F&A Booklet
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4. How is the overall F&A cost rate
calculated?
A formalized process developed by the Federal government (consistent with generally accepted accounting principles and presented in Circular A-21) is used to determine the university’s F&A cost rate for sponsored research. First, all F&A costs within the institution are assigned to one of nine cost pools related to primary functions. Circular A-21 defines the nine cost pools (see Question 5 ). Then a fractional amount from each cost pool is attributed to the research enterprise according to guidelines provided in Circular A-21. Totaling these fractional dollar amounts yields the university’s total F&A costs (TFAC) attributable to sponsored research.
The Total Facilities and Administrative Cost total is then converted to an F&A cost rate by dividing it by “Modified Total Direct Costs” (MTDC). In 1979, the Federal government elected to adopt a “Modified Total Direct Cost” approach for computing the F&A cost rate and charging F&A costs to individual grants. MTDC at WSU is calculated as total direct costs minus the cost of equipment, buildings, off-campus building rental, training stipends, tuition, and the portion of each subcontract in excess of $25,000. Nevertheless, for most individual research projects, MTDC represents simply the direct costs less any equipment costs and tuition expenses. (See Chart I, the F&A Cost Formula ) At WSU, with a new rate agreement in place that reflected changes in state and federal threshold -requirements, the threshold for equipment was raised from $500 to $5,000 for proposals submitted after March 2002.