GIM 22
Attachment A
A Primer on Facilities and Administrative Costs
9. Why should my grant pay F&A costs?
It is not uncommon for faculty members to feel that when they successfully compete
for a grant, the F&A cost component is something that they are bringing to
the University and donating to the institution. From the institution's point
of view, the faculty member's proposal really addresses the direct cost elements
only, and when a federal agency or other sponsor funds the research, the direct cost
commitment to the faculty member must be supplemented to pay for a share of the
institutional cost of research. The reimbursement of F&A costs is a matter between
the institution and the sponsor, based on the principles outlined in Circular
A-21. From the sponsor's and the institution's point of view, the F&A cost
component is distinct from the direct cost award, and in the best of circumstances
it simply reimburses the institution for the real cost to the University of a
specific research project.
These contrasting perceptions can be a cause for misunderstanding. The faculty
member feels that she or he is contributing significant F&A cost dollars to the
University, whereas the administration maintains that the University is simply being
appropriately reimbursed for the F&A costs of the project. There is typically a
tendency for faculty to underestimate the nature and cost of essential support
services. All too frequently, the recovered F&A costs do not fully cover the actual
F&A costs of such research. In many instances the cost of the space alone, if
calculated at market rates, would be comparable to the F&A cost amount generated by
the grant.
The situation is even more complicated than the above analysis suggests. When a
federal agency receives its appropriation from Congress, there is often no
distinction between direct and F&A costs. The agency receives a total budget to
carry out its program. Whatever funds the agency has to pay out for F&A costs are
clearly unavailable to award for direct cost purposes. Thus, there is a fundamental
trade-off made at the agency level between direct and F&A costs, which makes this
issue of legitimate concern to faculty considering the long-term funding prospects
for their disciplines.
Some faculty members feel that if they could force sponsors to reduce the F&A costs
a university can recover, there would be more money for their research program. That
tactic might work in the short term, if the "savings" were used to help fund a
larger number of grants. However, in the longer term, if the University loses
revenue in this way, it will be forced to cut services, staff and faculty positions,
reduce available research space, and trim other expenses, so that any initial
advantage will be undermined or completely outweighed by later disadvantages. In
reality, the University subsidizes many proposals for which the F&A cost rates are
arbitrarily restricted by the agency. In light of this, the University continually
strives to lower administrative costs and to conduct research in the most efficient
and effective manner possible. Through these efforts, the University lowers its
costs, and more direct cost funds are made available.
|
