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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

Scenario 1 Rebudget from a budget consolidation not subject to indirect cost recovery to a budget consolidation which is subject to indirect cost recovery. In this scenario, the rebudget will involve calculating an amount for the indirects which will be assessed on the budget consolidation. Example: PI wants to increase her supplies budget by $5,000 and will rebudget from funds available in her equipment budget. This agreement is under the Federal Demonstration Partnership (FDP) and the rebudgeting does not represent a change in scope in the project. The budget adjustment must include an amount for indirect cost recovery assessment. In this case the PI must include a rebudget entry to cover the indirect costs that will be assessed when the direct charges for the supply expenditures occur. Question: What amount should be rebudgeted from the equipment consolidation (SUB4)? F&A rate:   48.50%   Calculation: Amount to transfer to supplies:   $5,000     Transfer from: SUB4 $7,425 Debit $5,000 + ($5,000 x 48.5%) = $7,425 Transfer to: SUB3 $5,000 Credit $5,000 INDR $2,425 Credit $5,000 x 48.5% = $2,425 Answer: $7,425 must be rebudgeted from the equipment consolidation to cover $5,000 of supplies expense as well as the the additional amount of indirects ($2,425) associated with the supply expenditures.

Scenario 2 Rebudgeting a specified, not to exceed, amount from a budget consolidation which is not subject to indirect cost recovery to a budget consolidation which is subject to indirect cost recovery. In this scenario, the rebudget will involve calculating an amount for the indirects (INDR) which will be assessed on the budget consolidation. Example: PI has only $5,000 remaining budget available and this balance resides in the equipment (SUB4) expense category. Equipment purchases are no longer required on the project and the PI has been granted approval by the sponsor to rebudget from equipment to travel (SUB5) to attend a conference and present a research paper. The research administrator must prepare a budget adjustment for the exact amount of funds available ($5,000). Question: How much funding is available to the researcher to spend on travel costs? F&A rate:   48.50%   Calculation: Transfer amount not to exceed:   $5,000     Transfer from: SUB4 $5,000 Debit $5,000 Transfer to: SUB5 $3,367 Credit $5,000/1.485 = $3,367 INDR $1,633 Credit $3,367 x 48.5% = $1,633 Answer: There is $3,367 available for travel costs.

Scenario 3 Rebudgeting a specified, not to exceed, amount from a budget consolidation which is subject to indirect assessment to a budget consolidation which is not subject to indirect assessment. In this scenario, the rebudget will include an adjustment for a reduction in indirect cost recovery. Example: PI receives agency approval to purchase a piece of equipment in the amount of $5,000 which had not been included in his original budget submission. The PI wants exactly $5,000 transferred to equipment and no more. He has sufficient funds available in the supplies budget to accommodate the transfer. Because supplies (SUB3) expenditures are subject to indirects (INDR) and equipment purchases (SUB4) are exempt, the research administrator will need to calculate the amount of indirect "savings" which will result from rebudgeting to an expense category which is exempt from indirect assessment. Question: How much will the supplies budget (SUB3) be reduced for this transfer of $5,000 to equipment? F&A rate:   48.50%   Calculation: Transfer amount to equipment:   $5,000     Transfer from: SUB3 $3,367 Debit $5,000/1.485 = $3,367   INDR $1,633 Debit $3,367 x 48.5% = $1,633 Transfer to: SUB4 $5,000 Credit $5,000 Answer: The supplies budget will only be reduced $3,367 because this transfer "frees up" the indirects associated with the reduction in the supply expenditures which are subject to indirects.

Scenario 4 Rebudgeting a specified amount from a budget consolidation which is subject to indirect assessment to a budget consolidation which is not subject to indirect assessment. In this scenario, the rebudget will include an adjustment for a reduction in indirect cost recovery. Example: PI has an award under FDP and decides to rebudget $5,000 from supplies (SUB3). Because the supplies expenditures are subject to indirects and equipment purchases are exempt, the research administrator will inform the PI that her rebudget request will result in "freeing up" indirects (INDR) for an additional amount above the $5,000 to transfer to equipment (SUB4). Question: How much funding will be available to the PI for equipment expenditures by reducing his supplies budget by $5,000? F&A rate:   48.50%   Calculation: Transfer amount from supplies:   $5,000     Transfer from: SUB3 $5,000 Debit $5,000   INDR $2,425 Debit $5,000 x 48.5% = $2,425 Transfer to: SUB3 $7,425 Credit $5,000 + ($5000 x 48.5%) = $7,425 Answer: The PI frees up an additional $2,425 from indirects for his equipment purchases by rebudgeting from an expense category subject to indirects to an expense category exempt from indirect assessment, resulting in $7,425 available for equipment purchases.