History

Prior to 1937, research in higher education was largely funded by gifts from individuals or funding from foundations. With the establishment of the National Cancer Institute in 1937, NIH started to fund extramural grants which allowed universities to apply for and received federal funding for research. With more federally funded research occurring at universities, there arose some controversy that funds were being used to also support administrative costs. As the federal government understood that there was a real cost to supporting research, a somewhat arbitrary rate of 50% was approved around the time of World War II. Over the years, formalized regulations were put in place to allow each institution to calculate their own costs.

Calculations

For institutions of higher education, the F&A rate is comprised of two major categories: Facilities and Administration. Facilities includes the buildings, equipment and operations of the space where research is conducted, including library resources. Administration includes personnel who support the research enterprise, such as department administrators and central offices, like the Office of Research Administration. This portion is capped at no more than 26% since 1991 amid allegations of questionable costs being included in the F&A rate. While some institutions had to return funding to the government after an audit, the scope was not nearly as large as alleged and the most notable case against Stanford University (alleging up to $200 million in inappropriate charges) was dismissed.

While the actual work to calculate the F&A rate is complex, it ultimately boils down to a simple formula:

The numerator is the costs that go into the F&A described above and the denominator includes the costs that directly support the research projects such as salary for the PI and others working on the project, materials and supplies, travel, etc. Most of these costs come from the grants the University of Miami receives. The higher the numerator, the higher our F&A rate.

Why This Year is Important?

Our F&A rate is negotiated by looking at the costs associated with a single year. The last negotiation was almost eight years ago and fiscal year 2024 (next fiscal year) will be our base year or the year used to determine our new rate. The decisions we make this year can impact our rate with the two largest being how we utilize space and cost sharing.

In order to maximize the facilities portion of the rate, we need to ensure there is research occurring in our most valuable (most expensive!) space. ORA already partners closely with relevant leadership on this topic. Additionally, we can reduce the direct costs supporting research by reducing cost sharing. Cost sharing should only be done when it is mandatory (required by the sponsor) or in exceptional circumstances. As proposals submitted today will be awarded and active next fiscal year, it is important to minimize cost sharing when submitting proposals.

Please join me on July 21st at 12:00pm to discuss this topic further, I would love to hear from you!

Register in advance for the Zoom session here. You may also submit your question(s) and/or comment(s) in advance of the session.