Best Practices Guide
Background
F&A [Facilities & Administrative] costs, also known as IER [Indirect Expense Recovery] or Indirect Costs, are real costs that are necessary to cover expenses which cannot be charged directly to a sponsored project budget. F&A costs are allocated proportionately to externally funded research using a DHHS-negotiated and approved indirect cost [IDC] rate. F&A reimbursement pays for expenses related to facilities [e.g., space and utilities] and for administrative costs tied to supporting research activities [e.g., grant submission, financial management, and regulatory compliance]. IER is necessary for covering costs related to the funded research which are not recoverable directly from the award (e.g., space, facilities, and administrative charges).
F&A costs are a reimbursement to UAB for costs already incurred in supporting research activities and are not a source of profit for the university. At UAB, IER is distributed to the Schools/College of the Principal Investigator (PI) of each sponsored project. There are circumstances where it may be appropriate to redistribute (i.e., share) IER with other operational units; for example, when a partnering unit bears facilities and administrative-related responsibilities related to the project. The default is that the IER is allocated to the administrative unit where the PI has their primary appointment. Redistribution of F&A across administrative units should be considered when significant work on the project is performed outside the administrative unit of the PI. In general, it should be proportional to the direct cost budget, and the total research activities, allocable to the partnering investigators’ research team using the following guidelines.
Guidance
In determining when to redistribute F&A, please use the following metrics below:
- Faculty Role: Faculty must be a Principal Investigator [PI], Multi-PI [MPI], Co-PI on NSF or other federal proposals, or leader of a sub-project as clearly delineated in the proposal.
- Faculty Effort: There should be a minimum of 10% effort devoted for each PI, MPI, or Project Leader. Due to budgetary limitations, there may exist circumstances where faculty leadership effort may be less than 10%. This can be discussed on a case-by-case basis.
- Funding Level: This is applicable only to those proposals that have more than $250,000 annual direct costs.
- Proposal Mechanism: This is applicable only to NIH R01-level proposals or their equivalent [e.g. DP1, DP2, DP5, R37, R56, RF1, RL1, U01, R35, P and U awards], NSF grants, DOD grants, CDC projects, and other federal agencies.
- F&A Rate: This is applicable only to proposals with full sponsored research F&A reimbursement (48.5% for FY25).
- Activities described by the research proposal, including space and/or location of research conduct: The sponsored research activities being proposed must occur within the physical space assigned to the partnering researcher[s].
Please Note: ALL the above conditions must be met to redistribute IER.
Process
It is the expectation that as the proposal/application is being developed**, pre-award research administrators will work with PIs, MPIs, CoPIs and Project Leaders to develop a fair and transparent F&A sharing proposal when the above conditions are met. The redistribution proposal should be based on the pro-rata budget share of the total budget of each research team. As an example, consider a MPI application [Contact PI Smith is in HSOM/Neurology and MPI Jones in SOE/Civil, Construction, and Environmental Engineering]. This proposal has $500,000 in Total Annual Direct Costs and each research team meets all the criteria listed above. Contact PI Smith has 70% of the total annual budget while MPI Jones has 30% of the total annual budget, and so the expectation is that the F&A will be allocated and shared accordingly – via the UAB F&A re-distribution form. See example calculation.
Annual Costs
[DIRECT and F&A (INDIRECT)] for a MPI Project:
| $500,000 | Total Direct Annual Costs, per year |
| --$350,000 | Contact PI Smith Direct Cost Budget, 70% of total direct cost budget |
| --$150,000 | MPI Jones Direct Cost Budget, 30% of total direct cost budget |
| $242,500 | Total F&A Costs, per year, 48.5% of direct cost total |
| --$169,750 | Contact PI Smith F&A share, 70% of F&A |
| -- $72,750 | MPI Jones F&A share, 30% of F&A |
**Note: the F&A redistribution agreement must be prepared in tandem with initial grant submission.
The above guidelines are voluntary. In addition, while this is a best practice guidance, there may be conditions that occur which may warrant additional considerations. These guidelines will be reviewed regularly. Contact Gina Hedberg