F&A Waiver Policy

Utah State University
Sponsored Programs Office
F&A Waiver Policy and Procedure

Policy Statement: F&A Waivers on Sponsored Projects: Utah State University (USU) policy is to recover full Facilities and Administrative (F&A) costs. It is recognized that some sponsors require or strongly recommend a waived F&A rate. Therefore, reduction in, or waiver of, F&A costs may be allowed under certain circumstances explained hereafter.

TABLE OF CONTENTS

1.0 Purpose
2.0 Background
3.0 Criteria for Reduction or Waiver
4.0 Procedure for Requesting Reduction or Waiver
5.0 Administrative Fees

1.0 PURPOSE

The purpose of this policy is to set forth circumstances and to establish the procedure for requesting a reduction in or waiver of indirect costs on sponsored projects. Utah State University's (USU) policy is to recover full Facilities and Administrative (F&A) costs (also referred to as Indirect or Overhead costs) whenever possible. It is important to collect full F&A costs, especially from federal government and private sponsors, to offset the real costs of conducting sponsored projects. However, USU recognizes that some sponsors require or strongly recommend a waived F&A rate. Therefore, reduction in or waiver of F&A costs may be allowed under certain circumstances.

2.0 BACKGROUND

The practice of providing indirect cost returns to recipients of research, training, and demonstration grants originated with the United States government. Government officials recognized that it is not possible for prospective grantees to accurately proportion the organization's overhead costs among its various, and often numerous, activities and funded projects. F&A costs are those costs incurred by an organization which are not readily identifiable with a specific project, program, or activity but which are necessary to the general operation of the organization. These are costs of operating the facilities and may include the costs of maintenance, depreciation, general and departmental administration, utilities, janitorial services, accounting and purchasing services, research and grants administration and accounting services, library operations, etc.

In recognition that such F&A costs are real costs of doing business, the process of negotiating indirect cost rates was developed as a means to provide reimbursement to grantees for these supportive services. Grantee organizational expenditures are grouped into indirect cost pools and then distributed to appropriate organizational activities in a cost allocation process. This information is presented by the grantee organization to one of several agencies empowered to negotiate a federal indirect cost rate. Utah State University's F&A rate is negotiated and established annually with The Office of Naval Research.

The grantee's fiscal information is analyzed by federal officials to determine the allowable F&A rates, which are expressed as percentages. They are usually applied to either "modified total direct costs" (MTDC) base, which excludes certain expenditure categories such as certain subcontract expenses and capital outlay; to salaries and wages (S+W) only; or to salaries, wages and fringe benefits (S+W+F) only. The base upon which the rate is applied is determined during the rate negotiation with the cognizant federal agency. USU's rate is based on MTDC and our cognizant federal agency is The Office of Naval Research (ONR).

Application of the indirect cost rate determines the amount of reimbursement above the direct costs of the project that the grantee can request from the funding agency. The indirect cost rate is renegotiated periodically to allow for inflation, changes in the operations of the grantee organization, and/or changes in the level of sponsored activity. USU's rate is currently renegotiated on an annual basis at the end of each fiscal year.

Although a grantee organization may negotiate an F&A rate, it is not guaranteed that rate on every project. The rate is negotiated at the federal level, but not all federal agencies reimburse the full amount for all funded projects. Further, policies on indirect costs vary widely among state, regional, and local governmental agencies and public and private not-for-profit organizations. Often, both large and small private and corporate foundations will not reimburse indirect costs. They may, however, pay an "administrative fee" to offset some of the overhead costs of the recipient institution. However, corporate sponsors who are expected to benefit financially from sponsored research should be willing to pay the institution's full indirect cost rate.

3.0 CRITERIA FOR INDIRECT COST REDUCTION OR WAIVER

USU may consider a reduction in or waiver of indirect costs in the following situations:
3.1 The sponsoring agency's institutional policies restrict or prohibit payment of full indirect costs;
3.2 Grant or contract less than $50,000 to solely support graduate and/or undergraduate student(s). The minimum F&A rate of 8% will be used on all projects that support graduate and/or undergraduate student(s);
3.3 Approval provided by USU Vice President for Research (copy of written approval required). Submission of a discretionary waiver must occur 5 working days before the sponsor submission due date.

4.0 PROCEDURE FOR REQUESTING INDIRECT COST REDUCTION OR WAIVER

4.1 The Sponsored Programs Office (SPO) is responsible for approving F&A waivers as outlined in sections 3.1, 3.2, and 3.3 above. Section 3.4 requires the approval of the Vice President for Research.
4.2 Principal Investigators are not authorized to negotiate a reduction or waiver of indirect costs with the sponsor without the prior approval of SPO. Should need for negotiation be anticipated, the investigator should contact SPO well in advance of budget development and proposal submission.
4.3 If the sponsoring agency's institutional policies restrict or prohibit payment of full F&A costs, a written copy of the restriction must be provided to SPO, along with the SP01 form, at the time the proposal is submitted for institutional review and approval.
4.4 If the investigator wishes to seek an internal, reduction in or waiver of F&A costs, he/she must submit a written request to the Vice President for Research (VPR) prior to finalizing the project budget. The VPR will review the justification, assess the potential impacts on the institution, consult with SPO as necessary, and determine if the request will be approved. The written request must be submitted to the Vice President for Research Office at least 5 working business days before sponsor submission date.

5.0 ADMINISTRATIVE FEES

In instances where the F&A costs will be waived and/or restricted, an administrative fee can be considered if it is allowed by the sponsor. If an administrative fee is approved by the sponsor, the fee will be split 70% to cover general administrative costs (20% to Pre Award, 20% to Post Award and 30% to Central administration) and 30% to the generating units.

Revised 02/28/06