Calculating Facilities and Administrative Costs
Procedure Date: December 2016 Revision: 3 Last Review: December 2017
To assist faculty and staff with completing grant proposal budgets, below is an explanation of the methods used for calculating facilities and administrative (F&A) costs, also called indirect costs, at the University and what to include and exclude from the F&A cost calculation.
Modified Total Direct Costs (MC)
Per the University's F&A rate agreement with the Department of Health and Human Services, F&A costs are to be calculated on modified total direct costs which consist of the following:
- All salaries and wages
- Fringe benefits
- Materials, supplies, services and operating expenses
- The first $25,000 of each subcontract (regardless of the period covered by the subcontract)
Modified total direct costs exclude the following:
- Participant support
- Capital expenditures
- Patient care
- Student tuition remission
- Rental costs of off-site facilities
- Scholarships and fellowships
- Each subcontract portion over and above the first $25,000
Total Direct Costs (TC)
Some sponsors have published policies or statutes limiting the F&A cost reimbursement to the University. When F&A cost reimbursement is limited to less than the University's full, applicable F&A rate, the sponsor required F&A rate should be applied to the total direct cost base rather than the modified total direct cost base (no exclusions) unless the program announcement states that a different method must be used for calculating F&A.
Example: A sponsor's published policy states that F&A costs cannot exceed 10% of the total project costs. In this case, it would be incorrect to apply a 10% F&A rate to total direct costs.
In the example below, total direct costs are $90,000. If F&A costs will represent 10% of the total project cost, total direct costs will represent the remaining 90%. Once the total direct cost figure is known, the total allowable project cost can be determined by dividing the total direct costs by 90% ($90,000/.9 = $100,000). The maximum allowable F&A costs can then be figured: $100,000 - $90,000 = $10,000. The F&A rate applied to the total direct costs can now be figured as well: $10,000/$90,000 = 11.11%.
Total Direct Costs $ 90,000
F&A (11.11%) $ 10,000
Total Costs $ 100,000
Salary and Fringe (SF)
Salary and fringe is used as the base on which F&A costs are calculated when sponsor program guidelines specifically state that F&A costs are only allowed to be calculated on direct salaries and wages including all fringe benefits.
Use this method when sponsor program guidelines indicate that specific expenses are to be excluded from F&A.
Always review program guidelines as many sponsors indicate what costs, including F&A, are and are not allowable. When a sponsor's policy requires the University to apply a less than full F&A rate, a copy of the sponsor's policy must be included with the proposal materials as supporting documentation.