F&A or Indirect Costs
45.5% of salaries, wages & fringe benefits: off-campus program rate is 16.5%. Predetermined through IDC Rate Agreement with U.S. Dept. H.H.S. effective 7/1/12 through 6/30/16. Provisional thereafter until further notice.
What are Indirect Costs (IDC)?
Costs involved in conducting sponsored projects are categorized in two ways: direct costs or indirect costs. The federal government refers officially to indirect costs as facilities and administrative (F&A) costs, sometimes simply called "overhead" costs. Direct costs are "those costs that can be identified specifically with a particular sponsored project relatively easily with a high degree of accuracy." For example, the salary of a principal investigator (PI), or the purchase of specific supplies for a specific experiment are direct costs. They must be:
- Allowable (as described by federal cost principles in OMB Circular A-21;
- Reasonable (what a prudent person would spend);
- Allocable (limited to that portion of expenses directly benefiting the project and consistently treated as direct charges).
Indirect costs are "those that are incurred for common or joint objectives." In other words, indirect costs cannot be specifically attributed to an individual project. For example, it is difficult to say how much of a PI's lab space is used for a specific research project when multiple projects are being conducted in the same lab. We know the project benefits from the lab space, but how do we calculate the cost associated with that benefit? We arrive at the cost by using formulae that spread the costs of the whole lab across all projects conducted in the lab. The same basic process is used with all indirect costs across all projects.
Examples include the services of the accounting staff and research administrators, the cost of utilities for a building housing several research projects, office supplies, postage, local telephone service and communications infrastructure or salaries of personnel engaged in providing a broad range of departmental support activities.
In unusual circumstances, costs ordinarily claimed as indirect (hereafter referred to as "F&A costs") might be considered direct. The mitigating circumstances relate to the size, nature or complexity of the project. For example, although administrative and clerical staff salaries are ordinarily defined as F&A costs, if the duties required for a project are highly technical, then those salaries might be considered direct costs to the project. Typical F&A costs, like postage, photocopying, office supplies and local telephone service might be considered direct costs if justified by the nature of the project, e.g., mail or telephone surveys or supplies for participants. Within University guidelines, PIs must be able to justify a cost as direct of F&A on a case-by-case basis, and have those justifications reviewed by a research administrator.
How is the F&A Rate Calculated?
The F&A rates that can be charged to federally sponsored projects are compiled and presented to the Department of Health and Human Services (DHHS) in a proposal submitted by the University and audited by DHHS. For these negotiations, the University categorizes all F&A costs as facilities or administrative based on the nature of the cost. Costs for building depreciation, equipment depreciation, libraries, and operation and maintenance are categorized as facilities while costs for general, departmental and sponsored project administrations are categorized as administrative. Once the portion of these costs attributable to the research enterprise is calculated, that amount is converted to an F&A rate, which is usually reviewed and updated annually by DHHS.
What Are Some Examples of Institutional Resources Included in F&A Calculations?
- Affirmative action monitoring
- Animal and human subjects protection
- Building maintenance
- Custodial services
- Deans, department chairs, etc.
- Departmental administrative assistants
- Human resources services
- Laboratory space
- Legal counsel
- Office space
- Office supplies
- Purchasing services
- Research accounting
- Sponsored programs services
- Telecommunications infrastructure
- Utilities costs
This list is not exhaustive, but it provides an idea of the range of costs incurred by an institution in the support of research and sponsored programs.
How are F&A Rates Applied?
When conducting sponsored projects, the University strives to be reimbursed for its full costs. The F&A cost component of a sponsored project is intended to reimburse the University for the costs incurred to support research. Unfortunately, even when the current rate is applied, a portion of the actual costs are not recovered because of limitations created by the federal cost principles. The University further subsidizes the actual costs of research when non-standard F&A rates are applied. Normally, only limited F&A costs are collected from the State of South Carolina and some awarding agencies, including many foundations. The result is that the University collects a little less than 50 cents on every indirect cost dollar spent for sponsored projects.
When Coastal's standard F&A rate is applied, these personnel costs are multiplied by the F&A rate and the resulting F&A costs are added to the direct costs to obtain the total cost for the project. When a non-standard F&A rate is allowed there are usually no deductions from the base; the percent is applied to all direct costs. This is known as the Total Direct Cost (TDC) base.
What Costs Are Reimbursed by F&A Funds?
F&A costs represent a reimbursement for expenses already incurred. All F&A costs recovered are deposited as unrestricted funds (unrestricted meaning not confined to a set budget).
Why Are F&A Funds Important to You?
Whatever we call them, indirect costs are real. The University is dependent upon the recovery of F&A costs in order to maintain the infrastructure necessary to continue to support sponsored projects. Faculty, staff and students involved in research and sponsored programs experience the benefits of the F&A cost recovery every day when they turn on the lights, when they request a research assistant, when they use the telephone or the library and when they use the Internet, and so on.
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