GIM 22
Attachment A
A Primer on Facilities and Administrative Costs
15. How much F&A cost reimbursement accrues to the UW?
When the University announced a total of over $650 million for grant and contract
awards during FY 2000 (see Chart IX) some observers might have made a quick
back-of-the-envelope calculation and estimated that a 52% F&A rate must have yielded
the University $339 million in F&A costs. This is incorrect for several reasons, but
it certainly is erroneous because the $652 million figure already includes F&A
costs.
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.
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