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F&A costs, sometimes referred to indirect costs, are the cost of conducting business that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with specific projects (such as individual grants or contracts) or with a specific activities (such as instruction, research, public service).

F&A costs are real costs incurred by the institution to acquire and maintain its buildings and equipment, and to provide operational support. These support services include maintenance and operations (utilities, janitorial services, police services, etc.), library operations and administrative services. All of these costs are real, and without them, the institution could not exist. For example, accounting and payroll services are administrative functions that are not directly identifiable to specific projects or activities; however these services are necessary for the University to exist.

When the UAB performs activity for others such as the federal government, foundations, and private industry, through contracts, grants and other agreements, UAB policy requires it to recover the "full cost" associated with such projects, including all direct and F&A costs. Direct costs are the costs directly identifiable to individual projects. F&A costs are assigned to projects as a percentage of direct costs.

The F&A costs paid to UAB by project sponsors in this fashion are referred to as "F&A cost or overhead recovery", and represent the recovery of costs incurred by the university to provide the facilities and operational support for the project.

Sponsored projects are budgeted for direct and F&A costs. F&A cost recovery is the "recovery" of institutional costs incurred by the university to support the project. The recovery is reallocated to each School/College based on their share of the recovery. In certain cases, a portion of the recovery may be reallocated to principal investigators through their school’s/college’s budgeting procedures.

Construction and renovation of laboratories that are necessitated by the requirements of a particular project must be paid for by that project. Thus such reconstruction and renovation costs must be charged as a project direct cost. General renewal, reconstruction and renovation not necessitated by specific projects are funded by the institution and are not charged directly to projects.

Periodically, almost every entity that applies for federal funding prepares and presents a cost proposal to the university's cognizant federal agency for the purpose of negotiating F&A cost rates applicable to federally funded contracts and grants. The cost proposals are prepared according to the requirements specified in OMB 2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (aka Uniform Guidance), using actual cost data from prior year operations. The proposals are reviewed by the federal negotiators and rates are negotiated.

Unless otherwise indicated by UAB’s F&A policy, UAB applies the federally negotiated rates to all sponsor types, federal and non-federal.

UAB’s F&A rates are not to be negotiated with industry sponsors. Budgets to industry sponsors are to be total costs budgets.

For example, a line item budget: If direct costs for a supply item is $1,000.00 and the applicable F&A is 48.5% the line item in the sponsor budget would read $1,485.00.

Because UAB is a state institution, it cannot charge industry sponsors less than the negotiated rates; otherwise, it could be seen as subsidizing for-profit work. Further, the University has agreed to consistently apply its DHHS federally negotiated rates to all sponsor types, including industry. Certain program exceptions are codified in UAB’s F&A policy.

The F&A Task Force, the campus-wide committee charged with revising the policy, evaluated the many factors related to this issue. When we evaluated the projects that were the fee-for-service activities, the large majority were most often funded by a for-profit company and being performed in the same labs as research activities being led by the same faculty. Because the activity requires the same space, equipment, and institutional resources, it was decided it would be inappropriate to charge a for-profit corporation less than what we charge the U.S. Government. Therefore, fee-for-service activities will fall under the same rate as Organized Research.

No. UAB’s F&A Policy covers the circumstances under which exceptions to its DHHS federally negotiated rates apply.

In certain circumstances the School may elect to cost share part of the F&A costs. The basis for such decision is generally to support a School business purpose. For example, a pilot project or proof of concept project that is limited in duration and scope with the plan to obtain a larger grant in the future that would cover the full total costs. You will need to submit a Cost Sharing Commitment form with your materials to OSP. This form requires several signatures, and you must obtain all of them before routing the form to OSP. At the time of award, GCA will set-up the cost share account so that these costs are covered by the Department/School and not charged to the sponsor. The sponsor will pay their percentage, and the PI asks that the rest be borne by the Department and School.

If fifty percent (50%) or more of the extramurally funded project is performed in facilities not owned by UAB and rent is directly allocated in the project budget, then the off-campus rate applies.

Here are some examples:

1. Research will take place at a lab at Innovation Depot. Rental costs for the space are a line item in the funded project’s budget. The project will be charged at the off-campus rate.
2. Research will take place at a lab at Innovation Depot and the rental costs for the space are paid for centrally by UAB or UABRF. The project will be charged at the on-campus rate.
3. The research is strictly computer/data driven and will be done at the PI’s home rather than their office. The project will be charged at the on campus rate.
4. The research will take place at Children’s Hospital. The project will be charged at the on campus rate. Since Children’s Hospital is not owned by UAB, UAB centrally leases space there for university purposes. The leased building list is located on the Financial Affairs website. 

UAB has an internal form, the Indirect Cost Revenue Redistribution Form, that allows for the redistribution of the F&A (indirect) cost revenue among departments. The form should be submitted with the proposal submission for each sponsored project.

The NIH Grants Policy Statement section 7.4 Reimbursement of Facilities and Administrative Costs limits the rate to 8% of the modified total direct costs, exclusive of tuition and fees, expenditures for equipment, and consortiums in excess of $25,000.