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Understanding the F&A Rate Agreement at Northwestern University

Northwestern University, a private research university located in Evanston, Illinois, is known for its excellence in education, innovation, and discovery across a wide range of fields, from science to humanities. However, like other research institutions, Northwestern faces the challenge of funding its research activities, which can be costly and complex. One critical aspect of this challenge is the indirect costs or facilities and administrative (F&A) expenses that are necessary to support research but not directly attributable to a specific project or grant. To address this issue, Northwestern has established an F&A rate agreement with the federal government and other sponsors that determines how much F&A costs can be recovered from grants and contracts.

What is F&A?

F&A costs, also known as overhead or indirect costs, are the expenses that are incurred by the university to provide the infrastructure, facilities, and services that support research activities. These costs include but are not limited to:

– Building and maintenance of research facilities

– Utilities, such as electricity and water

– Administrative and technical personnel, such as grants managers and IT support

– Compliance with regulations and policies, such as animal care and human subjects protections

– Library resources and other academic services

– Depreciation and repairs of equipment and other capital assets

F&A costs are typically expressed as a percentage of the direct costs, which are the expenses that are directly attributable to a specific project or grant, such as salaries, supplies, and equipment. The F&A rate represents the proportion of the total indirect costs that can be recovered from the direct costs, thus allowing the university to cover its expenses and invest in its research programs.

How is F&A determined at Northwestern?

Northwestern follows the guidelines and regulations set forth by the federal government, particularly the Office of Management and Budget (OMB) Uniform Guidance, which outlines the principles and standards for determining, negotiating, and applying F&A rates for research institutions. The OMB Uniform Guidance requires that F&A rates be based on a comprehensive study of the university`s actual costs and activities, and be reviewed and updated periodically.

At Northwestern, the F&A rate agreement is negotiated by the Office for Sponsored Research (OSR), which is responsible for assisting researchers in obtaining and managing external funding for their projects. The OSR works with the university`s financial and facilities departments to collect and analyze the actual costs and activities related to research, and to develop a proposal for the F&A rate that is submitted to the federal government and other sponsors for approval. The proposed rate is based on factors such as the type and location of the research, the facilities and services used, and the historical trends and projections of the university`s costs and revenues.

What is the current F&A rate at Northwestern?

As of July 1, 2021, Northwestern`s F&A rate for research is 54% of the modified total direct costs (MTDC), which excludes certain expenses such as equipment, capital expenditures, and patient care costs. This means that for every dollar of direct costs that a grant or contract incurs, 54 cents can be charged for F&A costs. For example, if a project has a budget of $100,000 in direct costs, the F&A costs would be $54,000, resulting in a total budget of $154,000. This rate applies to most federal agencies and some non-federal sponsors, but some sponsors may have different rates or negotiate their own rates with Northwestern.

Why is the F&A rate important?

The F&A rate is important for several reasons:

– It allows Northwestern to recover its actual costs of supporting research activities and maintaining its research infrastructure, which is critical for the success and competitiveness of its research programs.

– It provides transparency and consistency in the budgeting and accounting of research expenses, both for the university and for the sponsors who fund the research.

– It helps to ensure compliance with federal and state regulations and policies that require adequate documentation and justification of F&A costs.

– It helps to manage the financial risks and uncertainties of research, such as unexpected expenses or changes in funding levels, by providing a predictable and reliable source of revenue for the university.

Conclusion

The F&A rate agreement at Northwestern University is a complex but essential component of the research enterprise that enables the university to fulfill its mission of advancing knowledge and improving lives through research. By understanding the principles and processes behind the F&A rate, researchers, sponsors, and other stakeholders can better appreciate the value and impact of research and the role that F&A costs play in supporting it.