Administering Office: Office of the Provost
Approved: Executive Council on March 21, 2005
Posted: April 29, 2005
The following statements were extracted from Policy 500.5 of The University of North Carolina Board of Governors on “ University Research Facilities and Administration Receipts Reporting Policy.”
F & A costs (sometimes called indirect or overhead receipts) are calculated for such items as facilities maintenance and renewal, libraries, salaries of technical, compliance and administrative personnel, equipment, scholarly development, and facilities support. F & A rates are set by negotiation between the federal government and each university. Lower rates are often established statutorily or by policy by certain programs and sponsors. Under federal OMB Circular A-21 indirect costs generally reimburse for costs of the grants and contracts operations of the institution and other overhead expenses of the university in a manner consistent with the formulae under which the funds were recovered.
UNC institutions determine expenditure of F & A receipts. The chancellor of each constituent institution shall expend F & A funds only to support scholarly development of its faculty, staff and students or to ensure that the campus infrastructure is supported to enhance such scholarly activities.
Facilities and Administration (F & A) rates for grant-funded projects are determined from a variety of sources. At the federal level, the rate for universities (including Western Carolina University ) is negotiated with the U.S. Department of Health and Human Services. The current agreement (and applicable rates) is posted on the Western Carolina University Sponsored Programs and Research website. Typically, F & A rates for federal training grants are restricted by federal regulations to 8% of total direct cost rates excluding subcontracts. In other cases, the Request for Proposal (solicitation) or sponsor may set a specific rate. Finally, some sponsors (especially foundations) may prohibit the inclusion of F & A costs in the budget.
The federal government’s Office of Management and Budget (OMB) Circular A-110 (Uniform Administrative Requirements for Grants and Contracts) considers “cost sharing” and “matching” to be synonymous. Cost sharing is defined as “all contributions, including cash and third party in-kind which meet seven criteria: verifiable, not included as contributions for any other federally-assisted project or program, necessary and reasonable for accomplishment of objectives, allowable, not paid by the Federal Government under another award (except where authorized by statute), provided for in the approved budget when required by the Federal awarding agency, and conform to other Circular provisions.” When required, cost sharing can be allocated either in cash (e.g., as in a grant from another permitted source) or “in-kind” as in the donation of equipment, materials, space, and/or services.
Unless restricted by the sponsor, all grant and contract proposal budgets submitted for external funding shall incorporate the full prevailing negotiated F & A rate or the approved university rate for a class of sponsors (e.g. corporate sponsors, state government, school districts etc.).
When the sponsor limits or prohibits the full recovery of F & A costs, the Principal Investigator must provide a statement from the sponsor concerning the restriction when submitting the proposal for internal review and approval. This statement may be a copy of the applicable policy from the sponsor’s website, request for proposal, grant guidelines, or other documents, or a written statement received directly from the sponsor when no other statement of its policy is available. If the sponsor permits the recovery of F & A costs, but does not specify a rate, contact the Office of Sponsored Programs and Research to determine the applicable rate.
When the Principal Investigator wishes to waive part or all of the full amount of F & A costs that could be recovered, the Principal Investigator must provide a written statement justifying the waiver when submitting the proposal for internal review and approval, and this statement must be signed by the Vice Chancellor of Finance and Administration (or Provost if the Vice Chancellor is not available). Any approved waived amounts should be included in the budget in the in-kind cost sharing column.
Western Carolina University has elected to invest a portion of its recovered F & A costs in the support and stimulation of research and scholarly activities. Consequently, at the beginning of each fiscal year the Budget office will transfer an equivalent amount of recovered F & A funds from the prior fiscal year into the general fund to Research Incentive accounts. The distribution and policies guiding F&A funds shall be specified in a memorandum of understanding (MOU) between the Chancellor, Provost and Chief Financial Officer. This MOU shall exist for a specified period of time or until the total university level of recovered F&A funds reaches an agreed upon threshold. Further, the MOU shall include the units receiving funds, the percentage of distribution, acceptable expenditures for funds, the F&A threshold and any other parameters the parties believe necessary. A copy of the MOU will be posted on the research administration website.
Research Incentive funds are restricted to items that support and stimulate faculty research. Research Incentive funds may be used to fund required institutional contributions (cost sharing)or cost overruns for existing grants. Funds allocated to Sponsored Programs and Research may be used to supplement the funding for the expenses of the office, to fund and stimulate grant writing initiatives that support scholarship and stimulate grant writing.
It is the general practice of the university not to cost share unless required by the sponsor. The exception to this practice is cost sharing will be claimed for F&A disallowed by sponsors (e.g. foundations). When cost sharing is required, the applicant should attach a copy of the requirement to the internal processing form. If a cost sharing commitment was not required, but the principal investigator desires a cost sharing commitment, the PI must provide a written statement justifying the inclusion on the “ Internal Processing Form for an Application for Grant, Contract, or Cooperative Agreement,” and the cost sharing amounts committed must be initialed by the person(s) whose budget(s) will provide the funds. This commitment must be approved by the Vice Chancellor of Finance and Administration (or Provost if the Vice Chancellor is not available).