PENN STATE - RESEARCH ADMINISTRATION

Policy RA06 COST RECOVERY FOR SPONSORED PROJECTS

Contents

  • Purpose
  • Definitions
  • ....Direct Costs
  • ....Facilities and Administrative (F & A) Costs
  • Policy
  • Procedures
  • Responsibilities

  • PURPOSE:

    The purpose of this policy is to ensure appropriate recovery of both direct and facilities and administration (F & A) costs associated with various sponsored institutional activities conducted by the faculty and staff of The Pennsylvania State University.

    DEFINITIONS:

    Direct Costs

    Direct costs are those expenses that are essential to the conduct of sponsored institutional activities and which can be readily attributed and directly charged to specific individual projects. They include expenditures for such items as personnel (salaries and fringe benefits), supplies, equipment, travel, and other direct costs necessary for conducting the sponsored activity.

    Facilities and Administrative (F & A) Costs (commonly referred to as "indirect costs")

    Facilities and administrative (F & A) costs are those expenses that are essential to the conduct of sponsored institutional activities but which cannot be readily attributed and directly charged to specific individual projects. F & A costs, therefore, include such items as:

    F & A Cost Rates are determined periodically from actual cost records through a detailed accounting procedure specified by federal cost principles. The rates are audited and approved by the federal government. Separate F & A cost rates are calculated for research and instruction, and on- and off-campus sponsored activities. (http://www.research.psu.edu/osp/prepare-proposals/develop-budget/fringe-indirect-costs-f-a)

    In accordance with federal regulations, the rates are expressed as a percentage of Modified Total Direct Costs (MTDC) expended, where MTDC represents direct costs excluding graduate assistant tuition remission, charges for patient care, equipment (defined as having an expected life of two years or more and having an acquisition cost of $5,000 or more), plant construction, building amortization, and the portion of each subaward and subcontract in excess of $25,000. (For more detail, see negotiated rate agreement link: http://www.research.psu.edu/osp/prepare-proposals/develop-budget/fringe-indirect-costs-f-a)

    POLICY:

    Grants, contracts and other agreements that designate Penn State as the Grantee Institution/Contractor are the appropriate mechanisms of support for all sponsored institutional activities at the University. Full recovery of both the direct and F & A costs associated with sponsored institutional activities is expected on all grants, contracts and other agreements that support those activities.

    The following guidelines are used for the recovery of F & A costs:

    1. If under the sponsor's published guidelines the University is required to cost share, or when an academic unit of the University proposes voluntary committed cost sharing and that cost sharing is to come from a contribution of F & A costs, the approval of the Vice President for Research and Dean of the Graduate School (for research projects) or the Corporate Controller (for non-research projects) is necessary before submission or acceptance (See procedures below for requesting approvals).

    2. If a sponsor is a not-for-profit or governmental [non-foreign] entity and has published guidelines (or otherwise verifiable written policy, statute, or legislation) prohibiting or limiting the recovery of F & A costs, the University shall accept the lesser rate or amount, if it considers the program desirable for University participation (as evidenced by the approval of the College/Unit on the appropriate Internal Approval Form), without requiring central approval. The University considers the loss of F & A cost recovery, in these cases, to be usable for cost sharing when allowed by the agency.

    3. If a sponsor which is associated with a particular industry and which is financed from voluntary contributions from member companies (e.g., Electric Power Research Institute, etc.) has issued an RFP or contract prohibiting or limiting the recovery of F & A costs, the University requires the approval of the Vice President for Research and Dean of the Graduate School (for research projects) or the Corporate Controller (for non-research projects) before submission or acceptance.

    4. If a sponsor is a for-profit entity and has an established, competitive grants program open to universities, and their published guidelines prohibit or limit the recovery of F & A costs to all applicants, the University requires approval of the Vice President for Research and Dean of the Graduate School (for research projects) or the Corporate Controller (for non-research projects) prior to submission or acceptance.

    5. The University waives the recovery of F & A costs on all gifts since there is no "deliverable" required. The University has established other guidelines (RAG04, Guidelines for Gifts, Grants, and Contracts (The Funding Matrix)) that give direction on recovery of F&A on unrestricted grants.

    6. Other than identified above, restrictions on F & A recovery from a for-profit company are not acceptable, except in some rare circumstances (such as when the project solely funds a student's research and the student is free to publish the results) that require special review and approval by the Vice President for Research and Dean of the Graduate School (for research projects) or the Corporate Controller (for non-research projects).

    7. For Commonwealth of Pennsylvania projects, the University shall attempt to recover F&A whenever possible. The following parameters should guide budget requests:

    Note: An imposition of an overall ceiling on the total amount of award by an agency is not considered adequate justification for a waiver of costs; rather, the scope of work for the project should match the funding available from the agency. Requests for waivers of full cost recovery that are the result of an agency recommending funding at a level less than proposed does not constitute adequate justification for cost sharing; rather the scope of work should be reduced to match the funds recommended for award.

    PROCEDURES:

    Proposal solicitations in some instances call for institutional cost sharing as a condition for an award. While the University is firmly committed to assisting faculty in the pursuit of outside funding for research initiatives and program development, the resources available for cost sharing are limited. All cost sharing must be approved by an appropriate institutional official who administers the source of funds providing the cost sharing. All cost sharing must be documented in accordance with University and sponsoring agency policy.

    Requests for waivers of F & A costs or for institutional cost sharing through the use of F & A costs must be submitted in writing to the Office of Sponsored Programs (OSP). Originating with the PI/PD, such requests shall identify the Principal Investigator, the proposal title, the agency and program to which the proposal is being submitted, the total amount requested, the amount of institutional cost sharing proposed, the amount of cost sharing the academic units involved are providing, and the rationale and justification (such as sponsor's written policy) for utilizing F & A costs for cost sharing or for waiving F & A costs.

    RESPONSIBILITIES:

    It is the responsibility of the College, Institute, or other Administering Unit to:

    It is the responsibility of the Office of Sponsored Programs or Office of Research Affairs (if request is to the College of Medicine), or Delegated Representatives to:

    It is the responsibility of the Research Accounting Office to:


    Effective Date: June 29, 2006
    Date Approved: June 28, 2006
    Date Published:  June 28, 2006 (Editorial changes- November 26, 2013)

    Most recent changes:

    Revision History (and effective dates):

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