Washington State University
BUSINESS POLICIES AND PROCEDURES MANUAL

SPONSORED AGREEMENTS
40.25
Revised 12-02
Sponsored Programs Services
335-2058
OGRD
335-9661

Facilities and Administrative Costs

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OVERVIEW

Facilities and administrative costs (F&A costs) are expenditures incurred by a sponsored project (programs 11-14) which are not readily identified with that project. Normally, F&A costs (often called overhead) are those costs which accrue from the general operation of the University, e.g., administration, maintenance, and building depreciation.

Direct Costs Defined

To better understand F&A costs, direct costs should be defined. Direct costs are those costs which can be easily and accurately identified and charged to a specific project, e.g., salaries, wages, employee benefits, equipment, travel, computer time.

SUPPORT OPERATIONS

F&A cost recovery reimburses the University for the additional expense of supporting sponsored projects. Specifically, F&A costs are incurred for purposes common to many or all projects, programs, or activities of WSU. Typical WSU operations for which sponsored projects are charged F&A costs include the following:

General Administration

General executive and administrative functions and expenses of a general nature which do not relate solely to any major function of the University. This includes Payroll, Purchasing, and other administrative functions.

Departmental Administration

Management and support duties which benefit departmental activities.

Sponsored Projects Administration

Proposal review, sponsor negotiations, sponsored project development, and grant and contract post-award administration.

Operation and Maintenance

Expenses incurred for the administration, supervisor, operation, maintenance, preservation, and protection of the University's physical plant.

Such expenses are normally incurred for the following services:

Libraries

Library staff time and library materials for use by those working on sponsored projects.

Depreciation

Building and equipment depreciation or use allowance.

SETTING RATES

The F&A cost rates are negotiated with the Department of Health and Human Services (DHHS), Division of Cost Allocation.

The WSU Office of Finance and Administration and DHHS personnel negotiate these rates in accordance with federal government cost principles set forth in Office of Management and Budget (OMB) circular A-21.

RATE CATEGORIES

Not all of the operations indicated above which contribute to a project's F&A costs apply equally to each project type or location, e.g., research versus educational services and on-campus versus off-campus locations. For this reason, separate rates have been negotiated for each category, taking into account those F&A cost elements which are most applicable. The appropriate F&A cost category is determined at the time of proposal preparation. Questions should be directed to the Office of Grant and Research Development (OGRD). The F&A cost categories are as follows:

Research

Research and development activities that are separately budgeted and accounted for.

Instruction

WSU's teaching and training activities. This includes all such activities whether they are offered for credit or not.

Other

Programs and projects that involve the performance of work other than research and instruction. Examples of such programs and projects are health service projects and community service programs.

On-Campus

Those activities which occur at WSU campuses in Pullman, Tri-Cities, Vancouver, and Spokane. This category also applies to the Intercollegiate College of Nursing/WSU College of Nursing (ICN) in Spokane.

Outlying Agricultural Research Stations

Activities occurring at specified College of Agriculture and Home Economics research centers and units.

Off-Campus

Activities occurring at locations other than in University-owned or operated facilities. Also, F&A costs associated with physical plant and library support are not considered applicable to the project.

DISTRIBUTION BASE AND CURRENT F&A COST RATES

The F&A cost rate is multiplied by the distribution base to calculate F&A costs. This distribution base consists of specified direct costs which have been charged to the project.

See the Sponsored Programs Services web site to view the current agreement for the distribution base and F&A cost rates. Go to:

http://www.sps.wsu.edu/

Select F&A Rate Agreement

Application of Current Rates

Use the appropriate negotiated rate for the fiscal year.

Location Rates

Sponsored Programs Services establishes a separate University account for each rate applied, e.g., on-campus, off-campus. The principal investigator or administrator charges expenditures to the appropriate account.

Off-Campus Rate Eligibility

To be eligible for the off-campus F&A cost rate, a project must meet the definition above for off-campus activities. A major consideration for eligibility is based on the majority of salaries, wages, and benefits that are applied to the project.

PROPOSAL PREPARATION

Projected F&A cost recovery is calculated and included in each proposal's budget. See also 40.02.

Calculation

Projected recovery is calculated as follows:

NOTE: Since the F&A cost rate for a future fiscal year may differ from the current rate, actual recovery may be more or less than the projected recovery.

One Rate

Examples

Research Activity

Example: The F&A cost rate for the research activity is 46.8% and the distribution base (e.g., modified total direct costs) equals $30,000. What is the projected F&A cost recovery?

Answer: 46.8% x $30,000 = $14,040

Other Sponsored Activity

Example: The F&A cost rate for an other sponsored activity is 30.2% and the distribution base equals $25,000. What is the projected F&A cost recovery?

Answer: 30.2% x $25,000 = $7,550

Two Rates

Examples

Research Activity

Example: The distribution base (e.g., modified total direct costs) totals $125,000, with $80,000 budgeted for on-campus and $45,000 for off-campus. What is the projected F&A cost recovery from each location for the research activity?

Answer: On campus 46.8% x $80,000 = $37,440
  Off campus  26%   x $45,000 = $11,700
  Total recovery   = $49,140

Other Sponsored Activity

Example: The distribution base for an other sponsored activity totals $100,000, with $70,000 budgeted for on-campus and $30,000 for off-campus. What is the projected F&A cost recovery from each location for the other sponsored activity?

Answer: On campus 30.2% x $70,000 = $21,140
  Off campus 22.3% x $30,000 = $  6,690
  Total recovery   = $27,830

Exceptions

Only under exceptional circumstances does the WSU Vice Provost for Research and/or the OGRD Director approve agreements with agencies which reimburse F&A costs at less than the current negotiated rates.

Investigators who prepare proposals for submittal to such agencies should contact OGRD to ascertain the acceptability of less than approved F&A rates.

ENCUMBRANCES

Sponsored Programs Services normally encumbers funds for F&A costs when a project account is first set up, renewed, or rebudgeted. The amount of the encumbrance is indicated in the Account Balances/Detail and/or on the Budget Statement under object 13. See 30.07 for more information about encumbrances and the Budget Statement.

CHARGING F&A COSTS

Sponsored Programs Services automatically charges F&A costs based upon the rates approved in the sponsor's agreement.

NOTE: A sponsor's liability for paying F&A costs incurred during a project does not lapse at the termination date. F&A costs may be charged for allowable direct costs posted to the account after the agreement's expiration date for goods received or services performed during the project period.

Verification

Departmental personnel and/or the principal investigator are to check the Account Balances/Detail to verify that the rate actually used is the same as the rate approved in the sponsor's agreement. If the Account Balances/Detail or the Budget Statement do not show the charge, or show an incorrect charge, telephone Sponsored Programs Services at 335-2058.

ALLOCATION

Refer to Executive Policy Manual EP2 for the policy on annual allocation of F&A cost recovery revenue to colleges and academic departments.