First, all F&A costs within the institution are assigned to one of nine cost pools related to primary functions. Circular A-21 defines the nine cost pools (see Question 6). Then a fractional amount from each cost pool is attributed to the research enterprise according to guidelines provided in Circular A-21. Totaling these fractional dollar amounts yields the University's total F&A costs (TFAC) attributable to sponsored research.
The TFAC total is then converted to an F&A cost rate by dividing it by "Modified Total Direct Costs" (MTDC). In 1979, the Federal government elected to adopt a "Modified Total Direct Cost" approach for computing the F&A cost rate and charging F&A costs to individual grants. MTDC at the UW is calculated as total direct costs minus the cost of equipment, buildings, patient care, off-campus building rental, training stipends, tuition, and the portion of each subcontract in excess of $25,000. However, for most individual research projects, MTDC represents simply the direct costs less any equipment costs. (See Chart I, The F&A Cost Formula.) The threshold for equipment was raised from $500 to $2,000 in FY1997 to reflect changes in state and federal threshold requirements.