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F&A Rate Practices, Concepts and Calculations

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F&A Rate Practices, Concepts and Calculations
ByMichael Anthony, University of WashingtonLupe Valencia, University of Washington
What are F&A Rates?What is the simplified (short-form) method?How is it calculated?What is the protocol for submission?Best practices
What are F&A rates?
The calculated rates are a representation of the facilities and administrative (indirect) costs that an institution incurs in support of major institutional activities (e.g., instruction, research).Facilities& Administrative (F&A) rates are negotiated with the federalgovernment (per assigned cognizant agency).Cognizant agenciesDCAA – Office of Naval ResearchDHHS – Cost Allocation Services
What are F&A costs?
Facilities and administrative costs are those costs that are incurred for joint objectives which cannot be identified specifically to a particular sponsored project, instructional activity or other institutional activity.Costs allowable for inclusion in the F&A calculation for reimbursement purposes are defined in the Code of Federal Regulations, UniformGuidance (UG),2 CFR Part200.Other specific applicable guidance can be found in corresponding AppendixIII(UG) andthe Cost Allocation Services Best Practices Manual.
What are F&A costs?
Administrative costs:General AdministrationSponsored Projects AdministrationDepartmental AdministrationStudent Administrative ServicesFacilitiescosts:Building/Equipment DepreciationInterest ExpenseLibraryOperations & Maintenance
F&A Rate Development Methods
Long Form (Standard) MethodRequired for schools with >$10M in direct federal awards excluding student aidThere are several options for allocating space costsVery time consuming and can beintrusiveto campus if it includes a space functionalization survey (optional)Requires segregation of direct cost bases (multiple bases = multiple rates)Schools with <$10M in direct federal awards excluding student aid have the option to use the long-form methodRate may be higher using this methodologyIf entity elects this option then you cannot revert back to the short-form (simplified) method in the future
F&A Rate Development Methods
Short-Form (Simplified) MethodFor schools with <$10M in direct federal awards excluding student aidLess time consumingMust not have used the long-form methodology in the pastPossible to seek Cognizant Agency approval to use this methodology if >$10M in direct federal awards excluding student aidOne direct cost rate = one indirect cost rate
Short-Form (Simplified) Method
FormulaIndirect Costs/Direct Costs = Indirect Cost Rate
What information do you need?
Base year cost informationPull financial transactions from financial system of recordInclude – account numbers and chart string, object codes, department numbers, financial statement cost categoriesReconcile transactions to the base year AnnualFinancial Report (AFR)Depreciation – must tie to AFR amount and must flag federal depreciation as it must be excluded.Review adjusting journal entries to determine which are to be included in calculationFinancial statement expense categories (NACUBO/WICHE) – will likely match direct costsF&A/Uniform Guidance– indirect costs/facilities and administrative costsFlagexclusions and unallowable costsCost groupings
Direct Costs
InstructionResearchAcademic SupportStudent ServicesInstitutional SupportAuxiliary EnterprisesOther Direct
Indirect Costs
General AdministrationDepartmentalAdministrationSponsored Projects AdministrationStudent Administrative ServicesOperations and Maintenance (O&M)LibraryDepreciationInterest
CapitalExpendituresIndirect Cost RecoveryStudent AidPatient CareTuition RemissionSponsor Paid RentPortion of Subcontracts > $25kParticipantSupportCosts
Unallowable Costs
Definedin Uniform GuidanceExamplesBadDebtFines PenaltiesEntertainmentFundraising
Top Level Rate Calculation Steps
Facilities & Administrative Costs
- Administrativesalaries/wages$350,000- Associated fringe benefits75,000- Finance and accounting costs25,000-Suppliesand materials17,000- Spaceassociated(O&M,Depr)27,000- Administrative travel6,000- Total indirect costs$500,000
Rate Calculation - Example
Step 1.Development of theF&A costpools (numerator):
CostObjectivesDirectS&WFederalNSFgrants$600,000FederalNIHgrants350,000GatesFoundation grants400,000State Contracts250,000Othersubcontracts400,000Total base costs$2,000,000
How is the Rate Developed?
Step 2.Development ofthe basecosts (denominator):
F&ACost Pool$500,000=25%DirectCostBase*$2,000,000*several options
How is the Rate Developed?
Step 3. Calculate therate:
F&A Rate Proposal Submission Process
June30, 2018 - FYE Close (FY 18 Base Year)October 30, 2018 – Audited Financial Statements IssuedDecember 31, 2018 – F&A Proposal Due to Cognizant AgencyMay 2019 – Data RequestJune 2019 – NegotiationsJuly 2019 – New F&A rates in place
F&A Negotiation Process
No F&A Rate
No F&A rateUniformGuidance allows for a10% de minimis MTDCrate to be used.There is no penalty for not having one.There are benefits to calculating a rate.Governmentagencies arerequired(subject to certain statutory limitations and the like)topay the negotiated rate.The F&A revenue that is generated is a budgetary inflow to your institution and can be used for institutional investments.
Best Practices
Requests for submission extensions (not rate extensions)Appeals ProcessRate ExtensionsSimplified Method Example





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F&A Rate Practices, Concepts and Calculations