GIM 22
Attachment A
A Primer on Facilities and Administrative Costs
4. How is the overall F&A cost rate calculated?
A formalized process developed by the Federal government (consistent with generally
accepted accounting principles and presented in Circular A-21) is used to
determine the University's F&A cost rate for sponsored research.
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.
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