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. Each university or college is under a cognizant federal agency that negotiates an indirect cost rate that will apply to all federal agencies. The University of Alaska is under the Office of Naval Research.
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:
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 applied.
How to Calculate F&A (Indirect)
1.) Add all project costs to get your Modified Total Direct Costs (MTDC).
The 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 being submitted to OSP. The waiver request is to be made when a proposal is submitted to the funding agency: F&A Exemption Form
The Facilities and Administrative (F&A) rates 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, 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) 2014-16. This rate agreement supersedes all previous rate agreements/determinations.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. territories.