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Government Costing

Facilities & Administrative (F&A) Rates

Federal – F&A Rates

Facilities and Administrative (F&A), also known as indirect or overhead, costs of the University are those expenses incurred for the common objectives of the University and are not easily identifiable with a particular project or activity. Indirect cost recoveries (F&A costs) provide each university with a significant source of institutional funding.  The F&A cost rate is the mechanism used to reimburse the university for the administrative and infrastructure support costs associated with sponsored research and other sponsored projects.  It is essentially an overhead rate.

There are two broad categories for these expenses, as implied by its name: Facilities expenses and Administrative expenses. The Administrative expenses include costs related to various University operations such as general university administration, sponsored projects administration, department administration, and student services administration. Facility expenses include various facility costs such as building and equipment depreciation, interest, operations & maintenance including utilities, library, etc.

Our sponsors recognize the importance of such infrastructure support and reimburses these costs through an accounting mechanism which applies an F&A rate to the modified total direct costs of each project, so that each project (federal and non-federal) pays its fair share of these support costs.

The Code of Federal Regulations (Uniform Guidance 2 CFR 200) stipulates how these calculations are to be made and requires universities to calculate and negotiate Facilities and Administration rates for Instruction, Organized Research, Other Sponsored Activities and Specialized Service Facilities. The principles are designed to provide that the Federal Government bear its fair share of total costs including facilities and administrative costs.

F&A proposals are performed based on a specified fiscal year of actual historical expenditures, space, fixed asset depreciation, FTEs, and more. The process to calculate, audit, negotiate, and obtain approval for F&A rate proposals is a time intensive process that involves numerous projects and takes approximately two years to complete. Currently, F&A rate proposals are prepared for each of the three Universities once every three to four years.

Once F&A rate proposals are compiled and appropriately documented by System Government Costing for our Universities, they are required to be submitted to Office of Naval Research (ONR).  ONR then contracts with the Defense Contract Audit Agency (DCAA) to perform an audit of the F&A rate proposal submission(s).  The DCAA audit generally takes anywhere from six to twelve months for completion, after which DCAA submits their audit report to ONR.  ONR then reviews the audit report and uses it as a negotiation tool to negotiate final F&A rates and the related rate period (generally three to four years) with the Universities.  Once final negotiated rates and rate periods are determined, ONR issues a formal pre-determined F&A rate negotiation agreement between ONR and the Universities which outlines the maximum rates which the Universities are permitted to charge sponsored projects during the fiscal years specified.  In addition, System Government Costing compiles and distributes university communications regarding these rates.

State of Illinois - F&A Rates

The State of Illinois passed the Grant Accountability and Transparency Act (GATA) to increase accountability and transparency in the use of grant funds and reduce administrative burdens on both State agencies and grantees by adopting federal guidance and regulations applicable to such grant funds.  Under this Act, the Illinois Governor’s Office of Management and Budget, through the Grant Accountability and Transparency Unit, maintains the responsibility of working with the State grant-making agencies and Illinois grantees in their adoption of GATA and have provided the Universities with State F&A rate setting guidance. 

Due to GATA, the State of Illinois developed an Indirect Cost Rate Proposal process and a software system called Crowe Activity Review System (CARS) developed by Crowe Horwath.  Each year System Government Costing completes the required reporting in the CARS application and reports our three Universities federally negotiated Facilities & Administrative rates. The reporting is required to be submitted 30 days after receipt of the auditor’s report(s) or 9 months after fiscal year end, whichever comes first.

In addition, under GATA, our State F&A rates are required to be calculated and adjusted on an annual basis.  The required methodology for calculating State F&A Rates starts with the institution’s federally negotiated rates and reduces the federal rates for proportionate state funding received by each University.  Each year System Government Costing calculates the three Universities State F&A rates, publishes related rate schedules, and issues campus rate communications. This rate process is completed at the same time CARS reporting is performed.

Distribution of F&A Recoveries

System Government Costing’s responsibilities do not include distribution of F&A recoveries.  For information related to the distribution of F&A recoveries, contact the following University offices:

Urbana-Champaign: Office of the Provost - http://www.provost.illinois.edu/

Chicago: Office of Budget & Financial Analysis - http://cfo.uic.edu/budgetoffice/

Springfield – Vice Chancellor for Academic Affairs and Provost - https://www.uis.edu/academicaffairs/

 


Last Updated: December 4, 2018

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