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Charging F & A Costs (Indirect Costs) to a Sponsored Project
Exceptions to Federally Negotiated F&A Rates
F&A Waiver Process
Corporate and Industry Sponsored Clinical Trials
Facilities & Administrative (F&A) costs, also known as indirect costs or overhead costs, are defined by the Office of Management and Budget Uniform Guidance 2 CFR, Part 200.56 as "those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved."
All grants, contracts and other sponsored agreements accepted by the University of Arizona are subject to the current federally negotiated F&A rate. The currently applicable rates are outlined in the August 29, 2016 Rate Agreement letter from the Department of Health and Human Services and are also available on the Facilities & Administrative (F&A) Rates page.
It is the University of Arizona’s policy to request the appropriate federally negotiated F&A rate for all sponsored activity regardless of funding source unless a sponsoring agency limits or forbids the reimbursement of F&A based on federal/state/local law, administrative regulation, or published sponsor policy. The federally negotiated F&A rate will be the basis for budget purposes on all sponsored activity with the exception of the following:
Reduced or waived F&A reimbursement is acceptable when stipulated (required) by a federal/state/local government, industry, or domestic non-profit organization. The University will honor a stipulated rate if the sponsoring agency has a formal, published policy regarding the reimbursement of F&A costs. The stipulation must come from the sponsor’s bylaws, published agency guidelines, administrative regulation, formal solicitation, program announcement or application kit.
If no formal stipulation regarding the reimbursement of F&A exists, a letter stating the restrictions on F&A may be substituted:
- The lower rate must apply universally to all grantees, not just to the proposal in question.
- The request must come in the form of written documentation from the sponsor, on official agency letterhead, stating the limitation on the reimbursement of F&A.
- The letter of request must be endorsed by the agency Chief Executive Officer, Chief Financial Officer, Contracts/Grants Officer or equivalent.
E-mails from a sponsor stipulating a rate do not qualify as stipulations and will require a waiver. No exceptions.
- Federal Flow through Awards. When funding flows from a prime sponsor through an intermediary sponsor, as in the case of federal flow-through awards, the F&A rate applicable to the prime sponsor will apply.
Documentation for a stipulated rate must be included with the proposal. To document a stipulated rate, attach a copy of the copy of the law, regulation or published policy stating the limitation on F&A reimbursement under the Abstracts and Attachments tab in the UAccess Research proposal document.
The University does not generally waive Facilities & Administrative (F&A) rates. Every project incurs utilities and other facility-based costs for projects in University space and facilities. Also, F&A must proportionately cover the overall costs of administrating the sponsored activity, which includes sponsored projects, compliance, general counsel, police, president’s office, business affairs, HR, administrative staff, and many others.
The Federal government looks carefully at our F&A costs when we submit the F&A proposal to determine our rate, and does not allow inclusion of many of the costs the University incurs in executing research. Because the Federal government determines the rates for a specified year that is previous to the current year, the costs we submit to the government are always lower than what we are currently experiencing (e.g. electricity is more expensive this year than the previous year that was used to determine the rate). When the government determines our F&A rate, it represents the average of all of these facilities and administrative costs amortized over the University research base to yield a fixed percentage that is the F&A rate.
The process works much like health insurance - the University pays a total cost, that then is allocated to each employee for an average, even though an individual may use more or less of actual services that go into determining the cost. The costs for facilities and administration that pertain to a particular project are paid by the University first, and then reimbursed at a later date by the sponsor through the charged F&A rate. If F&A is waived and not charged, the portion of the University’s F&A costs that pertain to that project are shifted elsewhere and paid for by some other activity/unit (and not paid by the project). This is why your college has to request the F&A rate adjustment, because these requests affect their bottom line through the balance of costs and revenues. There often are circumstances that warrant special consideration. The special circumstances are best known at the college level which is why college level approval is required when requesting a waiver of F&A costs.
A written request for F&A waivers is required from all sponsors that do not have a formal stipulation including Federal/State/Local agencies and non-profit organizations.
Please be advised, the University does not grant F&A waivers for industry, other for-profit entities, or foreign governments, as it would constitute a gift of public funds for private benefit. Under certain circumstances, an exception may be considered if the project supports a community service, scholarship/fellowship program, or meets other requirements as determined by the University.
Each proposal that includes less than the full F&A, which is not stipulated, must be accompanied by a letter from the Principal Investigator/Project Director, concurred with by the appropriate department/college approval. The letter should provide:
- The F&A rate being requested
- Rationale for the waiver, benefit to the University, and the return on this investment
- Any consequences of accepting or denying the waiver
- Any backup documentation that may substantiate the waiver request
- Approval from the Department Head and/or College Dean or Director
Improving the competitive advantage of the project, sponsor funding limitations, or worthiness of the project are examples of unacceptable justifications for a reduced F&A rate. All sponsored projects are worthy endeavors and serve to further the University’s mission. The justification for a reduced F&A rate must go beyond this argument.
A Principal Investigator contemplating the submission of a waiver request should contact their College Dean or Director to discuss the waiver and obtain approval prior to submitting the official request.
Sponsored Projects Services will review the waiver request prior to forwarding the request to Research, Discovery & Innovation (RDI) for further consideration. RDI will review a request for waiver and will notify the Principal Investigator of the decision.
RDI will not review or consider F&A waiver requests unless the appropriate department/college officials have approved the UAccess Research proposal or have otherwise approved the waiver in writing. F&A waivers may be routed separately from the completed proposal in order to adhere to any sponsor due dates. Please allow time for RDI to review of waiver requests, a minimum of eight days before sponsor due date is required.
Sponsored Projects Services will not sign any part of any proposal with reduced or waived F&A if it does not have approval from the Senior Vice President for Research (where such approval is required).
A continuation proposal, for a project previously granted an F&A waiver, will require an additional waiver for the continuation unless it is clear that Research, Discovery & Innovation granted the initial waiver for the life of a project.
If submitting a new or continuation proposal for a project under a Master Agreement with a pre-negotiated F&A rate, please indicate this to Sponsored Projects Services with a note on the Abstracts & Attachment page of the proposal in UAccess Research.
Clinical trials are generally conducted off campus, normally with a substantial patient care component in the budget using a standard agreement. Considering that clinical trials involve insignificant facilities and maintenance costs, and minimal administrative costs, and a patient care component, the University will accept a 25% Total Direct Cost (TDC) F&A rate for clinical trials that meet the eligibility requirements and use the standard University agreement. The University must ensure that federal sponsors do not in any way subsidize the F&A costs of other sponsors. The clinical trial F&A cost rate of 25% Total Direct Costs is a fair rate and adequately reimburses the University for the F&A costs associated with conducting clinical trials. Studies not meeting all the eligibility criteria or those studies not using the standard agreement or similar terms will be budgeted at the full on campus research F&A cost rate, including federally funded clinical trials.
Eligibility requirements for the 25% TDC Clinical Trial F&A Cost Rate:
- The study is consistent with the University’s mission.
- Human subjects are utilized in the study.
- Spending of award by budget category is discretionary.
- Limited accountability of funds, no requirement for return of unused funds.
- Sponsor provides drug or device to be tested, has tested it on animals, has obtained FDA approval to proceed to clinical trial, and has been issued an investigational drug or device number.
- The clinical trial agreement is compatible with the University-approved standard agreement.
Information on budgeting F&A costs can be found on the Budget Categories page.