Definition

Facilities & Administrative (F&A) costs are incurred for common or joint university objectives and, therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity (Uniform Guidance: Appendix III to Part 200 - Indirect (F&A) Costs). F&A costs are real costs that the institution incurs in support of extramural activities, but cannot be directly charged to a specific grant or contract. The costs result from shared services such as libraries; physical plant operation and maintenance; utility costs; departmental and sponsored project administrative expenses; and depreciation or use allowance for buildings and equipment. F&A costs are sometimes called indirect costs or institutional overhead.

Standard F&A rates for federal grants and contracts are periodically negotiated with our cognizant federal audit agency, the Department of Health & Human Services. The University’s current F&A rate agreement is posted here.

Basis for F&A Policy

As a recipient of federal funding, the University is obligated to comply with federal cost principles as set forth in the Uniform Guidance.  The University's adherence to these cost principles and practices is necessary to prevent cost disallowances by the federal government. 

It is the responsibility of principal investigators, departmental executive officers, and administrators to understand and comply with this policy.

Policy Statement

It is University of Iowa policy to charge the maximum, federally negotiated F&A cost rate on all sponsored projects, regardless of funding source, unless a sponsoring agency's written policy will not allow full recovery of F&A costs. For-profit entities should always be charged full F&A costs, but, in relation to not-for-profit entities, UI will accept a lesser rate if the program solicitation or agency’s written guidelines specify a lower rate. When funding flows from the prime sponsor through an intermediary sponsor, as in the case of federal flow-through awards, budgets should charge the F&A rate applicable to the prime sponsor. All other sponsored projects should charge F&A costs in accordance with the F&A rate table available on the Facilities & Administrative (F&A) Costs site.

UI Reductions of F&A Cost Reimbursement

Approval Authority

The UI President has delegated the authority to grant reductions to the University’s approved F&A cost rates on sponsored agreements to the Vice President for Finance and Operations (VPFO).  The VPFO has, in turn, delegated this authority to the Vice President for Research who has sub-delegated this authority to the Division of Sponsored Programs. These delegations of authority carry with them the responsibility to exercise prudent judgment with regard to the overall benefits that will inure to the University through the approval of F&A cost reductions. 

Procedure for Requesting F&A Rate Reductions

The University expects that proposals to external sponsors will include the maximum allowable F&A cost rate in the proposed project budget. To request an exception -- a reduction or full waiver of the allowable F&A costs -- the project director must initiate an F&A Rate Reduction Request Form, available on the DSP e-Forms site. The F&A RRR Form must be approved by the departmental executive officer and collegiate business officer and submitted to the Division of Sponsored Programs at least two weeks prior to sponsored project proposal submission or, in the case of a contract, the award negotiating procedure. Note that, in fairness to all investigators, all such requests must be duly justified and that, while requests to reduce F&A costs reimbursement receive due consideration, the granting of such requests is the exception rather than the rule.

Sponsor-Imposed F&A Rate Limits

Some sponsors, particularly non-profit and not-for-profit organizations, restrict F&A reimbursement to less than the standard rate negotiated through the federal government, basing the allowance on statute, codified agency regulations, or sponsor-specific policies as published in the solicitation or funding announcement. The University will generally accept these reduced reimbursement rates, deeming them appropriate when the sponsor restriction is a bona fide restriction initiated by the sponsor, consistently communicated to all applicants, publicly shared (e.g., a written policy on a sponsor's website), non-negotiable, and the proposed activities fit within the University's overall mission. 

A rate reduction requested by a specific program officer, as opposed to an overall agency, does not constitute an approved waiver. Note also that F&A cost reductions cannot generally be granted in relation to for-profit organizations, as rate reductions to such organizations -- whereby the sponsor would not be reimbursing the University for the full cost of the project -- constitute a gift of public funds for private benefit.  

Reductions that will be accepted: F&A Rate Reduction Request Form is not Required

• Reductions required by statute. 
• Reductions stemming from codified agency regulations. 
• Reductions mandated within the sponsor’s funding announcement/solicitation.  (Applicants should include the excerpt from the funding announcement or solicitation regarding F&A costs with the application materials when routing the proposal through the Division of Sponsored Programs.)
• Reductions resulting from changes in our federally negotiated rate that result in an increased rate after a project begins.
• Reductions for projects that are solely for one of the following budget categories:  travel, construction, equipment, or doctoral dissertation support.

 F&A reductions that normally will be denied

• Reductions for awards funded by for-profit sponsors.
• Reductions to cover expenses not paid for by the award sponsor, such as overdrafts, disallowed costs, sponsor default on payment or withholding of payment due to non-performance or disputes.
• Reductions requested solely because an award does not provide adequate direct costs for completion of the full scope of the project.
• Reductions that will not provide equitable treatment to all University researchers applying to the same sponsor.
• Reductions for awards under which intellectual property rights do not remain with the University.
• Reductions based solely on precedent.
• Reductions for the purpose of meeting cost share requirements without a corresponding commitment from Department and College for a proportional direct cost commitment.