Facilities and Administration (F&A) costs constitute reimbursement to the institution of ordinary expenses related to facilities - buildings and their maintenance, equipment and capital improvements, operations, and debt on buildings - and administration - administrative support, relevant fringe benefits, and other general administrative costs - needed to operate the University wherein the sponsored research or program takes place. F&A is interchangeable with Indirect Cost Recovery (ICR).
Background and Purpose
This policy describes the institution's expectations for full cost recovery on externally funded projects, the process for requesting a waiver or reduction in the federally negotiated Facilities and Administrative (F & A) rates, and the distribution and use of F&A.
Institutional policy imposes a duty on administrators and principals investigators (PIs) to perform work on sponsored projects on a fully costs recovery basis. Thus, as noted above, when allowed by sponsor policy, proposal budgets must include full direct and indirect costs. F&A recoveries are allocated to different functions of the university to help support grant activities.
Applying the appropriate F&A rate reimburses the institution for costs incurred to construct and maintain buildings, and provide equipment, utilities, general and administrative support for sponsored activities. These rates are negotiated with the cognizant federal audit agency (Department of Health and Human Services, Division of Cost Allocation) in accordance with Circular A-21. Current rates can be found at http://www.msudenver.edu/media/content/osrp/documents/forms/ICR2010.pdf.
Exceptions to the Federal F & A Rates
Occasionally, the development of campus research, training or public service programs or infrastructure may best be served by accepting a sponsored award at less than the indirect cost normally applied. Such interests must be viewed as so significant and important to the institution that funding the project at a loss is more important to the campus than recovering the full F & A costs. For the purposes of this policy, full cost recovery is defined as that F & A that is approved by the funding agency. For example, the Department of Education typically funds training grants at 8 percent. The full cost recovery is then defined as 8 percent.
Institutional Vital Interest waivers are applicable to an individual project and are appropriate only if the sponsor will not support F & A. The Provost will make the final determination if Institutional Vital Interest waivers will apply. Among the factors to be considered are:
- Short-term seed grants that attract future larger awards (< $25,000)
- Grants supporting conferences or meetings hosted by the institution
- Cases of hardship for a new investigator
- Support for equipment purchases
- Supplemental funding for student support services that the institution wishes to provide
- Supplemental funding for library holdings, performances, or exhibits
- Grants designed to enhance cultural/artistic activities
- Development of strategic partnerships
Unacceptable reasons to request a waiver or reduction in F & A costs
Institutional policy does not allow F & A waivers/reductions to be granted in the following circumstances:
- The principal investigator failed to submit the proposal via approved institutional channels (e.g. through the Office of Sponsored Research and Programs or other approved institutional channel) prior to submission to the sponsor. In these cases, the sponsor will be expected to pay the full applicable F & A rate or the department will be responsible for cost-sharing that portion of the F & A the sponsor refuses to pay.
- To increase (or perceive to increase) the competitiveness of a proposal.
Unspent F & A Balances
Quarterly or as requested by the principal investigator, the Office of Accounting will provide details on F & A balances available from the principal investigator's portion of recovered F & A costs. Eighteen (18) months after the project ends, any account that has had no activity will be contacted by Accounting Services. The designated "signatory" will be given six (6) months to provide guidance for the planned uses of the unspent funds. At the end of the six months, any funds with no planned encumbrances will revert to a central fund controlled by the Provost and will follow the approved uses of F & A funds.
Distribution of F&A Funds
Funds recovered pursuant to this policy will be given discrete account identities. One F & A fund will be created for each PI regardless of the number of grants. The distribution of F & A recoveries is as follows:
- 25 Percent to the Institution (to be managed by the VP AFF)
- 25 Percent to the Principal Investigator
- 20 Percent to the Office of Sponsored Research and Programs
- 15 Percent to the Supervising VP Area/President
- 15 Percent to the Deans/Departments
Use of Recovered F&A Funds
Per OMB A-21, "A cost is allocable to a sponsored agreement if (1) it is incurred solely to advance the work under the sponsored agreement; (2) it benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods, or (3) it is necessary to the overall operation of the institution." In keeping with these cost allocation principals defined by OMB A-21, funds generated through F&A recoveries should be spent in support of sponsored activities. The following example is not intended to define specific uses, but rather to provide general guidance for the use of F&A funds. Recipients of F&A may use these funds for items such as:
- research/program-related travel
- services to support research/program capabilities
- memberships, subscriptions, and journals
Limited salary uses may be made of these funds in accordance with the following principles:
A. Pursuant to Section J.8.d (2) (a) of OMB A-21, recovered funds may not be used to supplement salaries for faculty or staff during the period of the individual's contract obligation to the institution. This will not prevent the use of such funds for summer salary determined in accordance with policies prescribed by the institution. [OMB A-21 Section J.l0.d (2) (a)]. Use of these funds for summer salaries requires written approval of the dean.
B. Funds may be used to hire support staff to provide administrative and technical assistance to the sponsored activities enterprise. Funds may also be used for salary for research assistants, associates, scientists, post-docs, and other staff such as student employees in keeping with institutional policy.
In keeping with the institutional mission to engage the community at large in scholarly inquiry, creative activity, and the application of knowledge, faculty and staff are encouraged to pursue research and training opportunities in the business or private sector.
The Office of Sponsored Research and Programs in consultation with Contracts and Business Services will negotiate the terms of the Contract or Fee for Services Agreement. Agreements may include the following as defined:
- Cost reimbursable contracts - The institution (contractor) is reimbursed for actual costs plus the preapproved negotiated facilities and administrative cost rate.
- Fixed price contracts - Contract stipulates the exact amount to be paid for the services of products being purchased.
- Time and materials agreement- Contract provides for acquiring supplies or services on the basis of:
- Direct labor hours at fixed hourly rates that include wages, overhead, general and administrative expenses [loaded labor rates] and
- Material as cost, including, if applicable, material handling costs as part of material costs.
The total amount of the agreement will be in keeping with institutional policies which govern extra duty pay and sponsored activities. A copy of the contract or fee for service agreement must be submitted for review and approval by the Department Chair, Dean and the Provost prior to the performance of the work.
To qualify for consideration, the contract or fee for service agreement should demonstrably benefit student learning, faculty teaching and advising, community service, and other university educational initiatives. Specifically for time and materials agreements, the institution will assess a ten percent (10%) administrative fee to be incorporated with the loaded labor rate.
Recommendations for faculty reassigned time and extra duty pay on contracts and fee for services agreements must specify:
- the assignment [this should include a specific description of the temporary work and the desired outcomes, time and effort reports required, documentation evidence that the work is not part of the employee's regular duties and evidence that the additional duties are not so burdensome as to interfere with the employee's performance of regular full time duties];
- a termination date for the assignment not to exceed one (1) year;
All agreements to work on grant- and contract-funded reassigned time and extra duty pay will incorporate the standards of time and effort reporting necessary to comply with the terms of the grant or contract.
Facultv Reassigned Time/Summer Month Calculations
It is not unusual in a federal or state project to find that the proportion of faculty time supported by a sponsor is limited. In proposing a project with grant funds, the principal investigator must select a workable and fundable methodology, including the amount of time that is available to work on a project as a faculty member. The principal investigator must secure approval from the respective Chair and Dean to ensure that proposed workload is feasible.
Faculty members may request reassigned time up to 50 percent (and more under extraordinary circumstances) during the academic year to work on grant-funded projects. Reassigned time applications must be approved by the faculty member's Chair, Dean, and the Provost. Requests for grant-funded reassigned time must also be approved at the time the grant is submitted.
Faculty reassigned time is to be included as a direct cost in grant proposals. Reassigned time (buyout) should be calculated based on the appropriate percentage of the PI's academic year base salary (including fringe benefits) and not on the amount needed to hire a replacement. The following is a general formula for calculation of reassigned time costs:
(AY base salary/24 credits) x no. credits reassigned x 1.28 (assuming fringe at 28% of base)
EXAMPLE: Professor Able has a base AY salary of $40,000. Professor Able is requesting 50% reassigned time as part of a grant proposal. The budget request for reassigned time would be ($40,000/24 credits) x 12 credits reassigned x 1.28 = $25,600. As a direct cost to the grant, this amount would be subject to the standard F&A recovery as well.
Faculty members may use qualifying accomplishments that result from grant-funded work as professional development and service accomplishments in their annual self evaluations, applications for tenure and promotion, and in post tenure review.
- For non-teaching work funded by grants during the academic year (nominally August 15 – May 14) faculty members may earn overload pay for the work performed over and above their assigned university duties. Overload pay may be up to 25 percent of a faculty member's academic year base salary (subject only to the limitations imposed by the granting agency).
- For non-teaching work funded by grants during the summer (nominally May 15 - August 14), faculty members may be paid up to 41.67 percent of their academic year base salary for 12 weeks of full time work (subject to the limitations imposed by the granting agency). (NOTE: The percent of pay is calculated with the assumption that it is for three months work, so 33 percent of the base pay. Additionally, faculty may be able to work overload during the summer for up to 25 percent of the summer pay for a total of 41.67 percent of the faculty member's base pay.)
Example: Professor Able has a base AY salary of $40,000. Assuming compliance with granting agency regulations, Professor Able is eligible for 25 percent overload pay of her AY base (0.25 x $40,000 = $10,000) during the Academic Year, or $10,000. During the summer, Professor Able is eligible for an additional 41.67 percent of her AY base (0.4167 x $40,000 = $16,668), or $16,668. The total remuneration from grant activities for the 12 month period is ((0.25 + 0.4167) x $40,000 = $26,668), or $26,668. Therefore Professor Able's total pay for the 12 month period is her AY base pay ($40,000), plus her total remuneration from grant activities ($26,668), for a total of $66,668.
- For teaching work funded by grants, summer salary will be established and paid at the same rate as university-funded teaching, that is, up to 25 percent of the previous academic year's salary (for full time faculty who teach a full time summer load of eight or more credit hours).
The employee's summer semester may combine teaching and non-teaching duties, but the amount of teaching duties will directly reduce the time available to compensate other grant-funded activities at the
higher rate. For this calculation, one credit hour of teaching will equate to one full time week of non-teaching duties.
This administrative policy becomes effective on July 1, 2011 and supersedes any prior agreements or understandings regarding these policy issues, including the July 16, 1993 Memo from then-Provost and Vice President of Academic Affairs, Dr. David Williams to then-Vice President of Administration and Finance, Mr. Joseph Arcese.