Location

Sponsored Programs

Office of Sponsored Programs
875 Perimeter Dr, MS 3020
114 Morrill Hall
820 Idaho Ave (Courier)
Moscow, ID 83844-3020

Phone: (208) 885-6651
Fax: (208) 885-5752
osp@uidaho.edu

Budget Preparation: F&A Costs

F&A costs, also known as "overhead" or "indirect" costs, are project-related expenses that cannot be identified readily and specifically to a particular sponsored project, e.g. the costs of heat and air conditioning, electricity, building maintenance, security, libraries, administrative services, etc.  Accurately attributing each of these so-called “indirect” costs to each sponsored project would be very difficult. Nevertheless, indirect costs are real costs to the University and the government recognizes the University's right to claim them as expenses related to sponsored projects.  To this end, the University and the federal government negotiate rates for indirect cost reimbursement based on A) The type of work being done (research, education, public service/outreach) and B) whether the majority (2/3 or more) of the work is being done on- or off-campus (with “off-campus” defined as facilities not owned or leased by UI).  Any limitations by the sponsoring agency on negotiated indirect cost rates must be provided in writing prior to proposal submission.  Absent a written sponsor policy only the Vice President for Research and Economic Development may grant a waiver or reduction in overhead rates.  Note that F&A waivers will rarely be considered for limitations to overhead imposed by for-profit entities.

 

All federal sponsors are expected to pay the federal negotiated indirect rates; exceptions should be documented in the Program Announcement or RFP.

 

For detailed information on the current indirect rates applied to organized research, instruction, public service/outreach, ag & forestry experiment station, and state of Idaho agencies, please go to:

http://www.uidaho.edu/osp/faratetable

 

Calculating indirect costs

 

In the budget, indirect costs are calculated by multiplying the sponsor’s overhead rate by the direct cost base.  Depending upon the sponsor, the direct cost base may be either the simple total of all direct costs in the budget (Total Direct Costs, TDC), or the “modified” total direct costs (MTDC), i.e., TDC minus the total of all items in the budget that do not bear overhead.  Note that the maximum amount of indirects that may be charged to a sponsor is our negotiated rate using MTDC as a direct-cost base.  If the sponsor uses a limited rate and TDC you may need to do a comparison against this maximum and choose whichever method is the least cost to the sponsor.  Most Federal sponsors use MTDC. 

 

On budgets for federal sponsors, subtract the following line items from the direct-cost base to arrive at MTDC, per UI’s negotiated rate agreement:

 

Equipment (> than $5,000 and with a useful life of more than one year); capital expenditures; charges for patient care; student tuition remission; rental costs of off-site facilities; scholarships and fellowships; that portion of individual subcontracts over $25K; and any other agency-specific exclusions such as participant support costs

 

Example 1 (TDC): A PI is submitting a proposal for a one-year project starting 7/1/11 with direct costs of $150,000 to the XYZ Foundation. The sponsor limits F&A to 15% on Total Direct Costs (TDC). The Total Project Cost is:

 

$150,000        Total Direct Cost (TDC) base

  +22,500        15.0% F&A on TDC base

$172,500         Total Project Cost (TDC + F&A)

 

Example 2 (MTDC): A PI is submitting another proposal to the NSF for the same time period and the same direct-cost amount. Of the $150,000, $40,000 is for a subcontract to WSU.  Here, the Total Project Cost is:

 

$150,000        Total Direct Costs (TDC) base

   -15,000        Less $15,000 subcontract cost (1St 25,000 of subcontract is subject to F&A)

$135,000         Modified Total Direct Costs (MTDC) base

  $61,020         45.2% F&A on MTDC base

$211,020         Total Project Cost (TDC + F&A)


Example 3 (TPC)

 

The total project costs (TPC) method is unusual in that it allows F&A to be charged not only on direct expenses, but also on the F&A expenses themselves.  The easiest way to do this calculation is to first convert the TPC rate to a TDC rate using the following formula:

 

    TPC F&A Rate/(1-TPC F&A Rate) = TDC Rate (ex. 20% TPC = 20%/(1-20%) = 25%)

 

Once you have converted your rate then you may use the TDC formula of multiplying all direct costs by the TDC rate:

 

            $150,000        Total Direct Costs

                37.500         25% F&A (TDC Rate)

            $187,500         Total Project Costs (TDC + F&A) and (TPC x 20% = $37,500)