FACILITIES AND ADMINISTRATIVE COSTS (F&A) Understanding Indirect Costs

What are Direct Costs Direct costs are those that can be specifically identified with a particular sponsored agreement, an institutional activity, or that can be assigned to such activities with relative ease, and with a high degree of accuracy. Examples of Direct Costs are: Principal Investigator (PI) / Project Director (PD) salaries, project employee wages, lab supplies, project travel, research equipment, etc.

What are F&A Costs F&A costs are those that are incurred for common or joint projects or objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity.

Total Project Costs Direct Costs + F&A (Indirect) Costs = Total Project Costs

Examples of F&A Costs Facilities (F) costs: buildings, improvements in support of research such as: Depreciation expenses for buildings and equipment Plant operations Repairs Utilities (Water, Electrical, Natural Gas, Waste Disposal) Custodial Interest Library costs

Examples of F&A Administrative (A) costs are offices that provide support institution-wide such as: President, Provost Deans, Chairs Financial and Business Affairs Accounts Receivable, Accounts Payable, Cashier, Purchasing Contract Administration, Risk Management, AAG Research and Sponsored Programs Human Resources Student Affairs Administration and Services

Why the Need to Identify F&A Costs? They must be accurately identified so the University can recover those costs from the sponsor. If they are identified as a contribution from the University to sponsored agreements, they cannot be charged to grants as a Direct Cost or used as Cost Share. Why not? Principle of Consistency. OMB A-21 C 11 (a) Cannot identify / commit a cost as part of the F&A pool or base, and then charge it as a Direct Cost. Cannot declare a cost as a Direct cost in one agreement and then declare it as an F&A (Indirect) cost in another.

Who Assigns the F&A Rate? The Department of Health and Human Services. Using Office of Management and Budget Circular A- 21 as a guide, WWU gathers information about F&A costs incurred campus-wide and develops an average F&A rate. This is the starting point used to negotiate with HHS.

How Does HHS Assign the Rate? The past fiscal year is used as the base year. Restricted and Unrestricted Centers are categorized. Pools Administration Bases

Whats in the Pool Category? Facilities Buildings Equipment Physical Plant Operations Library

Whats in the Administration Category? General Administration College Administration Departmental Administration Sponsored Project Administration Student Services Human Resources Financial and Business Administration

What is in the Base? Instruction Organized Research Other Sponsored Research Sponsored Instructional Activities Other Institutional Activities

After Bases and Pools are Established? The pool expenses are allocated among the pools as appropriate (library buildings put in the library pool) Unallowable costs are removed (A-21 J 10) Bases are reduced to Modified Total Direct Cost by removing capital equipment, subcontracts over $25K, student aid, etc. from total base costs. Caps from the government are applied to expenses (26% for administration) Major increases or decreases to pools, bases are projected and incorporated (construction etc.) based on how much they contribute to research

And After That? Total costs in each pool derived Total pool cost in each group divided by correct base costs and F&A rate is determined Rates are proposed to and negotiated with HHS. HHS gives final determination and Rates are implemented

How Often are F&A Rates Negotiated? It depends.... On the number of years negotiated / assigned by HHS. Normally it is for two to four fiscal years, with a provisional year added to use when the new rates are being negotiated.

What is Westerns F&A Rate? 53.1% of Salaries and Wages (not fringe) for on- campus 18% for off campus Every college/university has different rates/policies/distribution plans Many institutions use modified total direct cost rates, and we dont.

What Qualifies as Off Campus? Off Campus Rate: When all of the research or activity occurs at a remote location where no university resources contribute to the support of the facility. However, (1) if a university office is located off campus, and (2) if the University pays the rent and utilities it does not qualify for the 18% rate.

How Does the University Recover F&A? When salaries and wages are charged to a sponsored agreement WWU pays them and then RSP bills the sponsor for the grant expenditures + the appropriate amount of F&A

What Happens to Recovered F&A? 25% to Fiscal Services and Budget Office 22% to RSP (salary and wages for personnel and operating expenses) The Remaining 53% to Faculty: Travel to conferences ($500 per Tenured faculty) Redistribution to colleges of proportion recovered Research Equipment Match Small grants (GIA, Pilot P, Summer R/T, Mini, Manuscript, Pub Support, Journal Editing,) Project Development Awards Scientific Technical Services