Understanding F&A Rates Caroline Beeman February 28, 2007.

Understanding F&A Rates

Caroline BeemanFebruary 28, 2007

2Understanding F&A Rates

Why an F&A Cost Rate?

It is federal policy to provide for the reimbursement of F&A costs except when specific limitations and prohibitions exist

This is accomplished through use of an F&A rate

The cognizant agency negotiates and approves the F&A rates for an educational institution on behalf of all Federal agencies


What is the F&A Cost Rate?What is the F&A Cost Rate?

A single number that reimburses the institution A single number that reimburses the institution for the use of:for the use of: BuildingsBuildings EquipmentEquipment Interest on DebtInterest on Debt O&MO&M General AdministrationGeneral Administration Departmental AdministrationDepartmental Administration Sponsored Projects AdministrationSponsored Projects Administration LibraryLibrary


Calculation of the Facilities & Administrative Calculation of the Facilities & Administrative RateRate

(aka = Indirect Cost Rate)(aka = Indirect Cost Rate)

F&A COSTSF&A COSTS Building DepreciationBuilding Depreciation Operations & MaintenanceOperations & Maintenance

General AdministrationGeneral Administration Sponsored Project Sponsored Project

AdministrationAdministration Library SupportLibrary Support Equipment DepreciationEquipment Depreciation Departmental AdministrationDepartmental Administration Interest on DebtInterest on Debt

DIRECT COSTSDIRECT COSTS Research Salaries & FringesResearch Salaries & Fringes Consultant ServicesConsultant Services TravelTravel Technical ServicesTechnical Services Research SuppliesResearch Supplies Subcontracts up to $25,000 Subcontracts up to $25,000 Committed Cost SharingCommitted Cost Sharing

F&A Costs ÷ Direct Costs $1,000,000$515,000

0.515 = 51.5%


How is the F & A Calculation How is the F & A Calculation Done?Done?

Start with Financial StatementsStart with Financial Statements Adjust to Allowable CostAdjust to Allowable Cost Map to OMB Circular A-21 Pools and BasesMap to OMB Circular A-21 Pools and Bases Allocate PoolsAllocate Pools Summarize Pool Allocations to Each BaseSummarize Pool Allocations to Each Base Calculate RatesCalculate Rates

THE DIRECT COST BASESTHE DIRECT COST BASES


The Direct Cost BasesThe Direct Cost Bases

Bases represent an institution’s direct costs Bases represent an institution’s direct costs activities (A-21, Section B.1):activities (A-21, Section B.1): Instruction and departmental research (IDR)Instruction and departmental research (IDR)

Sponsored instruction and trainingSponsored instruction and training Departmental researchDepartmental research

Organized research (OR)Organized research (OR) Sponsored researchSponsored research University researchUniversity research

Other sponsored activities (OSA)Other sponsored activities (OSA) Other institutional activities (OIA)Other institutional activities (OIA)



A-21, Section G.2 discusses the distribution A-21, Section G.2 discusses the distribution basis for F&A costs and defines it as modified basis for F&A costs and defines it as modified total direct costs (MTDC). total direct costs (MTDC).

MTDC usually includes MTDC usually includes Salaries and wages & associated fringe benefitsSalaries and wages & associated fringe benefits Materials and suppliesMaterials and supplies ServicesServices TravelTravel Sub-grants and subcontracts up to the first $25,000 Sub-grants and subcontracts up to the first $25,000



MTDC excludes (G.2)MTDC excludes (G.2) Equipment (capital equipment only)Equipment (capital equipment only) Patient carePatient care Tuition remissionTuition remission Scholarships and fellowshipsScholarships and fellowships Sub-grant and subcontract costs over $25,000Sub-grant and subcontract costs over $25,000 Space rental costsSpace rental costs

INDIRECT COSTSINDIRECT COSTS


Facilities and Administrative Facilities and Administrative CostsCosts

Costs that are incurred for common or joint Costs that are incurred for common or joint

objectives and therefore cannot be identified objectives and therefore cannot be identified

readily and specifically with a particular readily and specifically with a particular

sponsored project, instructional activity or any sponsored project, instructional activity or any

other institutional activity. (B.4)other institutional activity. (B.4)


Facilities and Administrative Facilities and Administrative CostsCosts

Administrative componentsAdministrative components General administration and general expensesGeneral administration and general expenses Departmental administrationDepartmental administration Sponsored projects administrationSponsored projects administration Student administration and servicesStudent administration and services

Administrative components are capped at 26% Administrative components are capped at 26%

of modified total direct costs (G.8)of modified total direct costs (G.8)


Facilities & Administrative Facilities & Administrative CostsCosts

Facilities componentsFacilities components Building depreciationBuilding depreciation Building interestBuilding interest Equipment depreciationEquipment depreciation Operations and maintenanceOperations and maintenance LibraryLibrary


Depreciation Depreciation

Expenses are for the portion of costs related to Expenses are for the portion of costs related to the institution’s buildings, capital improvements the institution’s buildings, capital improvements to land and buildings, and equipment which are to land and buildings, and equipment which are computed in accordance with J.14, see also F.2. computed in accordance with J.14, see also F.2.


Interest on DebtInterest on Debt Interest associated with certain buildings, equipment Interest associated with certain buildings, equipment

and capital improvements are allowable if they support and capital improvements are allowable if they support sponsored agreements (F.3)sponsored agreements (F.3)

Buildings acquired or completed after July 1, 1982Buildings acquired or completed after July 1, 1982

Major reconstruction and remodeling of existing buildings Major reconstruction and remodeling of existing buildings completed on or after July 1, 1982completed on or after July 1, 1982

Acquisition or fabrication of capital equipment completed Acquisition or fabrication of capital equipment completed on or after July 1, 1982, costing $10,000 or more, if the on or after July 1, 1982, costing $10,000 or more, if the government agreesgovernment agrees


Operations and MaintenanceOperations and Maintenance

Expenses incurred for administration, supervision, Expenses incurred for administration, supervision, operation, maintenance, preservation and protection of operation, maintenance, preservation and protection of the institution’s physical plant (F.4)the institution’s physical plant (F.4)

Normally includesNormally includes Janitorial/housekeepingJanitorial/housekeeping UtilitiesUtilities Grounds maintenanceGrounds maintenance SecuritySecurity Environmental safetyEnvironmental safety Hazardous waste disposalHazardous waste disposal

Utility cost adjustment (UCA) of 1.3 points only Exhibit B Utility cost adjustment (UCA) of 1.3 points only Exhibit B schoolsschools


General Administration and General General Administration and General ExpensesExpenses

Expenses incurred for the general executive and Expenses incurred for the general executive and administrative offices and other expense of a general administrative offices and other expense of a general nature which do not relate solely to any major function of nature which do not relate solely to any major function of the institution (F.5)the institution (F.5)

Normally includesNormally includes Allocations from administrative offices that serve an entire Allocations from administrative offices that serve an entire

university systemuniversity system Institutional administrative executive officesInstitutional administrative executive offices Financial planning, budgeting, payroll, accountingFinancial planning, budgeting, payroll, accounting Safety and risk managementSafety and risk management General counselGeneral counsel Management information systemsManagement information systems Cross allocations from depreciation, interest and O&MCross allocations from depreciation, interest and O&M


Departmental AdministrationDepartmental Administration

Expenses incurred for administrative and Expenses incurred for administrative and supporting services that benefit common or joint supporting services that benefit common or joint departmental activities or objectives (F.6)departmental activities or objectives (F.6)

The most difficult cost pool to developThe most difficult cost pool to develop DA costs are not normally identified on DA costs are not normally identified on

university current fund statementsuniversity current fund statements


Department AdministrationDepartment Administration

Composed of:Composed of:

Academic deans’ offices (limited to costs associated with Academic deans’ offices (limited to costs associated with administrative activities)administrative activities)

Academic departments and divisions salaries and fringe Academic departments and divisions salaries and fringe benefits attributable to administrative workbenefits attributable to administrative work

Includes bid and proposal effortIncludes bid and proposal effort Limited to 3.6% of department MTDC of salaries & fringe of Limited to 3.6% of department MTDC of salaries & fringe of

faculty and professional personnel conducting research and/or faculty and professional personnel conducting research and/or instructioninstruction

3.6% limit does not apply to professional business or 3.6% limit does not apply to professional business or administrative officersadministrative officers

Other administrative and supporting costs are allowable Other administrative and supporting costs are allowable provided they are treated consistently in like circumstances provided they are treated consistently in like circumstances (includes secretarial and clerical salaries, administrative (includes secretarial and clerical salaries, administrative officers and assistants, travel, office supplies etc)officers and assistants, travel, office supplies etc)


Sponsored Projects AdministrationSponsored Projects Administration

Expenses are limited to those incurred by a Expenses are limited to those incurred by a separate organization established primarily to separate organization established primarily to administer sponsored projects. Includes grant administer sponsored projects. Includes grant and contract administration, special security, and contract administration, special security, purchasing, personnel, etc. (F.7)purchasing, personnel, etc. (F.7)

SPA is allocated to the functions performing SPA is allocated to the functions performing sponsored projects based on MTC of the sponsored projects based on MTC of the sponsored projectssponsored projects Usually includesUsually includes

Organized researchOrganized research Sponsored instructionSponsored instruction Other sponsored activityOther sponsored activity


LibraryLibrary

Expenses incurred for the operation of the Expenses incurred for the operation of the library including the costs of books and library library including the costs of books and library materials purchased for the library less materials purchased for the library less applicable credits (F.8)applicable credits (F.8)

Standard Allocation based on FTE’sStandard Allocation based on FTE’s


Student Administration and ServicesStudent Administration and Services

Expenses incurred for the administration of Expenses incurred for the administration of student affairs and for services to students student affairs and for services to students including dean’s of students, admissions, including dean’s of students, admissions, registrar, counseling and placement, student registrar, counseling and placement, student advisors, student health and infirmary services, advisors, student health and infirmary services, catalogs and commencements and convocations catalogs and commencements and convocations (F.9)(F.9)

Per A-21 - shall normally be allocated 100 percent Per A-21 - shall normally be allocated 100 percent to instruction functionto instruction function


What is a Space Survey?What is a Space Survey?

A space survey is the process of assigning A space survey is the process of assigning institutional space into OMB Circular A-21 institutional space into OMB Circular A-21 functional categories based on space usefunctional categories based on space use

The results are used to calculate the percentage The results are used to calculate the percentage of space that is used to support organized of space that is used to support organized research and support the subsequent allocation research and support the subsequent allocation of space related costs to organized research of space related costs to organized research

Used to allocate Building and Equipment Used to allocate Building and Equipment Depreciation, Interest and O&MDepreciation, Interest and O&M


Applying the F&A Rate – example Applying the F&A Rate – example 11

Total directs = $530,000Total directs = $530,000 F&A rate = 54%F&A rate = 54% Tuition remission = $5,000; Rent = $4,000; Equipment = Tuition remission = $5,000; Rent = $4,000; Equipment =

$21,000$21,000 How much is F&A?How much is F&A?

Total F&A = MTDC x F&A rate

Total F&A = (Total directs - exclusions) x F&A rate

Total F&A = ($530,000 – ($5,000+$4,000+$21,000)) x 54%

Total F&A = $500,000 x 0.54

Total F&A = $270,000


Applying the F&A Rate – example Applying the F&A Rate – example 22

Total grant available = $800,000Total grant available = $800,000 F&A rate = 54%F&A rate = 54% Tuition remission = $5,000; Rent = $4,000; Equipment = Tuition remission = $5,000; Rent = $4,000; Equipment =

$21,000$21,000 How much is available for direct costs?How much is available for direct costs?

Total available = total direct + total F&A

Total available = (MTDC + exclusions) + (MTDC x F&A rate)

$800,000 = (MTDC + $30,000) + (MTDC x 54%)

$800,000 - $30,000 = (MTDC x 1) + (MTDC x 0.54)

$770,000 = MTDC x (1 + 0.54)

MTDC = $770,000 / 1.54 = $500,000

Total directs = MTDC + exclusions

Total directs = $500,000 + 30,000 = $530,000


UVa’s Current F&A RatesUVa’s Current F&A Rates

Organized Organized Other SponsoredOther Sponsored ResearchResearch InstructionInstruction Activity Activity OnOn Off Off On Off On Off On On OffOff

Bldg Depr’nBldg Depr’n 4.0 4.0 1.5 1.5 0.40.4Equip Depr’nEquip Depr’n 4.3 4.3 1.9 1.9 0.70.7InterestInterest 1.2 1.2 1.2 1.2 0.80.8O&MO&M 12.7 12.7 12.7 12.7 3.13.1Utility Cost Adj 1.3Utility Cost Adj 1.3 -- -- -- --LibraryLibrary 2.0 2.0 14.4 14.4 1.81.8Admin CompAdmin Comp 26.026.0 26.026.0 26.026.0 26.026.0 26.026.0 26.026.0

TotalTotal 51.5 51.5 26.026.0 50.0 50.0 26.026.0 32.8 32.8 26.026.0


Percentage

State 30 % AdminUVA Wise and SW Va Center 30.000%All Others 28.400%

Institutional AllocationsVPR 10.310%ITC 1.170%Technology Commitments 1.170%VPF/CFO 3.160%Curry School Library 2.960%Alderman Library 2.960%Health Sciences Library 2.960%

Reserve for Capital OutlayAcademic 17.000%School of Medicine 17.000%School of Nursing 17.000%UVA Wise 20.000%

Schools (Deans & Departments)Architecture 35.830%Arts & Sciences Dean 19.050%Arts & Sciences Departments 16.780%Curry Dean 32.247%Curry Departments 3.583%Engineering Dean 25.081%Engineering Departments 10.749%Nursing 35.830%SOM Dean (from Non-Clinical Depts.) 27.225%SOM - Non-clinical Departments 8.605%SOM Dean (from Clinical Departments) 6.425%SOM - Clinical Departments 29.405%UVA Wise 50.000%Center for Politics 70.000%SW Va Center 70.000%Other Schools 35.830%

Percentage AllocationsF&A Distribution

For FY2006-2007 (Revised)

Allocation

Understanding F&A Rates Caroline Beeman February 28, 2007.

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