Facilities and Administrative (F&A) Costs
University of Kentucky Administrative Regulations (see AR 7:3) require that sponsors be charged for the full cost of an externally-funded project (i.e., grant, contract, or other agreement). The full cost of every sponsored agreement includes direct costs –– those allowable costs used to actually carry out the project –– and indirect costs, which are officially called facilities and administrative (F&A) costs. This document provides policy and procedural guidance for charging F&A costs to sponsored projects accepted by the University of Kentucky Research Foundation (UKRF).
Definition of F&A Costs
F&A costs are real expenses incurred by the university in support of sponsored projects, but which by federal regulation cannot be charged directly to a specific grant, contract, or other sponsored agreement. F&A costs stem from the institutional need to maintain a shared infrastructure that supports the research and scholarly activities of all investigators. F&A costs are divided into facilities costs (e.g. building depreciation, operation and maintenance, utilities) and administrative costs (e.g. sponsored projects administration, purchasing, accounting, legal services).
Federal regulations governing F&A costs are described in Office of Management and Budget (OMB) Circular A-21 (Cost Principles for Educational Institutions). The federal F&A cost rate is negotiated periodically with the university’s cognizant audit agency, the Department of Health and Human Services.
Federal F&A Rates
Effective 03/09/2021 until amended
|Indirect Rates||On Campus||Off Campus|
|Department of Defense
Included in the base: all salaries and wages, fringe benefits, materials and supplies, services, travel and subgrants and subcontracts up to $25,000 of each subgrant or subcontract
Excluded from the base: equipment, capital expenditures, charges for patient care, participant support costs and tuition remission, rental costs of off-site facilities, scholarships, and fellowships, as well as the portion of each subgrant and subcontract in excess of $25,000.
Total Direct Costs must be used as the base for the F&A calculation for all sponsors who publish an F&A rate less than UK's standard rate (or full F&A rate) and do not stipulate any direct cost category exclusions.
An exception from the policy of charging full F&A costs will be granted to non-profit sponsors and governmental agencies that have explicit, published policies limiting their F&A cost rate. Principal investigators need not request a policy exception; these are granted automatically. Note that an exception is different from an F&A cost waiver, which is outline below.
Non-profit sponsors: UKRF will grant a policy exception on awards from non-profit sponsors that do not reimburse the university at the maximum allowable federally-negotiated F&A cost rate, provided the sponsor has an explicit, published policy limiting its F&A cost rate, and provided such policy is applicable to recipients at all universities. This policy exemption does not apply if a non-profit sponsor does not specify its maximum allowable F&A rate, or if the sponsor allows for negotiation of the F&A rate.
Governmental sponsors: UKRF will grant a policy exception on awards from governmental sponsors that do not reimburse the university at the maximum allowable federally-negotiated F&A cost rate, provided the agency has an explicit, published policy limiting the F&A cost rate for all applicant organizations.
For-profit sponsors: For-profit sponsors are charged the full F&A rate appropriate to the sponsored activity. Without full cost recovery, the university is subsidizing the cost of the project for the sponsor. This is tantamount to a gift of public funds for private benefit, which is not in the best interest of the citizens of the Commonwealth of Kentucky.
An F&A policy exception will be granted to for-profit sponsors for projects involving only student support (e.g. fellowship, traineeship, residency), provided such policy is applicable to all recipients.
F&A Cost Waiver
In contrast to the policy exceptions outlined above, an F&A cost waiver is an institutional agreement between UKRF and a sponsor that F&A costs will be charged at a rate lower than the sponsor’s published rate or that F&A costs will not be charged to a particular sponsored agreement. A waiver shall be granted only under exceptional circumstances and only when the programmatic benefit to the university is compelling and outweighs the institutional benefit of recovering the full cost of conducting the project.
An F&A cost waiver shall not be approved because the principal investigator thinks this will increase the competitiveness of the application or because the total award amount is capped.
Investigators are reminded that while they are free to discuss the scope of work with a potential sponsor, they are not authorized to negotiate F&A costs. Any “prior understanding” between an investigator and a sponsor regarding F&A rate is not binding on the university.
Procedure for Petitioning for a Waiver of F&A Costs: The waiver of any portion of eligible F&A cost recovery must be approved by the Director, Office of Sponsored Projects Administration, who has delegated authority from the Vice President for Research, prior to the submission of the application. Under no circumstances shall F&A cost waivers be considered after an award is accepted by UKRF.
A petition for a waiver of F&A costs must be submitted in writing by the principal investigator prior to circulating the final proposal with its internal approval form (IAF). The petition must include written concurrence of the department chair/school director and college dean, or center/institute director, acknowledging that the F&A costs waived will be deducted from any allocation of F&A (incentive, enhancement, or research advancement award) returned to the unit(s) for the years applicable to the award. Any such deduction shall be divided proportionally among the department(s)/school(s) and college(s) or center(s)/institute(s) involved.
To allow for timely review, a petition for F&A waiver must be received by the Director, Office of Sponsored Projects Administration, at least ten (10) working days prior to the sponsor’s deadline.
The waiver petition should include the following information:
- The amount of the waiver expressed as a reduction of the applicable federally-negotiated F&A cost rate.
- The reason for the waiver request that includes the programmatic imperatives of the proposed project to the department/school, college and/or unit.
- The impact on the University of Kentucky of granting or denying the F&A cost waiver petition.
Signature of the department chair and dean or director. F&A cost waiver petitions involving multiple academic units must have written concurrence of all cognizant department chairs, deans and/or directors. Any F&A cost waiver petition not signed by the cognizant dean or director will be returned to the investigator.