Facilities & Administrative Costs also known as Indirect Costs are defined by the federal government:
“as those costs incurred for a common or joint purpose benefiting more than one cost objective, and not readily assignable to the cost objectives specifically benefited, without effort disproportionate to the results achieved” 2 CFR 200.56
F&A rate calculation basics
Ann Holmes of UMCP is an expert in explaining the basics of calculating the F&A rates. A link to a short 20 minute video of her explaining F&A is found here. When watching the video, it helps to have two documents (F&A Rate Calculation & Expense Cost Pools) on hand, which are attached for your convenience.
How does Cost Share contribute to the F&A rate calculation?
Cost Share Contributions (not including 3rd Party Cost Share) are factored into the UMBC Standard F&A Rate negotiations. The Standard F&A rate is calculated by taking the allocated F&A costs from a selected period of time and dividing them by the Direct Costs (also known as the Base) for the same period. The ratio is the basis for the Standard F&A Rate. The Cost Share commitments for that same period are added to the Total Direct Costs, which decreases the Standard F&A Rate. 3rd Party Cost Share is not included as part of this F&A Rate calculation as 3rd Party contributions are from external, and not UMBC, resources.
- F&A Costs/Direct Costs = $50,000/$100,000 = an F&A Rate of 50%
- Factor in Cost Share Commitments of $20,000:
- F&A Costs/(Direct Costs + Cost Share Commitments) = $50,000/($100,000 + $20,000) = an F&A Rate of 42%
Factoring in Cost Share Contributions reduces the computed F&A rate, which means fewer resources for UMBC.
F&A Related Links