Initially Approved: March 21, 2005
Posted: April 29, 2005
Revised: September 21, 2022
Policy Topic: Business Administration and Auxiliary Services; Research and Sponsored
Administering Office: Office of the Provost
This policy has been established to meet the compliance standards set forth in the federal Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Principal Investigators/Project Directors and administrators involved in sponsored projects must understand and comply with this policy to ensure that costs are properly charged and meet federal costing standards.
Facilities & Administrative (F&A) costs are indirect costs which are necessary to support research and other sponsored projects, but which cannot be readily assigned to individual projects. 2 C.F.R. § 200.1 (2022). Examples include facilities maintenance and renewal, libraries, salaries of technical, compliance and administrative personnel, equipment, scholarly development, and facilities support. 2 C.F.R. § 200.414(a) (2022). F&A rates are approved by the federal government as the basis for determining the amount of F&A costs chargeable to individual grant and contract awards. 2 C.F.R. § 200.414 (2022). These costs are generally charged to all external grants and contracts unless the sponsor’s written policy prohibits or limits such reimbursement.
“Direct Costs” charged to sponsored agreements must be allowable, allocable, and reasonable. These costs can be identified specifically with a particular sponsored project, an instructional or any other institutional activity, or can be directly assigned to such activities relatively easily with a high degree of accuracy. 2 C.F.R. § 200.413(a) (2022). Direct costs do not include overhead or other indirect costs.
“Facilities and Administrative Costs” are also referred to as indirect costs, overhead, overhead costs, or administrative costs. Defined as reimbursement for actual institutional expenses that support extramural activities but cannot be directly charged to a specific grant of contract award. 2 C.F.R. § 200.1 (2022). Information on current F&A rates are available on the Office of Research Administration website.
“Indirect Cost Reduction” is any request to apply a lesser rate than the federally negotiated Facilities and Administrative Cost rate or the rate established in a sponsor’s published program or policy documentation.
“Office of Management and Budget (OMB)” is a branch of the Executive Office of the President. OMB helps the president formulate spending plans; evaluates the effectiveness of agency programs, policies, and procedures; assesses competing funding demands among agencies; and sets funding priorities. OMB ensures that agency reports, rules, testimony, and proposed legislation are consistent with the president’s budget and with federal administration policies. 2 C.F.R. § 200.1 (2022).
“Principal Investigator” is any faculty or indefinite status staff member that may serve as a principal investigator on a sponsored project.
“Project Director” see Principal Investigator.
The principal investigator (PI) or project director (PD) must include indirect costs in the proposal budgets of all grants, contracts, and other sponsored agreements submitted for external funding at the maximum rate allowed by the sponsor. The PI or PD shall use the University’s official, federally negotiated indirect cost rate unless specifically limited for all awardees by a sponsor.
When the sponsor limits or prohibits the full recovery of F&A costs, the PI 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.
The University’s F&A rate agreement is negotiated with the U.S. Department of Health and Human Services every four years by the Office of Research Administration. The current agreement is posted on the Office of Research Administration website.
The University shall determine expenditure of F&A receipts. The chancellor 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. The University has elected to invest a portion of its recovered F&A costs in the support and stimulation of research and scholarly activities. Further information can be found in APR 28.
This policy shall be reviewed and revised as necessary every four (4) years in conjunction with the F&A rate negotiation.
2 CFR 200: OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards: