Penn State - Research Administration
Policy RA30 FACILITIES AND ADMINISTRATIVE (F&A) COSTS
Policy Steward: Vice President for Research, and Corporate Controller
To define the appropriate Facilities and Administrative (F&A) rates to use for federal and non-federal proposals and to identify circumstances when full F&A is not assessed.
Facilities and administrative (F&A) costs (also referred to as indirect costs or overhead) are those expenses that are essential to the conduct of sponsored awards but which cannot be readily attributed and directly charged to specific individual projects without effort disproportionate to the results achieved. (See Uniform Guidance 2 CFR 200.56.) F&A costs include such items as:
- Departmental administrative costs in support of research, such as administrative and technology support staff
- Costs of supplies and general use equipment (e.g., copiers, telephones, printers and related supplies)
- Central administrative services (e.g. accounting, human resources, purchasing, security, environmental health and safety), custodial services, building and grounds maintenance.
- Capital expenses associated with laboratory and office space, classrooms and other facilities
- Library services
- Sponsored program administrative services (e.g. research administration, research protections)
F&A cost rates are determined periodically from actual cost records through a detailed accounting procedure specified by federal cost principles (Uniform Guidance 2 CFR 200, Appendix III). These rates are developed by the Corporate Controller's Office and 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. More detail including rate summaries can be found here.
In accordance with federal regulations, the rates are expressed as a percentage of modified total direct costs (MTDC)
expended, where per Uniform Guidance 2 CFR 200.68:
"MTDC means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and subawards and subcontracts up to the first $25,000 of each subaward or subcontract (regardless of the period of performance of the subawards and subcontracts under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward and subcontract in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs."
For more detail, see negotiated rate agreement link: http://www.research.psu.edu/osp/documents/rates/FA-Current.
Per the Uniform Guidance 2 CFR 200.414(c):
(1) The negotiated rates must be accepted by all Federal awarding agencies. A Federal awarding agency may use a rate different from the negotiated rate for a class of Federal awards or a single Federal award only when required by Federal statute or regulation, or when approved by a Federal awarding agency head or delegate based on documented justification as described in paragraph (c)(3) of this section.
(2) The Federal awarding agency head or delegate must notify OMB of any approved deviations.
(3) The Federal awarding agency must implement, and make publicly available, the policies, procedures and general decision making criteria that their programs will follow to seek and justify deviations from negotiated rates.
(4) As required under §200.203 Notices of funding opportunities, the Federal awarding agency must include in the notice of funding opportunity the policies relating to indirect cost rate reimbursement, matching, or cost share as approved under paragraph (e)(1) of this section. As appropriate, the Federal agency should incorporate discussion of these policies into Federal awarding agency outreach activities with non-Federal entities prior to the posting of a notice of funding opportunity.
Certain costs are not permitted to be incorporated into the F&A cost calculation. University Guideline FNG05 – Expenditure Guidelines for Costs Not Allowable under Uniform Guidance 2 CFR 200, provides detailed information on these costs and the procedure for excluding them from the indirect cost pool.
DETERMINING APPLICABLE RATES:
The principles defined in the Uniform Guidance are used to determine the applicable F&A rates for both federal and non-federal projects:
"Federal agencies must use the negotiated rates . . . in effect at the time of the initial award throughout the life of the Federal award . . . "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 awarding agency at the time of the Federal award. If negotiated rate agreements do not extend through the life of the Federal award at the time of the initial award, then the negotiated rate for the last year of the Federal award must be extended through the life of Federal award "(Uniform Guidance 2 CFR 200, Appendix III, Part C.7)."
"Time of Initial Award" is 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 Federal Award"
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 rates 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 rates 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.
ON-CAMPUS VS. OFF-CAMPUS RATES:
"Off-campus project" means research/instruction conducted at a research/instruction site or facility not owned or centrally leased by the University.
The investigator should develop the budget according to where the anticipated costs will be expended, on-campus or off-campus. In allocating the anticipated costs, the investigator shall distribute the portion of direct salary and wages (including any cost sharing) that will be incurred off-campus excluding any cost to third party subcontractors. If the salary and wages anticipated to be incurred off-campus are greater than the salary and wages to be incurred on campus, the negotiated off-campus rate shall apply to the entire project.
Detailed examples can be found here (PDF).
Principal Investigators shall work with their assigned research coordinators in building their sponsored budgets to determine the appropriate indirect rate. In reviewing and making the determination of the rate, the research coordinators shall review the project scope to ensure that the work truly involves costs conducted off-campus. When a determination cannot be easily made, the Office of Sponsored Programs or the Office of Corporate Controller shall be consulted to assist in rendering a decision.
EXCEPTIONS TO RECOVERING FULL F&A:
Sponsored awards are expected to recover full F&A costs, except as provided below. Failure to recover F&A from a sponsor places the recovery of those costs on other revenue streams such as tuition, endowments or discretionary funds.
The following guidelines are used for the recovery of F&A costs:
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 F&A 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.
- 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 (for research projects) or the Corporate Controller (for non-research projects) is necessary before submission or acceptance. (See procedures below for requesting approvals.)
- 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 may 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.
If the sponsor is foreign or for-profit, a lower F&A rate will not be accepted unless a formal waiver is approved by the Vice President for Research (for research projects) or the Corporate Controller (for non-research projects).
- 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 (for research projects) or the Corporate Controller (for non-research projects) before submission or acceptance.
- 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 (for research projects) or the Corporate Controller (for non-research projects) prior to submission or acceptance.
- The University waives the recovery of F&A costs on all gifts since there is no "deliverable" required. The University has established RA04, Gifts, Grants, and Contracts (The Funding Matrix), that stipulates policy regarding the recovery of F&A on charitable grants, unrestricted grants, restricted grants, contracts, and industry membership agreements.
- Other than identified above, restrictions on F&A recovery from a for-profit company are not acceptable, except in 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 (for research projects) or the Corporate Controller (for non-research projects).
- For Commonwealth of Pennsylvania projects, the University shall attempt to recover F&A whenever possible. The following parameters should guide budget requests:
- The Commonwealth is required (under Pennsylvania Governor's Office Management Directive 305.21) to identify whether they are funding a specific project with federal funds, state funds, or a combination of both.
- If the Commonwealth funds a project with federal funds, the University should request full F&A costs at the
same level as if the University were contracting directly with the federal agency involved.
- If the Commonwealth funds a project solely with state funds, the University will charge the amount permitted by
the state agency.
- More information can be found in the F&A FAQ.
REQUESTING COST SHARING OR WAIVERS OF F&A:
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.
For questions, additional detail, or to request changes to this policy, please contact the Office of the Vice President for Research or the Office of the Corporate Controller.
FNG05 - Expenditure Guidelines for Costs Not Allowable Under Uniform Guidance 2 CFR 200 (Under review @ February 2016)
RA04 - Gifts, Grants and Contracts (The Funding Matrix)
RA50 - Cost Sharing
Effective Date: February 26, 2016
Date Approved: February 22, 2016
Date Published: February 26, 2016
Most recent changes:
- February 26, 2016 - This new policy (incorporating parts of RA06, RAG06 and RAG07) has been created as part of the policy reorganization brought about by implementation of the Uniform Guidance (2 CFR 200).
Revision History (and effective dates):
- November 26, 2013- Editorial change in the POLICY section, removal of Gas Research Institute in guideline #3, as it no longer exists.
- March 19, 2013- Editorial changes in the DEFINITIONS (F&A Costs) section, providing the correct links for F&A and MTDC, respectively.
- February 24, 2010 - Minor revision in the DEFINITIONS (F&A Costs) section, changing subgrant to subaward.
- January 1, 2010 - Editorial changes. Title changed FROM "Senior Vice President for Research and Dean of the Graduate School" TO "Vice President for Research and Dean of the Graduate School," to reflect position changes, effective January 1, 2010.
- November 8, 2006 - Editorial change - changed Vice President for Research
to Senior Vice President for Research.
- June 29, 2006 - revisions made to all sections to
reflect current handling.
- August 27, 2003 - Editorial change: Under the POLICY section,
guideline #2, "College/IRP/Unit" was changed to "College/Unit" and "Clearance
Data Form" was change to "appropriate Internal Approval Form."
- February 28, 2003 - Editorial change: form URL updated.
- October 11, 2001 - Removed the mention of blanket approval from the
guidelines that are used for the recovery of F & A costs.
- February 20, 1998 - Reformatted for GURU in February 1998 from OSP
dated September 1994.