Facilities and Administrative costs (F&A), also known as Indirect Costs or IDC, are at the very least misunderstood by researchers. At their worst, they smack of "Big Brother." But F&A costs truly are transparent and nothing to fear (or despise!)
Keeping the lights on
F&A are costs that cannot be uniquely associated with a particular project, but which are nonetheless incurred by the university due to the project.
"If a Principal Investigator (PI) is using on-campus lab space, there is no easy way to determine what the electricity costs or maintenance costs are for the PI's work in the lab on any particular sponsored project," states University of Berkeley's website. "The same problem exists when a piece of equipment is shared by a number of PIs or projects; there is no way to determine the cost attributable to each PI or project."
So, we know it isn't easy to calculate how much utilities or janitorial staff cost a university during a sponsored project. But the question persists: do universities "make money" on sponsored research projects?
"No," says Cris Milligan, assistant vice president for research administration at the University of Houston. "Sponsors do not cover the full costs of conducting the research that they support. The unfunded costs are subsidized through university, college, department and faculty contributions."
Where has all the money gone?
F&A costs are a relatively small percentage of the actual costs that a university spends on any given project: for instance, operations and maintenance typically includes the day-to-day activities necessary for the building and its systems and equipment to perform their intended function.
Other monies go toward departmental, sponsored program and general administration costs. Rent needs to be paid on buildings where the research takes place, equipment must be purchased and libraries are maintained.
What goes in, must come out!
Grants can be funded by federal agencies such as the National Institutes of Health, National Science Foundation and the Department of Energy. Other support from companies, foundations and state and local agencies can be pursued by development officers within the colleges.
Recovered F&A costs totaled over $22 million at the University of Houston in 2019. Salaries and benefits, maintenance and operations, travel and business expenses, scholarships and fellowships and lastly capital outlay and contracting of services all take up their fair share of the pie.
"Of course, to be successful in research, PIs need a whole ecosystem of supporting teams, from grant administrators to student services, operations and maintenance to IT. That is what indirect spend is: it relates to every purchase not directly related to the performance of the sponsored research," says Milligan.
The aim of most every university is full recovery of costs associated with sponsored projects. For instance, the University of Michigan Office of Research states, "Periodically, the Department of Health and Human Services (acting on behalf of the federal government) and the University negotiate an agreement setting forth indirect cost rates for three types of sponsored activities: organized research, instruction and other sponsored activities."
The agreement specifies the rates at which the University can recover its indirect costs associated with projects sponsored by all agencies of the federal government.
Non-federal sponsors (i.e., private sponsors, whether industry or non-profit) are not bound by the terms of OMB Uniform Guidance. These monitored costs are not necessarily guided by the principle of full cost recovery for universities. Your friendly development officer will come in handy when applying for this kind of support; just be clear that the percentage of F&A may be determined on a slightly different scale.
This article originally appeared on the University of Houston's The Big Idea. Sarah Hill, the author of this piece, is the communications manager for the UH Division of Research.