With MSU’s newly-approved Facilities and Administrative (F&A or Indirect Cost) rates being implemented, DER wants to take this opportunity to discuss the concept of F&A and provide more information for newer researchers as to why these real costs are so critical to MSU’s continued mission of research (conducting research of the highest caliber).
To start, check out this video (The Chicken Sandwich and F&A: How to Explain F&A to Your Faculty) which helps to describes F&A in a more “digestible” way.
Question: What Is F&A? Answer: Facilities and administrative costs are incurred for common or joint objectives and, therefore, cannot be readily identified with a particular sponsored project. F&A costs are also commonly referred to as indirect costs or overhead.
Question: How Is the F&A Rate Determined? Answer: The F&A rate is negotiated periodically by MSU Contract & Grant Administration and MSU's cognizant federal agency, the US Department of Health and Human Services (DHHS), Department of Cost Allocation Services. The negotiation process is subject to a detailed review by federal auditors.
What Makes up Our Current Research Rate? Answer: The following is included in the administrative and support expenses…
- Departmental Administration
- Operations and Maintenance
- General and Administrative Expenses
- Building and Equipment Costs
- Library
These real costs associated with the categorized expenses above are necessary to enable the full capacity of research at MSU. Though these costs cannot be “readily identified with a particular sponsored project,” we budget for these costs by applying F&A to each applicable project budget using MSU’s approved rate agreement. MSU has recently published its new approved rate agreement. The new negotiated F&A rate agreement goes into effect July 1, 2023 until June 30, 2027. The MSU F&A rates for July 1, 2023 – June 30, 2027 are:
- Research – 57%
- Other Sponsored Activities – 37%
- Off-Campus – 26%
Now that you understand F&A, you may be interested to learn more about how F&A dollars flow to departments represented in your proposal. To learn more about how overhead flows through MSU after the project is funded and costs are expensed, please see a past DER seminar titled Data and Reporting (beginning at 19:05). This informative session shares how F&A circulates back following the allocated F&A return. Note: this presentation is from a few years ago; our rate is changed as discussed above, but the basic concepts still stand true today.
Remember, DER is here to help you budget for your next proposal and ensure that all appropriate and allowable project costs are incorporated into your future proposal budget. If you have questions related to building your next proposal budget, please send an email to proposals@egr.msu.edu. DER is here to help.
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