F&A Costs Are Those Costs Incurred in Support of Sponsored Projects and Include the Following

Background

Facilities and Administrative (F&A) costs, also known as Indirect Costs (IDC), are costs that are general institutional expenditures (e.g., heat, lights, phone) incurred for multiple or shared sponsored projects, functions, or activities and therefore cannot be specifically identified with relative ease and with a high degree of accuracy to a sponsored project or other institutional activity. A sponsored project is an externally funded activity that is governed by specific terms and conditions. Sponsored projects must be separately budgeted and accounted for subject to terms of the sponsoring organization. Sponsored projects may include grants, contracts, and cooperative agreements for research, training, and other public service activities.

F&A costs are those costs incurred in support of sponsored projects and include the following areas:

• Academic college office costs for salaries and operating expenses, limited to administrative and clerical functions.

• Academic department expenses for the administrative effort of clerical, faculty, and other professional personnel involved in various missions of the unit.

• Cost of depreciation on capitalized equipment purchased with non-sponsored funds.

• Central operation costs such as: Business Services, Facilities Management, SPA, and Libraries.

Charging F&A / INDIRECT COSTS

All proposals for sponsored research, education and outreach (Public Service) projects should include overhead or F&A costs, if allowed. The University rates should be used whenever possible. If a sponsor has a published rate that differs from the University, the sponsor’s rate should be used on applications. University’s standard rates can be found at http://www.ospa.umn.edu/forms/rates/F&A.html.

To determine the amount of F&A charged on a sponsored project, multiply the applicable F&A rate by the total direct costs or for most federal sponsors, the “modified total direct costs”. Modified total direct costs are the total direct costs minus equipment, capital expenditures, charges for patient care, graduate student fringe, space rental of off-site facilities, scholarships and fellowships as well as the portion of each sub-grant or subcontract in excess of the first $25,000 per project period.

F&A WAIVERS

A F&A waiver/reduction is an institutional agreement that the University will charge F&A costs at a lower rate than the rate published by the Vice President for Research or a published rate of the sponsor. In the Medical School, F&A waivers should be a rarity as they affect the department’s ability to pay for their overhead costs. The policy can be found at http://policy.umn.edu/Policies/Research/COST_PROC03.html.

A. Obtaining an F&A Cost Waiver/Reduction:

Unless a project falls into a limited number of pre-established exceptions (see Section B below), Principal investigators must petition for such a waiver/reduction on a case-by-case basis. Waivers/reductions are not granted for an entire type or class of project.

B. Determining if an Individual Project Waiver or Reduction is Needed:

Review the Facilities & Administrative (Indirect) Cost Rates table to determine the full applicable rate for your type of project (research, instruction or other sponsored activity), taking into consideration whether your project will be conducted on or off-campus. Most projects will adhere to these published rates. These projects are considered to be carrying "full F&A".

In addition to these projects, an individual project waiver/reduction as outlined in Section D does not have to be obtained if one or more of the following criteria exists:

· The rate applied to the project is the full applicable rate for your type of project (e.g., industry-funded clinical trial.). A note should be added to the Proposal Routing Form identifying the reduced rate and noting that the reduced rate is posted on the “Other Sponsor-Established Rates” table.

· The governmental or non-profit sponsor has a published rate lower than the full applicable rate. [This does not apply to for profit agencies, which are expected to pay the full applicable rate.] To be acceptable, the published rate of the non-profit or governmental agency must appear in its guidelines (request for proposal, request for application, broad agency announcement, or other published guidelines) of the agency, or be published on their web site, or be confirmed in writing by their grants office (not a program official.) The lower rate must apply universally to all proposals submitted for that particular program or that agency (not solely our proposal.) The Principal investigator must furnish evidence of the published rate by the time the proposal budget and Proposal Routing Form is submitted to Sponsored Projects Administration for institutional endorsement of the proposal, or the sponsor's rate must appear on SPA's "Other Sponsor-Established Rates" table. If such documentation cannot be provided, the Principal Investigator must include the full applicable F&A rate in the proposal.

· The award is being transferred from another institution/entity with direct cost equivalency (the amount of direct costs remaining at the old institution will be the same as the direct costs awarded to the University). In this instance, Sponsored Projects Administration will establish an F&A rate that ensures that our Principal Investigator is held harmless (e.g., the same amount of direct costs remaining upon departure from the old institution/entity will be made available; UMN will adjust its F&A rate as needed to ensure direct cost equivalency.) Evidence of the direct cost amounts remaining at the time of the transfer (e.g, via a Public Health Service relinquishing statement, final financial report, or similar documentation endorsed by an institutional official) is required. A note should be added to the Proposal Routing Form identifying the reduced rate and that it is due to a PI transfer. Note that any additional reduction in rate (beyond maintaining direct cost equivalency) requires an individual project waiver.

· The project has an approved individual project waiver in place, and any additional funding (e.g., supplement or renewal) provided by the sponsor does not exceed 25% of the original amount anticipated on the award. Funding added to a project above these levels require their own waiver. A note should be added to the Proposal Routing form identifying that this project is subject to a previously-approved individual waiver and the supplement does not exceed 25% of the original amount anticipated on the award.

C. Acceptable and Unacceptable Reasons for Individual Project F&A Waivers/Reductions:

Acceptable Reasons. Some of the reasons the University may approve an F&A waiver include the following. This list is not exhaustive, and the presence of one or more of these conditions does not guarantee that a rate reduction will be granted. Each circumstance is different and requests are treated on a case-by-case basis.

· Seed grants which may attract larger awards (normally, these waivers are approved with the stipulation that all future funding on the project will carry full F&A).

· Hardship for new PI

· Awards which include equipment or building funds

· Community relations or library projects

· Student services projects (or increase funding to pay for students)

· Capped awards

· Department committed to undertake the research regardless of external funding (e.g, any dollar gained is better than nothing)

· Small cost

· Junior faculty or incoming faculty member

· Enhance cultural/artistic activities

· Only available source of funds in an area

· Strategic partnerships

Unacceptable Reasons. University 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 Sponsored Projects Administration 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.

D. How to Request an Individual Project F&A Waiver/Reduction:

Each request is subject to departmental and collegiate approval, which is not guaranteed and depends on the unique circumstances of the request. Strategic waivers are also subject to institutional approval. Principal Investigators may not offer or promise a reduced rate to a sponsor in advance of receipt of an approved waiver. The University will not alter its review procedures or approval criteria because of such promises. Principal Investigators and their units are responsible for requesting any waivers needed in a timely manner; recommended turnaround times are shown below.

There are three types of Individual Project F&A Waivers/Reductions:

1. Small Project Waivers (projects requesting $50,000 of direct costs or less per year).

Eligible projects for this type of waiver are those projects requesting $50,000 direct costs per year or less, from any type of sponsor (including for-profit). If the proposal requests more than $50,000 in any single year of the project, a regular or strategic waiver must be used.

Department heads and collegiate research associate deans or deans have the authority to make the decision to waive or reduce F&A on small projects based on their assessment of the compelling nature of the request, the importance of the individual project, the best interest of the college, fairness to other investigators, and the ability of the department or college to financially forego the F&A that would otherwise have been recovered. Principal Investigators should not assume that such waiver requests will be granted.

Departments and colleges may establish their own processes and timelines for such waiver requests (including requiring use of the institutional Individual Project F&A Waiver/Reduction form) or they may use the Proposal Routing Form for gathering requested data; consult with your unit for their process. SPA accepts the signature of the collegiate official(s) on the Proposal Routing Form as evidence of approval; submission of a completed Individual Project F&A Waiver/Reduction form is not required by SPA.

2. Regular Waivers.

Regular waivers are a request to waive or reduce indirect cost for projects that do not fit within the Small Project category, but whose rate reductions are within certain published levels. Requests beyond those published levels must be considered under the “Strategic” category. Collegiate research associate deans or college deans have the authority to make the decision to waive or reduce F&A on these types of projects based on their assessment of the compelling nature of the request, the importance of the individual project, the best interest of the college, fairness to other investigators, and the ability of the department or college to financially forego the F&A that would otherwise have been provided. Principal Investigators should not, however, assume that such waiver requests will be granted.

Completion of an Individual Project F&A Waiver/Reduction form is required, and a fully approved copy of the form must be furnished to Sponsored Projects Administration before the proposal will be submitted.

The recommended lead time for such waivers is one week (beginning with the time the Principal Investigator submits his/her Individual Project F&A Waiver/Reduction form to the unit head and ending with the time the proposal is due at SPA.)

3. Strategic Waivers.

Strategic waivers are a request to waive or reduce indirect costs beyond certain published levels. This type of waiver is granted only rarely, and only when it is in the overall best interest of the institution. This type of waiver requires the approval of the Vice President for Research in addition to departmental and collegiate approval.

Since this type of waiver may necessitate discussion between collegiate deans and the Vice President for Research, additional lead time is needed. The recommended lead time for such waivers is at least two weeks (beginning with the time the Principal Investigator submits his/her Individual Project F&A Waiver/Reduction form to the unit head, and ending with the date the proposal is due at SPA.)

E. Processing of Reduced-Rate Proposals without Evidence of an Approved Waiver:

If a proposal is submitted to Sponsored Projects Administration at a reduced rate without evidence of an approved reduction/waiver, SPA will contact the principal investigator or his/her unit to determine whether an Individual Project F&A Waiver/Reduction form or collegiate signature on a PRF (small project waivers) is in process. If a reduction request is in process, the grant administrator will facilitate a decision. If the process cannot be completed prior to the Sponsor's proposal deadline, the Principal Investigator is responsible for updating the proposal to use the full institutional F&A rate applicable to that type of project prior to its submission to the Sponsor.

F. At the End of the Project:

For fixed-price awards or other awards where the University is allowed to retain the unexpended balance, all reductions are granted with an understanding that if there is a balance at the end of the project, the F&A rate reduction will be rescinded. The published rate will be charged to the entire project and the value of the reduction will be subtracted from the remaining balance. For example, if a balance of $5000 remains at project end and the principal investigator was granted a reduction valued at $1500, $3500 would be available for transfer to departmental account. However, if the balance was $500, no funds would be available for transfer to the departmental account and the effective reduction would then be $1000.

F&A SHARING AMONG COLLEGES

When sponsored project proposals are prepared which include more than one college and more than $100,000 of total direct costs per year, ICR must be shared unless the opportunity to share is waived by participating colleges. This ICR sharing policy applies to new and competitive renewals only (existing arrangements are exempt) and the minimum ICR must be $1,000 per departmental unit.

The deans of the involved colleges or their representatives must agree on how the returned indirect costs will be shared if the project is funded or they may waive their right to receive a portion of the ICR. The principal investigators assist with this process. Any disagreements are mediated by a representative from central academic administration.

If an agreement regarding the method to distribute ICR (i.e., separate budgets or proportional contribution) is not reached prior to the deadline for submission of the grant application, the application can be submitted when the PRF indicates (by dean's signature) the intent to share or waive sharing of ICR. The proportional contribution or separate budgets must be finalized prior to account set up, if the grant is awarded.