A revised calculation might suggest that direct costs for grants of about $429 million must have yielded $223 million in F&A costs, the two together totaling $652 million in FY 2000 awards. (If the rate is 50%, then for each dollar in direct costs, the F&A cost is 50›, making the total cost $1.50, and the fractional F&A cost rate applied to the total is 33%.) This is a more appropriate calculation but it is still not correct. It is not appropriate to apply the rate to the total direct costs (TDC), since F&A costs are calculated on the basis of MTDC, not TDC. Further, research activities carried out at, for instance, the Applied Physics Laboratory and off-site locations such as observatories and accelerators are charged at a lower rate because many underlying costs (facilities costs, for example) are borne by the grant or contract, or by other entities. Most training grants are capped at an 8% rate. The Federal Department of Agriculture has established a 19% F&A cost rate for its competitive grants. Grants from private foundations often allow only 10% for F&A costs. The net result of all of these factors means that the effective recovery rate for F&A costs is substantially below the maximum 52% on-campus rate allowed for federal grants at the UW.
Chart X shows the effective recovery rate at the University of Washington during the last ten years. The average for the entire period is about 24% if calculated on a TDC base. If the calculation is made on modified total direct costs (MTDC), the percentage is slightly higher, but nowhere near what people generally think it to be. The effective rate of F&A cost recovery for all federal grants and contracts in FY 2000 was about 28% and about 30% for industry grants. The actual F&A costs recovered in FY 2000 were approximately $119 million, rather than the $339 million that may have been estimated by some.
