F&A Booklet
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19. How are F&A cost reimbursements related to
University expenditures?
University budget policies have, in general, allocated F&A cost reimbursements to the support of research in a manner consistent with the pattern of expenditures in the University’s audited F&A cost studies and rates. Given that WSU does not recover all its F&A costs, the effective rate is less than the audited rates, other University funds must be used to help pay for these activities.
Although the F&A cost processes identify the costs incurred in supporting the research program (as outlined earlier in this document), the actual budgeting process cannot allocate funds efficiently on a simple item-for-item basis. For example, a $100,000 federal research grant may generate an F&A cost payment of roughly $28,000 (see Chart IV ), but it would not be practical to restrict expenditure of the $28,000 solely to the F&A costs incurred by that specific grant in that particular year. (The roof may not need to be repaired that year.) It may help to recall the definition of F&A costs as “those that are incurred for common or joint objectives, and therefore cannot be identified readily and specifically...”
In general, a much more macroscopic approach is called for when dealing with expenditures. When the University develops its budget for a particular biennium, it starts with an estimate of the total revenues available for that biennium, including State funding, tuition, F&A cost reimbursement, interest and investment income, and so on. Arrayed against this projected total income figure is the wide range of anticipated expenses that must be funded. Some expenses are relatively predictable, such as salaries, but other categories cannot be pinned down as easily in advance. Utility costs, self-insurance costs, regulatory compliance costs, responses to competitive salary offers, special matching requirements for major equipment proposals, as well as many other costs that cannot be accurately predicted.
Just as in any budgeting process, prudent judgments must be made to try to match total projected income with total projected expenses, including planned improvements and new programs. In this process, efforts are made to relate the projected F&A cost of research and training to the estimated F&A cost reimbursements. In practice, all the previously mentioned funding sources are combined to support the total budget identified in the University’s policy-based and priority-driven budget process. The expenses identified in the cost study used to justify the F&A cost rate are real expenses that have been paid for by the institution from the total pool of available fund sources.