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F&A Rate Application Examples

• Selecting the Correct F&A Rate
• Calculating F&A Costs for a Budget
• Rebudgeting with F&A Costs

Guidance for awarding and charging the facilities and administrative rate can be found in OMB Circular A-21 Section G.7. This section of A-21 requires that federal agencies use the negotiated rates for F&A costs in effect at the time of the initial award throughout the life of the sponsored agreement. Life is defined as the competitive segment of the project. Because new rate agreements are negotiated every four or five years, they do not extend through the life of some sponsored agreements. When this occurs, the rate for the last year of the negotiated rate agreement will extend through the end of the life of competitive segment of the sponsored award.

Example 1:
The University had a predetermined rate of 48.50%, effective July 1, 2003 increasing to 52.0% through June 30, 2008. After June 30, 2008, the 52.0% rate is provisional until a new rate is negotiated. In August 2007, the F&A rate in effect was 52.0%. If a competitive award is received for the five-year period beginning August 1, 2007 and ending July 31, 2012, the 52.0% rate would be used for the funding and reimbursement for the full five-year period. Even though the University negotiated a higher rate beginning July 1, 2009 the change does not affect either the funding or the charging of F&A costs on this award. See below timeline for further illustration:

Rate Agreement Timeline	Negotiated Rate (%)
July 1, 2003 - June 30, 2005	48.5
July 1, 2005 - June 30, 2007	51.5
July 1, 2007 - June 30, 2008	52.0

Competitive Award Rate Timeline	Rate Used for Full Five-Year Period (%)
August 1, 2007 - July 31, 2012	52.0

As in past years, the new rate agreement results in different predetermined rates for different years covered by the agreement. Consequently, these rates will be applied separately to each year of the competitive segment. Again, if an award began during the last year of the negotiated rate agreement, the predetermined rate for the last year of the agreement would be extended through the end of the competitive segment of an award.

Example 2:
The University has negotiated predetermined rates for the period July 1, 2008 through June 30, 2013. The rates are: 52.0% for 2008-09; 53.0% for 2009-10 and 2010-11; 53.5% for 2011-12; and 54.0% for 2012-13. The University receives a competitive award for May 1, 2009 through April 30, 2014. For 2009 the 52.0% rate would be used for funding and reimbursement of F&A costs. The 53.0% rate would be used for 2009-10 and 2010-11. The 53.5% rate would be used for 2011-12. And, the 54.0% rate would be used for the remainder of the competitive segment. See below timeline for further illustration:

New Rate Agreement Timeline	Negotiated Rate (%)
July 1, 2008 - June 30, 2009	52.0
July 1, 2009 - June 30, 2011	53.0
July 1, 2011 - June 30, 2012	53.5
July 1, 2012 - June 30, 2013	54.0

Competitive Award Rate Timeline	Rate Used for Full Five-Year Period (%)
May 1, 2009 - June 30, 2009	52.0
July 1, 2009 - June 30, 2011	53.0
July 1, 2011 - June 30, 2012	53.5
July 1, 2012 - April 30, 2014	54.0

Example 3:
The University’s last predetermined rate of 52.0% ended on June 30, 2008. After June 30, 2008, the rate of 52.0% is used and considered provisional until a new rate agreement is negotiated.

Please note that there is a special situation that applies when the initial award is received during the “gap” period when only a provisional rate is in effect. For UC Davis, this was the period of July 1, 2008 through August 29, 2008. If an initial award under a competitive segment was received during this gap period, the provisional rate of 52.0% must be used for funding purposes for the full competitive period unless provisional forecasted rate increases were used for the entire competitive period, however, the new predetermined rate(s) eventually negotiated for the period would be used for F&A reimbursement.

To minimize the impact to funding, UCD operates under provisional forecasted rates until a new rate agreement is negotiated. See the Facilities and Administrative Cost Rates letter for more information.

The NIH Grants Policy Statement informs on page 83 that F&A costs awarded may be subject to upward or downward adjustment, depending on the type of rate negotiated, and grantees may rebudget between direct and F&A costs in either direction without NIH prior approval, provided there is no change in the scope of the approved project.