Budget Development and Guidance – Facilities & Administrative (F&A) Costs

Costs involved in conducting sponsored projects are categorized in two ways: direct costs and indirect costs.  The federal government, and Appalachian, officially refers to indirect costs as Facilities and Administrative (F&A) costs, but sometimes faculty may refer to these as "overhead" costs.

What are these costs?

While direct costs are "those costs that can be identified specifically with a particular sponsored project relatively easily with a high degree of accuracy", such as the salary of a principal investigator or the purchase of specific supplies for a specific experiment, F&A costs are "those that are incurred for common or joint objectives." In other words, F&A costs cannot be specifically attributed to an individual project; F&A costs promote research and scholarly activity at the institution.

Examples of F&A costs include:

  • Services of accounting staff and research administrators
  • Cost of utilities for a building housing several research projects
  • Office supplies, postage, local telephone service and communications infrastructure
  • Salaries of personnel engaged in providing a broad range of departmental support activities  

F&A costs do NOT include:

  • Fringe benefits for personnel
  • In-kind support for a project
  • Discretionary funds for the university  

The F&A rate(s), expressed as a percentage of a base amount (the Modified Total Direct Costs or MTDC), is established by negotiation with a cognizant federal agency, based upon the institution's projected costs, and distributed as prescribed in OMB Circular A-21.  For Appalachian, our cognizant agency is the Department of Health and Human Services (click here to see Appalachian’s IDC Rate Agreement).

Appalachian's current on-campus rate is 32.4% MDTC.  

Appalachian's current off-campus rate, which applies only to “facilities not owned by the University and to which rent is directly allocated to the project”, is limited to 15.8% MTDC. 

Why must I include them in my budget?

When conducting sponsored projects, the University strives to be reimbursed for its full costs.  The F&A cost component of a sponsored project is intended to reimburse the University for the costs incurred to support research.  Unfortunately, even when the current 32.4% on-campus (15.8% off-campus) rate is applied, a portion of the actual costs are not recovered because of limitations created by federal cost principles.  The University further subsidizes the actual costs of research when non-standard F&A rates are applied.  Several state agencies and many foundations limit the F&A rate that they allow grant or contract recipients to charge.  As a result, Appalachian collects far less than the 32.4% approved rate for sponsored projects.

Unless the sponsor restricts the rate, or the PI or Project Director requests (click here to see Policies & Procedure to Request F&A Reduction) and receives a waiver (click here to see the Request for F&A Reduction form) to reduce the F&A rate, all budget proposals from Appalachian will include the 32.4% rate.  Should a PI or PD not include the full negotiated rate, Appalachian reserves the right to not accept the grant or contract should it be awarded.

Why Are F&A Funds Important to You?

Whatever we call them, indirect costs are real.  The University is dependent upon the recovery of F&A costs in order to maintain the infrastructure necessary to continue supporting sponsored projects.  Faculty, staff and students involved in research and sponsored programs experience the benefits of F&A cost recovery every day when they turn on the lights, when they request a research assistant, when they use the telephone or the library, and when they use the Internet, just to name a few examples.

At Appalachian, of the F&A costs that are collected, at least 20% is redistributed to the colleges and departments (see distribution chart). Five percent (5%) of all recovered F&A dollars are returned to the home college of the project, and 15% of all recovered F&A dollars are returned to the home department of the project.  For projects submitted through an institute, the institute will receive 20% of recovered costs, the college 5%, and the department 15%.  Each director, dean, and chair, respectively, determines the distribution of funds within his or her control.

At the University level, in addition to infrastructure, F&A dollars currently support the following:

  • The University Research Council internal grants program
  • Graduate assistantships
  • Institutional memberships that promote research and external funding, such as the Community of Science and Collaborative Institutional Training Initiative to provide training for human subject research
  • Research Development Officers from each college
  • Staff positions in Sponsored Programs and Special Funds Accounting

>> Return to the Budget Development and Guidance Main Page.

>> Return to the Creating a Budget - Budget Checklist page.

>> Return to the Proposal Submission - Grants - Application Process page.