be of like nature in terms of their relative contribution
to (or degree of remoteness from) the particular cost objectives to
which distribution is appropriate. Cost groupings should be established
considering the general guides provided in subsection c of Section F in 2 CFR 220 (OMB Circular A-21).
An indirect cost rate is simply a mechanism for determining fairly and
conveniently within the boundaries of sound administrative principle,
what proportions of Departmental/organization administration costs each
programs should bear. F&A Rates are developed under the requirements of the U.S. Office of Management and Budget Circular A-21, Cost Principles for Educational Institutions. An indirect cost rate represents the ratio between
the total indirect costs and benefiting direct costs, after excluding
and or reclassifying unallowable costs, and extraordinary or distorting
expenditures. (i.e., capital expenditures and major contracts and
subgrants). The indirect costs in the numerator of the equation should
bear a reasonable relationship to the direct costs from the denominator.
This will allow for each program or activity represented in the direct
costs base to assume their fair share of indirect costs when the rate is
How to Calculate F&A (Indirect)
1.) Add all project costs to get your Modified Total Direct Costs (MTDC).
2.) Subtract: Equipment (defined as having a useful life of more than one year and an acquisition cost of $5,000 or more per unit) Capital expenditures, Patient care costs, tuition remission charges,
long-term space rental costs, scholarships and fellowships, sub-grant
& subcontract portions in excess of $25,000 regardless of period
covered. For example: If a subcontract is proposed for three years
using the same entity at $35,000 per budget year, the F&A rate is
applied only to the first $25,000 of Year 1 from your TDC. These items
cannot have F&A charged to them. The remaining amount is your
Modified Total Direct Costs (MTDC).
3.) Multiply the MTDC and the F&A rate this total will equal your F&A costs.
4.) F&A Costs + MTDC = Total Project Costs
University expects the full F&A cost rate to be used on all
sponsored projects. Some sponsors such as Foundations and private
industries have written policies that limit or exclude full indirect
costs. The University will accept these rates when the written policy
is provided, and attached to the Indirect Cost Waiver which has been
approved and signed by the College’s Dean prior to the proposal
submittal to OSP. In unusual circumstances, the PI can obtain a
waiver for F&A costs from the Vice Provost for Research and Graduate
Studies. The waiver request is to be made when a proposal is submitted
to the funding agency: F&A Exemption Form
F&A State of Alaska Memorandum of Agreement (MOA)
The University of Alaska has a fundamental role to play in providing education, basic and applied research and public service programs to support the development of Alaska's economy.The University recognizes that the State is partially funding facilities and administrative costs through the annual general fund appropriation. The University and State agree to simplify and standardize the award process by adopting an F&A rate of 12% for State-sponsored awards for instruction, training and other sponsored activity funded by the State. State sponsored research will apply a rate of 25%. The base for both of these rates will be Modified Total Direct Cost or MTDC as described in 2 CFR 220 (OMB Circular A-21).
FY11-13 Predetermined Federal Rates
The Facilities and Administrative (F&A) rates contained herein are for use on grants, contracts and/or other agreements issued or awarded to the University of Alaska (UA) by all Federal Agencies of the United States of America, in accordance with the cost principles mandated by 2 CFR 220. These are shall be used for forward pricing and billing purposes for UA's Fiscal Year (FY) 2011-2013. This rate agreement supersedes all previous rate agreements/determinations for Fiscal Year(s) 2011-2013. Negotiation Agreement for Predetermined Rates. Dated 12/20/2010 by Department of the Navy, Office of Naval Research.
CESU projects F&A Rates
The Cooperative Ecosystem Studies Units (CESU) Network is a national
consortium of federal agencies, academic institutions, tribal, state,
and local governments, nongovernmental conservation organizations, and
other partners working together to support informed public trust
resource stewardship. The CESU Network includes nearly 300 partners, including 13 federal agencies, in seventeen CESUs
representing biogeographic regions encompassing all 50 states and U.S.
The objectives of this network are to:
• provide usable knowledge to support informed decision making;
• ensure the independence and objectivity of research;
• create and maintain effective partnerships among the federal agencies and universities
to share resources and expertise;
• take full advantage of university resources while benefiting faculty and students;
• encourage professional development of current and future federal scientists, resource
managers, and environmental leaders; and
• manage federal resources effectively
On May 1, 2004, the Cooperative Ecosystem Studies Units (CESU) Network
Council raised the F&A (indirect cost) rate to 17.5%. A fact sheet regarding the F&A rate policy is available.