Penn State - Research Administration
To define the procedure to determine appropriate fringe benefit and F&A rates and bases for sponsored projects to comply with OMB Circular A-21.
Application of Fringe Benefits - The actual negotiated fringe benefit rates will be charged regardless of whether such rates are higher or lower than the rates used in the applicable proposal. The fringe benefit rates will be adjusted each July 1 for projects overlapping fiscal years.
Application of F&A Costs - The rate in effect at the time of the award will establish the rate for the life of the award or each competitive segment thereof.
Base Determination - F&A will be applied to Modified Total Direct Costs (MTDC). Modified Total Direct Costs are all costs excluding graduate tuition remission, capital equipment (defined as having an expected life of two years or more and acquisition cost of $5,000 or more), plant construction, building amortization, the portion of each subgrant and subcontract in excess of $25,000 for each competitive segment of an award, and patient care costs.
OMB Circular A-21 Requirement: Federal agencies shall use the negotiated rates for indirect (now F&A) costs in effect at the time of the initial award throughout the life of the sponsored agreement. "Life" for the purpose of this subsection means each competitive segment of a project. A competitive segment is a period of years approved by the Federal funding agency at the time of the award. If negotiated rate agreements do not extend through the life of the sponsored agreement at the time of the initial award, then the negotiated rate for the last year of the sponsored agreement shall be extended through the end of the life of the sponsored agreement. Award levels for sponsored agreements may not be adjusted in future years as a result of changes in negotiated rates.
"Time of Initial Award"
Defined as the effective date of the agreement, rather than the execution date since agreements can be signed by both parties well before or after the effective date of the agreement. If pre-award costs are authorized which cut across the first day of a fiscal year, indirect cost charges will reflect the rates in effect at the time of the expense.
"Life of the Sponsored Agreement"
- If the federal agency has committed to a multi-year award and has provided the allocations and/or estimates for the individual out-years, then the rate should be fixed for the life of the agreement (generally, but not always, NSF, NIH, DOD).
- If the federal agency has committed to a multi-year award but only provides funding for the first year and then requests a proposal for the second year, then only the first year should have the rates fixed. When the second year funding comes in, the rate will be fixed again at the time of the second year award (generally, but not always, NASA and EPA). Any request for proposal beyond what has been defined as the period of performance will result in a proposal that will contain the new rates.
- If submitting a proposal for a supplement to an existing award that does not extend the period of performance and the existing award has fixed rates for the life of the agreement, then the proposal for the supplement should contain the rates established for the life of the agreement.
NASA ASSISTANCE AWARDS:
NASA policy makes maximum use of multiple year grants spanning generally three years. For the periods covered neither a new proposal nor another technical evaluation is required. This type of award will contain a clause anticipating the multi-year commitment and will result in the rates being fixed for the multi-year duration of the award. A research grant continuing beyond this three-year commitment will require a new proposal, will be subject to peer evaluation, and will result in a new competing segment with rates being fixed on the effective date of the modification awarded to extend the grant.
However, frequently, NASA does not make a multi-year grant commitment in response to a multi-year proposal. NASA sometimes provides the funding for only the first year and then requests a new proposal for each subsequent year. In these cases, the grant does not include a clause anticipating the multi-year commitment. That being the case, each year is considered a competing segment and rates are fixed on the effective date of each grant modification extending the date.
DOE ASSISTANCE AWARDS:
Most DOE awards are written with multi-year (usually three) project periods, with the negotiated estimated budgets for the full multi-year period incorporated in the award. In those cases, rates should be fixed on the effective date of the grant for the life of that multi-year project period, which constitutes a single competing segment. Funded extensions of the original multi-year period will require new proposals and will constitute new competing segments, even though the same funding instrument will, in all likelihood, be retained by DOE.
For those few DOE awards where budgets must be submitted and approved annually, each annual period is considered a competing segment and rates will be fixed on the effective date of each annual period.
DOD ASSISTANCE AWARDS:
Most DOD awards reflect multi-year commitments where budgets are negotiated prior to award and funding is provided on an annual basis. While some of our DOD sponsors (ONR, AFRL) use the standard incremental funding language and others (AFOSR, ARO) use the standard option period language to express the multi-year commitment, all of these awards anticipate a multi-year commitment to a budget negotiated prior to the initial award and represent a single competing segment. Rates should therefore be fixed on the effective date of the award for the multi-year period. Funded extensions of the originally anticipated multi-year period will require new proposals and will be treated as new competing segments.
NIH ASSISTANCE AWARDS:
NIH defines competing segment as "The initial project period recommended for support (up to 5 years) or each extension of a project period resulting from the award of a competing continuation grant that establishes a new competing segment for the project." Rates are fixed as of the effective date of each competing segment
The following explanation of NIH Award Number codes is offered as an aid to determining where in a competing segment the individual Grant Year falls.
Award Numbers appear as: X ANN AANNNNN-NN where A= alpha and N= numeric
Where X = 1 This is the first year of a brand new grant,
Where X = 2 this is the first year of a subsequent competing segment
Where X = 3 this is a supplemental award to an existing grant
Where X = 4 this is an extension to an existing award
Where X = 5 this is a non-competing grant year within a competing segment
Where X = 6 through 9 this indicates various change of institution codes
NSF ASSISTANCE AWARDS:
NSF defines Grant Period as "the period of time between the effective date and the expiration date of an NSF Grant shown as the duration." The effective date and the expiration date will be stated within the award letter. This Grant Period, then, is the period within which expenditures may be charged to the Grant without having to submit another proposal. Note that for Continuing Grants, annual progress reports are required but these are not considered proposals.
In certain situations (supplemental or creative awards, for example) the overhead rate can increase for the additional funds. OSP can provide further information.
Implementation of the "Fixed Rate" requirements of A-21 can be confusing if PSU is not receiving good information from the prime awardee regarding the "life of the prime agreement." For subawards, "Time of the Initial Award" is the effective date of the PSU subaward. The effective date of PSU's subawards may be the same as or later than the effective date of the prime awardee's Federal agreement. For subawards, "Life of the Sponsored Agreement" is the multi-year portion of the prime competing segment that is awarded to PSU. Occasionally, a prime awardee solicits a single-year proposal from PSU and makes a single year commitment only to subsequently solicit another single year proposal and make another single year commitment. While generally we would evaluate each single year as an individual competing segment, if PSU is informed via the soliciation that the subsequent period is within the same prime award competing segment as the prior period, PSU should propose and apply rates that were applicable based on the effective date of our initial subrecipient agreement.
Questions should be directed to College/Unit Research Coordinators and/or OSP Negotiators.
Proposal submitted in March with Fringe Rates of 25%, 11%, 8% and .5% and an F&A rate of 40%. New rates negotiated and approved are fringe: 26%, 10%, 8%, and .5% and F&A: 42%. The proposed project is awarded in September for a three-year period. The project would be administered in Year 1 with fringe rates of 26%, 10%, 8% and .5% and F&A of 42%.
In Year 2, the new negotiated rates are Fringe: 24%, 4%, 8% and .4% and F&A: 38%. The project would be administered in Year 2 with fringe rates of 24%, 4%, 8%, and .4% and F&A of 42%.
In Year 3, the new negotiated rates are Fringe: 27%, 5%, 9%, and .6% and F&A: 41%. The project would be administered in Year 3 with fringe rates of 27%, 5%, 9%, and .6% and F&A: 42%.
Effective Date: July 1, 2003
Date Approved: January 14, 2004
Date Published: January 20, 2004 (Editorial change on March 25, 2008)
Most recent changes:
Revision History (and effective dates):