f&a fundamentals...f&a fundamentals redac meeting 3/13/19. 2 definition •omb uniform...
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F&A Fundamentals
ReDAC Meeting
3/13/19
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Definition
• OMB Uniform Guidance (200.56) Definition of Indirect (facilities & administrative (F&A)) costs
“Indirect (F&A) costs means those costs incurred for a common or join purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. …”
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F&A Rate Development
• Rates are developed for an institution, not a project
• VCU develops the rate and submits it to our cognizant agency for negotiation
• Rates are developed based on actual expenses in prior years
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F&A Rate Calculation
Research F&A Rate =F&A Costs
Research Modified Total Direct Costs (MTDC) + Cost Sharing
As the denominator gets bigger, our F&A rate lowers. This is why cost-sharing is discouraged; it negatively affects our F&A rate for future years.
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F&A Myths
• Myth #1
F&A rates are so high. VCU’s F&A rate is 55%. More than half of my budget goes to F&A costs!
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F&A Myths – The Reality65¢ of every dollar is for direct research costs
35¢ of every dollar is for F&A costs
Administration related = 16¢
Facilities related = 19¢
Operations & Maintenance 8.5¢
Buildings 6¢Equipment 3¢
Library 1.5¢
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F&A Myths
• Myth #2
F&A costs are not real costs. They are profit that my institution uses to subsidize other activities (like education or athletics).
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F&A Myths – The Reality
• F&A costs are real expenses incurred by the institution in support of sponsored projects.– Related to administrative management and to
providing the facilities in which the project occurs
• F&A costs simply reimburse the institution for expenses already spent. They do not represent a “profit” for VCU.
• In developing our rates, only costs related to sponsored projects are included. We are prohibited from including any other expenses.
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F&A Myths
• Myth #3
F&A is so high because institutions hire more and more administrators. Institutions do this so that they can recover more F&A. What a counterproductive system; there is nothing that discourages excess spending!
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F&A Myths – The Reality
• Facilities– Building Depreciation
– Equipment Depreciation
– Interest
– Operations and Maintenance
– Library
• Administrative– General Admin
– Departmental Admin
– Sponsored Projects Admin
– Student Admin and Services
• Capped at 26% (1991)– Only applicable to IHEs
– Faculty Administration capped at 3.6% (1986)
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F&A Myths – The Reality
• More administrators?
– VCU exceeds the 26% cap, so changes in our administrative costs do not affect our F&A rate.
– Institutions often do hire more administrators
• Institution bears these costs aka “unfunded mandates”
– Institutions subsidize every single project (even if “full” F&A is recovered).
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F&A Myths
• Myth #4
We can reduce F&A rates by reducing the regulations surrounding sponsored projects.
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F&A Myths – The Reality
• Due to the 26% cap on Administrative costs, a reduction in regulatory burden will not have much of an impact on F&A rates.
– VCU is well over the 26% cap and thus significant regulatory relief would have to occur for this to affect our rate.
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Questions?