REPLY -- Re: [RESADM-L] Indirect rate application Steve Bradley 12 Nov 2001 14:20 EST
Mr. Roberts,

I apologize for my slightly tardy response, but I had to prioritize work with
our federal A-133 auditors over the past week.

1) In any event, your F&A Rate Setting/Charging question was addressed with DHHS
& ONR federal negotiators at the April 2001 national Facilities & Administrative
(F&A) Cost [formerly known as Indirect Cost] conference and the following
responses provided.  Generally, auditors did not have a problem with the
difference in business & industry (B&I) F&A rate setting, since such is outside
A-21 applicability (see section A3).  Therefore, the application of federally
negotiated rates need not apply to non-federal grants.

2) Interestingly, auditors indicated that universities theoretically could
charge non-federal/B&I grants with their full Calculated F&A rates, even if such
was higher than the final federal rates negotiated with federal auditors.  For
example, assuming that a university proposed a 50% Organized Research rate but
such was negotiated and finalized at 45% with the federal government, the
institution could theoretically charge B&I research grants at the full 50%

However, as you know, most institutions face competitive factors for B&I grants
that make this a scenario improbable for actual application.  Also, please note
that in this hypothetical example, the university would be limited to the 45%
rate application for federal Research clinical trial grants.

3) Also, federal negotiators acknowledged that, in many cases, B&I sponsors have
written policies that mandate such lower rates (or, in certain cases, provide
for no F&A costs).  Negotiators agreed that non-federal grants may use a total
direct cost (TDC) basis for rate application (versus the normal federally
negotiated modified total direct cost-MTDC-basis), as mandated by non-federal
sponsor terms and conditions.

4) However, federal negotiators properly emphasized A-21 costing mandates. For
federal F&A rate proposals and calculations, the paramount issue is consistency
in mapping associated indirect type costs allocations and direct "base" costs to
the same proper major function (i.e., Organized Research, Public Service,
Instruction, etc.) for federal rate calculations (see section G1a3).

For example, if an institution considers B&I clinical trials as related to its
Public Service mission, all such grant direct grant "base" costs and associated
indirect cost allocations (i.e., departmental administration, depreciation,
etc.) must be mapped as such within the federal Public Service rate calculation.

5) Of course, this has the effect of lowering the federally negotiated F&A
rate.  And, an institution would experience reduced F&A costs Reimbursements
from non-federal/B&I grants by charging a rate lower than the federally
negotiated rate.

I hope my response is of some assistance concerning your question.

"Roberts, Kevin L." wrote:

> My institution has some development prospects that will give money to fund
> research but, they want a maximum 10% indirect rate applied.  I have been
> asked if there are "...any government or other legal issues with not
> applying the same indirect rate to all grants".  I believe the answer to the
> question is no since we currently have various indirect rates applied to our
> various industry/commercial/foundation awards and a different rate applied
> to our federal awards.  However, being relatively new to my position and to
> the field, I don't know where to go to get a definitive answer to the
> question.  Any help you can give would be appreciated.
> Kevin L. Roberts
> Mayo Foundation
> Pavilion B-20J
> 200 First St. SW
> Rochester, MN 55905
> (507) 266-5368
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