GIM 22
Attachment A
A Primer on Facilities and Administrative Costs
11. How has the F&A cost rate changed over the years?
Chart VI shows how the F&A cost rate
has changed at the University of Washington during the last two decades. In 1979 the
federal government revised Circular A-21 and changed the base from salaries
and wages to the MTDC approach discussed earlier. As a result, F&A cost rates at the
University have been applied on an MTDC basis since FY 1981.
During the early eighties, the University was successful in negotiating with the
State of Washington to change the way in which the F&A cost funds received by the
University were handled. Until that point, the F&A cost funds basically reverted to
the State. In return, the State made an off-setting adjustment in the University's
budget based on a forecasted amount (invariably too low) for such costs. Even if the
UW subsequently generated more F&A cost reimbursement, it usually did not have
access to the excess.
In 1983, the State and the University agreed to a revenue-neutral transfer of
authority for the F&A cost component of the budget. In other words, the State agreed
to allow the University to retain its F&A cost reimbursements as received, and
discontinued the off-setting adjustment. From that year forward, any increases in
F&A cost reimbursement received by the University have accrued, in essence, to the
institution. This approach provides the University greater flexibility and increased
incentive to recover a more realistic portion of the F&A costs from the federal
government. As Chart VI shows, the F&A
cost rate has gradually increased during the 1980s, reflecting increased costs and
an effort to recover sums that more nearly approximate the University's actual
expenditures. The present rate is 52%.
The F&A rate was fairly stable overall during the period from 1990-2000, averaging
about 51%. The rate dropped by 3 points in 1993 due to the effects of a 1991
revision of Circular A-21, which capped the administrative components. The rate
gradually increased again in the late 1990s, resulting from a major capital
construction program. The program was undertaken both to support the graduate and
research activities on campus, and to bring undergraduate teaching laboratories and
facilities up to modern standards. The new building program added to the
Buildings and
Improvements cost pool, which is a component of the Facilities costs.
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