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Facilities & Administrative (F&A) rates are used to recover costs spent on sponsored projects that cannot be directly attributed to a particular project; these are often called indirect costs. Costing Policy & Analysis calculates, proposes, and negotiates F&A rates with the federal government (Department of Health and Human Services [DHHS]) and is based on 2 CRF 200 which is also known as Uniform Guidance. Below are some useful definitions of important terms from Uniform Guidance:

• 200.56 - Indirect/Facilities & Administrative costs: Indirect (F&A) costs means those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect (F&A) costs. Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived.
• §200.57 - Indirect Cost Rate Proposal: Indirect cost rate proposal means the documentation prepared by a non-Federal entity to substantiate its request for the establishment of an indirect cost rate as described in Appendix III to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs) through Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost Proposals of this part, and Appendix IX to Part 200—Hospital Cost Principles.
• §200.412 - Classification of Costs: There is no universal rule for classifying certain costs as either direct or indirect (F&A) under every accounting system. A cost may be direct with respect to some specific service or function, but indirect with respect to the Federal award or other final cost objective. Therefore, it is essential that each item of cost incurred for the same purpose be treated consistently in like circumstances either as a direct or an indirect (F&A) cost in order to avoid possible double-charging of Federal awards. Guidelines for determining direct and indirect (F&A) costs charged to Federal awards are provided in this subpart.
  (a) Facilities and administration classification. For major Institutions of Higher Education (IHE) and major nonprofit organizations, indirect (F&A) costs must be classified within two broad categories: "Facilities" and "Administration." "Facilities" is defined as depreciation on buildings, equipment and capital improvement, interest on debt associated with certain buildings, equipment and capital improvements, and operations and maintenance expenses. "Administration" is defined as general administration and general expenses such as the director's office, accounting, personnel and all other types of expenditures not listed specifically under one of the subcategories of "Facilities" (including cross allocations from other pools, where applicable). For nonprofit organizations, library expenses are included in the "Administration" category; for IHEs, they are included in the "Facilities" category. Major IHEs are defined as those required to use the Standard Format for Submission as noted in appendix III to this part, and Rate Determination for Institutions of Higher Education paragraph C. 11.

University of Virginia's' F&A rate agreement is negotiated with the DHHS every three to five years and is derived through a complex calculation involving space usage and the following cost pools:

• Facilities Cost Pools -

1. 1. Building depreciation
   2. Equipment depreciation
   3. Interest
   4. Operations & maintenance (utilities, maintenance, etc.)
   5. Library services

• Administration Cost Pools - the administrative cost pools are capped at 26 percent, regardless of what these costs actually are.

1. 1. General administration
   2. Departmental administration
   3. Sponsored projects administration
   4. Student services administration.

Below are some useful presentations to help you understand indirect costs in more details:

• This presentation outlines the basic mechanics of Facilities and Administration Cost and how they it is calculated with scenarios outlining how F & A is rate is derived (attachment)
• University of Virginia Rate Guide (attachment)

1. Proposal Submission: Introduction

2. Proposal Submission: Pre-Proposals and Letters of Intent

3. Proposal Submission: Budgets

4. Proposal Submission: Federal Proposals

5. Proposal Submission: Non-Federal Proposals

6. Proposal Submission: Sponsor Guidelines and Restrictions

7. Proposal Submission: Internal Forms and Routing

8. Proposal Submission: Indirects (F&A)