Facilities & Administrative (F&A) or Indirect Costs (IDC)

Base: The F&A rate is applied to a base of direct costs in order to determine the F&A Cost. The base can be calculated in one of the following ways:

• Total Direct Costs (TDC) = TDC means all direct costs included in the project budget. There are no exclusion or modifiers.
• Modified Total Direct Costs (MTDC) = MTDC means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs (§200.1).

Is it Research?

Organized Research means all research and development activities of an institution that are separately budgeted and accounted for. It includes:

• Sponsored research means all research and development activities that are sponsored by Federal and non-Federal agencies and organizations. This term includes activities involving the training of individuals in research techniques (research training).
• University research means all research and development activities that are separately budgeted and accounted for by the institution under an internal application of institutional funds. (2 CFR 200 Appendix III Section A.1.b.).

An Organized Research rate (56.5%) may be appropriate if you can answer yes to any of the following:

• Is there a systematic investigation or are there activities including testing and evaluation?
• Will there be a scholarly inquiry, analysis, or critical study, testing, hypothesis, or data collection?
• Will the findings be used to contribute to generalizable knowledge (i.e. meant to have an impact on others within the discipline) inside or outside the Institution?
• Will the results or outcomes be published, archived, presented or viewed in some way as relevant beyond the specific participant population?

Is it Instruction?

Instruction means all teaching and training activities (except for research training), whether they are offered for credits or through regular academic departments or separate divisions. Also considered part of Instruction is departmental research:

• Sponsored instruction and training means specific instructional or training activity established by grant, contract, or cooperative agreement. For purposes of the cost principles, this activity may be considered a major function even though an institution’s accounting treatment may include it in the instruction function.
• Departmental research means research, development and scholarly activities that are not organized research and, consequently, are not separately budgeted and accounted for. (2 CFR 200 Appendix III Section A.1.a.).

An Instruction rate (50%) may be appropriate if you can answer yes to any of the following:

• Will the activity support curriculum development?
• Will the activity support teaching/training activities (other than research training)?
• Is the intended audience students enrolled at the University?

Is it Other Sponsored Activities?

Other Sponsored Activities means programs and projects financed by Federal and non-Federal agencies and organizations which involve the performance of work other than instruction and organized research. Examples of such programs and projects are health service projects, community service programs, conferences, travel grants, public events, library collections, archival digitizing or cataloguing. (2 CFR 200 Appendix III Section A.1.c.).

An Other Sponsored Activities rate (40%) may be appropriate if you can answer yes to any of the following:

• Is the intended audience the public?
• Is the intended activity a conference whose participants are not students enrolled at the University?
• Is the intended activity travel to a conference (excludes travel related to research)?

The F&A rateis the result of dividing the University’s indirect cost pools (or overheard) by the direct costs and cost share of all the sponsored research and other activities. The University’s overhead includes: depreciation on buildings, equipment and capital improvement, operations and maintenance expenses, the libraries, general, departmental, student, and sponsored administration. Methods for this calculation are outlined in Appendix III to Part 200 of Uniform Guidance – Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (2 CFR 200 Appendix III).

The rates in an F&A rate agreement are typically effective for a two to four year period, and may be extended for an additional two year provisional period afterward. The University currently has four federally negotiated rates: Organized Research, Other Sponsored Activities, Instruction, and Off Campus. The Off Campus rate is statutorily limited to 26% and is unlikely to change in the foreseeable future. The Instruction rate has remained stable since it was first established in 2003. The Organized Research and Other Sponsored Activities rates have historically changed every two to four years.

There are several drivers of these costs. The cost of space (building construction and maintenance) has risen rapidly during the Austin-area housing and construction boom. If the research community can use laboratory and research office space more efficiently, we can limit such increases in the future. The cost of administration has increased as more regulatory burdens are imposed. UT and other research universities work hard to try to make sure that regulations are appropriately scoped to the concerns they hope to address.

No. F&A is charged as a surcharge on select direct costs, not a fraction of the total grant. In short, the portion that goes to overhead is much lower than this rate implies. For example, when the F&A rate was 54.5% (for the three-year period beginning in 2013) the average fraction of an NSF grant that went to overhead was 22.4%.

The university covers all indirect costs related to research from its own accounts. As you spend direct funds from your grant, UT bills the granting agency for those direct expenses and receives a reimbursement for the allocated indirect expenditures at the agreed rate.

At the end of each calendar year, the Office of Sponsored Projects (OSP) calculates the total F&A reimbursements the sponsors have provided against the direct-cost expenditures on each grant. Generally, 75% of the reimbursement is allocated to the institution to cover university-wide research F&A expenses for the next year. 25% of the total is distributed to your college/school dean to cover the support and facilities that the college/school provides for research. The dean decides how to apportion these funds among departments and other units.

No. Subrecipients and subcontractors, including those from for-profit organizations, may not charge a fee as well as indirect (F&A) costs. However, a fee may be paid to a contractor providing routine goods or services under a grant in accordance with normal commercial practice.

No. The same IDC rate that was approved at the time your grant or contract was awarded will continue to be applied, even if you and your research staff/trainees are working 100% remotely. The reason the on-campus rate will still be applied is that the research operating costs incurred by your sponsored research activity continue to be incurred even when you are off campus – costs including building leases for your office and research space; permanent infrastructure depreciation; and salaries, health insurance and other benefits for your research administration staff, department finance support, and all the other UT employees who help you execute and administer your research without being directly billed to your grant/contract.

Although allowable, the University of Texas does not negotiate F&A (IDC) rates on behalf of subrecipients. This process can be lengthy and it is the university's practice not to take on this role in negotiation. For those entities without a rate agreement, it is recommended to utilize the 10% de minimus rate.