GIM 22
Attachment A
A Primer on Facilities and Administrative Costs
14. Why should I pay the same rate as my colleague for F&A
costs?
Implicit in the accepted procedures for determining F&A costs is the notion of
averaging. It has been a principle with the federal government that there should be
a single F&A cost rate for each institution's on-campus research. Since every grant
is different and places unique demands on the institution's resources, some grants
recover more than actual costs and some recover less. Nevertheless, everyone should
be aware that since the recovery of F&A costs is generally well below the actual
cost of supporting research, probably no one is paying more than could be justified,
even though someone may be paying relatively more than another colleague.
The disadvantages of using an average rate can be easily stated. It is obviously not
a precise method, and it lacks strong incentives for efficiency. Questions of
fairness arise because comparisons can be made that seem to suggest that one person
is at a disadvantage relative to another. But the alternative to averaging would
have few proponents. It would require an extremely complex (and costly) accounting
effort to attribute a different F&A cost rate to each grant. Substantial
fluctuations in cost recovery rates would arise, depending on when a person utilized
a particular resource, the starting date of a grant compared to the fiscal year and
so forth.
The averaging approach is a convenient and straightforward method. The differential
impacts tend to balance out over time, and the stability of the rate is an advantage
for most participants. If one takes into account the broad range of variability over
time and over various research activities, the averaging approach seems the best of
admittedly imperfect alternatives.
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