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New Facilities and Administrative (F&A) Costs Rates Effective July 1, 2019

EKU has received notification of new Facilities and Administrative (F&A) costs (also referred to as indirect costs) rates for the period of July 1, 2019 through June 30, 2023 or until amended.  Effective immediately, the revised rates must be used for all sponsored project proposals with anticipated start dates on or after July 1, 2019. 

The new rates are as follows:

On-campus rates:
  • Organized Research: 44% MTDC for FY 2020; 45% for FY 2021; 46% beginning in FY 2022
  • Instruction: 53% MTDC
  • Other Sponsored Activities: 42% MTDC
Off-campus rates:
  • Organized Research:  26% MTDC
  • Instruction:  26% MTDC
  • Other Sponsored Activities: 26% MTDC

To learn more about F&A costs and how they are budgeted and recovered, please review the answers to Frequently Asked Questions (FAQs) below. 

FAQs

What are Facilities and Administrative Costs? 
Also referred to as indirect costs, F&A costs are expenses incurred by an organization that cannot be identified readily and specifically with a particular sponsored project, but contribute to the ability of the University to conduct sponsored projects.  Expenses of maintaining and operating the University’s sponsored project infrastructure include costs related to buildings (labs, offices, training facilities, etc.), utilities (water, electricity, heating, air conditioning, etc.), maintenance (custodial and facilities services, etc.), equipment, libraries, general administration (purchasing, accounting, payroll, human resources, legal services, etc.), departmental administration (deans offices, academic departments, etc.), and sponsored project administration.  These costs are considered F&A costs, and sponsoring agencies reimburse organizations for these expenses through an F&A rate. 

To what budget items does the F&A rate apply?
All rates are applied to a Modified Total Direct Costs (MTDC) base.  The MTDC base includes all direct costs, excluding capital expenditures, equipment with a per-unit cost of $5,000 or more, charges for patient care and tuition remission, rental costs of off-campus facilities, scholarships, fellowships, participant support costs, and the portion of each subaward that exceeds $25,000. 

How do I know which rate to use in my budget?
In order to determine the appropriate rate for a specific project, the project must be classified by function and as either on-campus or off-campus. 

There are separate rates for Organized Research (an inquiry, experiment, or investigation undertaken with the intention of increasing scholarly understanding in the involved discipline), Instruction (teaching activities) and Other Sponsored Activities (generally service projects that are neither organized research nor instruction). 

The off-campus rate applies to activities performed in facilities not owned by the University and to which rent is directly allocated to the project.  The off-campus rate is lower because, in these cases, the sponsoring agency is directly paying for the facilities component.  When a project involves work performed in rented facilities as well as work performed on campus, actual costs must be apportioned between on-campus and off-campus components using the appropriate F&A rate.  

Why does the University require project directors to budget for F&A costs?
F&A costs are real costs that are incurred by the University in administering a sponsored award.  Because it is not practical for a project budget to allocate funding for all such costs, the Federal government utilizes a rate model to account for these expenses and to provide a fair and consistent method through which reimbursement can be made.  The University requires that sponsored project budgets include F&A costs because facilities and administrative expenses are incurred for each sponsored project, and without funds to cover these costs, the University would not have an infrastructure that could support sponsored projects.  It would be unfair to require students to cover these costs through tuition revenue, especially for projects that are not for their direct benefit.

How are the rates determined?
The Federal government outlines specific procedures to be used in determining the rates and requires institutions to provide a proposal and financial data in accordance with these procedures.  The government then uses a detailed review process to arrive at approved rates for each organization.  The rates are not set by the University and cannot be amended without a new Federal rate agreement. 

What does the University do with funds recovered through the F&A rate? 
The University currently has a unique policy that involves returning a portion of the recovered funds to the units from which the awards originated.  These funds are provided to support research and scholarship within those units.  The remaining funds are used to help offset the University’s facilities and administrative expenses. 

What if I want to apply to a funding program that limits or prohibits F&A costs?
If a sponsoring agency limits or prohibits the recovery of F&A costs, the University currently accepts these restrictions and subsidizes the F&A costs provided that written documentation (i.e., policy statement or application guidelines) from the sponsoring agency is provided when the proposal is submitted for internal review.

What if I have a current sponsored project award that uses a lower rate?
The revised rates apply only to new awards and do not impact existing awards.  Effective immediately, project directors are required to use the new rates for all proposals submitted for internal review.

Where can I get more information about F&A Costs?
The National Institutes of Health website has an informative video that provides an overview and history of F&A costs and rate agreements. 

If you have questions about budgeting for F&A costs, please contact Sponsored Programs.  

Published on April 04, 2019

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