Explanation of Facilities and Administrative Costs

Facilities and administrative (F&A) costs (formerly known as indirect costs) are incurred in conducting or supporting research and service but they cannot be readily identified as benefiting particular research or service projects. F&A costs are of two kinds: facilities costs and administrative costs. Facilities costs are divided into the following categories of supporting activities:

Administrative costs are divided into the following categories of supporting activities:

An F&A rate is established on the basis of costs incurred by the university in a previous year and by negotiations between the university and the federal government. Basically the rate is the F&A cost for a particular function (e.g., research conducted on campus) during the selected year divided by the direct costs (actually the modified direct costs, see below) incurred in support of that function during that year (where the direct cost basis consists of expenses for salaries and wages, fringe benefits, material and supplies, services, travel and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract). Current F&A rates for Wright State University are found here.

The F&A rate is applied on the same basis on which it is calculated, namely, on what is called modified total direct costs (MTDC), consisting of salaries and wages, fringe benefits, material and supplies, services, travel and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract--where these costs have been incurred in the conduct of a sponsored project. Equipment costing $5,000 or more, capital expenditures, charges for patient care and tuition remission, rental costs, scholarships, and fellowships as well as the portion of each subgrant or subcontract in excess of $25,000 are excluded from the MTDC base.

The F&A rate applied to sponsored agreements is an average rate. Individual projects may actually incur more or less expense for facilities and/or administration. While in theory it would be possible to use many specific F&A rates for many different kinds of projects (as is often done by for-profit companies working on large government contracts), in a university setting this is not practicable.

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