F&A Booklet
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14. Why should I pay the same rate as my colleague
for F&A costs?
Implicit in the accepted procedures for determining F&A costs is the notion of averaging. It has been a -principle with the federal government that there should be a single F&A cost rate for each institution’s on-campus research. Since every grant is different and places unique demands on the institution’s resources, some grants recover more than actual costs and some recover less. Nevertheless, everyone should be aware that since the recovery of F&A costs is generally well below the actual cost of supporting research, probably no one is paying more than could be justified, even though someone may be paying relatively more than another colleague.
The disadvantages of using an average rate can be easily stated. It is obviously not a precise method, and it lacks strong incentives for efficiency. Questions of fairness arise because comparisons can be made that seem to suggest that one person is at a disadvantage relative to another. But the alternative to averaging would have few proponents. It would require an extremely complex (and costly) accounting effort to attribute a different F&A cost rate to each grant. Substantial fluctuations in cost recovery rates would arise, depending on when a person utilized a particular resource, the starting date of a grant compared to the fiscal year and so forth.
The averaging approach is a convenient and straightforward method. The differential impacts tend to balance out over time, and the stability of the rate is an advantage for most PI’s. If one takes into account the broad range of variability over time and over various research activities, the averaging approach seems the best of admittedly imperfect alternatives.