Facilities and Administrative (F&A) Costs
Yale’s Rate Agreement Policy 6002 Application of Facilities & Administrative Rates & Cost Recovery
F&A Overview
Facilities and Administrative (F&A) costs, also known as “indirect costs” or overhead, are the real costs of university operations which are not readily assignable to a particular sponsored project, university funded research activity, instructional activity, clinical activity or other institutional activity. Examples include:
- Central services (e.g HR, Finance, Environmental Health), custodial services, data network security, building operations and maintenance.
- Depreciation, building and equipment
- Sponsored programs services, including compliance oversight
- Departmental administrative costs in support of research
- Office supplies and general use equipment
- Utilities, internet and telecommunications
- Library services
Yale is dependent upon the recovery of F&A costs in order to maintain the infrastructure necessary to support sponsored activities. Faculty, staff, and students involved in research and sponsored programs experience the benefits of F&A cost recovery every day when they enter a building, turn on the lights, consult with a research assistant, get help from research administration professionals when they write proposals or in managing grants and contracts, or use the telephone, internet or the libraries just to name a few examples.
The payment of F&A by the federal government underscores the long-standing partnership between universities and the government to conduct research in the national interest and a commitment to reimburse a part of the associated infrastructure.
Facility and Administrative Costs (F&A) are negotiated with the government by individual universities. Yale develops and negotiates an F&A rate with the U.S. Department of Health and Human Services (DHHS) Cost Allocation Services. The formulas in these negotiated F&A rate agreements are applied to all externally funded projects, including U.S government grant-making agencies and non-federal sponsors, to calculate project-specific indirect costs. For most U.S. government-funded grants, Yale’s federally-negotiated Facilities and Administrative (F&A) rate agreements, which are calculated on the assumption of full-cost recovery, will be applied, according to 2 CFR Part 200, Appendix III to Part 200, Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Educations (IHEs) Contents.
F&A Calculation
F&A costs are applied on a modified total direct cost (MTDC) base. The non-F&A- bearing costs in the budget must be identified so that project F&A can be accurately calculated.
The MTDC base excludes the following cost components:
- Tuition
- Capital expenditures
- Equipment
- Charges for Patient care
- Rental costs
- Tuition Remission
- Scholarships and fellowships
- Participant support costs
- Subaward expenditures in excess of $25,000
Calculation Example
Example: When preparing a budget, the F&A rate is applied using the federally defined base using Modified Total Direct Costs (MTDC). The F&A rate is applied to MTDC, which consist of all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel and up to the first $25,000 of each subaward. Modified total direct costs shall exclude equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward 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, eg. the NIH limits F&A reimbursement on large purchases of genomic arrays.
Example using 67.5%:
Salary and Wages $100,000
FB $28,800
Supplies $25,000
Travel $10,000
Equipment $100,000
Subaward $60,000
Total budget $323,800
To calculate F&A:
Total Budget: $323,800 Less MTDC exclusions: Equipment $100,000 Subaward >$25,000 $35,000
MTDC base $188,800
F&A 67.5% $127,440
OSP training - Preparing the budget F&A costs
For more information, view the Costs of Federally Sponsored Research Infographic on the Association of American Universities (AAU) website.