F&A and Fringe Benefit Rate Agreements
Fringe Benefit Rate Breakdown by Component
Facilities and Administrative (F&A) Calculation
Facilities and Administrative (F&A) costs (also referred to as "Indirect Costs") are those that are incurred for common or joint objectives and therefore cannot be identified with a particular activity. These costs are classified under the following categories: building/equipment depreciation, interest on external debt, operation and maintenance, library, general administration, departmental administration, sponsored project administration and student administration. Sponsored Award Accounting calculates F&A rates for the following activities: Sponsored Research, Instruction and Other Sponsored Activities. Sponsored Award Accounting works with various departments in the University to collect the information necessary to properly classify costs. Some of the data sources used in the F&A calculation are:
- FAS: All expenditures for the fiscal year are categorized into one of the indirect and direct cost pools, making sure that unallowable costs are excluded.
- Payroll: Salary information is used to classify expenditures by job code.
- Property: All building and equipment depreciation expenses are extracted from the Property Management System (PMS) and assigned to cost pools. Equipment surveys are also performed in order to ensure that equipment assets exist and are assigned to the correct room.
- Space: The University space data is used to allocate space related costs. In order to do this properly, each room in University buildings must be inventoried to make sure attributes such as room number, room type, square footage and department are correct. In addition, a room occupant survey is performed in January of the proposal year. All BSD, PSD and Biophsych room occupants are identified and assigned to rooms. The salaries and wages of room occupants are used to assign space related costs for those departments to functions.
The F&A costs in each category are allocated to Sponsored Research, Instruction and Other Sponsored Activities based on various allocation methodologies. The total F&A expenses allocated to each activity are divided by the corresponding Modified Total Direct Cost (MTDC) base to calculate the F&A rates. MTDC represents direct costs excluding things such as equipment, student aid and subcontracts in excess of the first $25,000. For example, the total of all F&A costs allocated to Sponsored Research is divided by the Sponsored Research MTDC base to calculate the Sponsored Research F&A rate.
The University calculates F&A rates generally every three years. The University submits those calculations as a Proposal to its cognizant Federal agency, the Department of Health and Human Services (DHHS). Using the University's Proposal as a starting point, the University and DHHS eventually arrive at a negotiated rate agreement.
Fringe Benefit Calculation
The University's fringe benefit rates are calculated by Sponsored Award Accounting annually and negotiated with the Department of Health and Human Services.
Rates are calculated for benefit eligible (receive full benefits) and benefit ineligible employees (receive FICA, Medicare and Workers' Comp only). In addition, a Federal rate is calculated which is the same as the benefit eligible rate excluding unallowable dependent tuition remission benefit expenses. This rate is only applied to salaries charged to Federal awards.
Some of the major fringe benefit cost categories are: Health Insurance, Retirement, FICA/Medicare, Tuition Remission, Workman's Compensation and Unemployment Insurance. Fringe benefit expenses also include short/long term disability, life insurance, temporary shutdown, staff/faculty assistance, child/elder care, employee physicals, training and flex-transportation/medical/dependent.
Each rate is calculated by dividing the projected benefit expenses, including any prior period over or under recoveries, applicable to each employee category (benefit eligible, benefit ineligible and Federal) by the corresponding wage base.
The University is required to file a Disclosure Statement (DS-2) with the Department of Health and Human Services' (DHHS) Division of Cost Allocation (DCA). The DS-2 describes the University's cost accounting practices which must conform to Federal regulations. If cost accounting practices change significantly, the DS-2 must be revised to reflect the changes.
Sponsored Award Accounting prepared the DS-2 and submitted it to the DCA in December 1996. Since then the University has submitted DS-2 revisions that the government has approved, with the last approval dated June 29, 2006.