Duke's Negotiated Rate Agreement

Defining F&A : Duke's Rates : Sponsor Rates : Doing the Math : Equipment Fabrication : Rate Changes

Defining Facilities and Administrative Costs

Direct costs are those which can be identified specifically with a particular sponsored project and which can be directly assigned to such activities, relatively easily and with a high degree of accuracy. For example, the supplies needed for a research project are easy to identify; however, costs such as heating and air conditioning rooms and labs used by the project staff are not. The latter are indirect, defined as those that are incurred for common or joint objectives, and which cannot be identified readily and specifically with a particular sponsored project. (The federal government has recently changed the terminology used to refer to indirect costs. They are now called Facilities and Administrative, or F&A, costs.)

Federal regulations provide principles for determining which costs are applicable to agreements with the government and identify which of those costs may be charged as direct and which must be charged as Facilities and Administrative Costs. Furthermore, the rules state that the distinction between direct and Facilities and Administrative Costs must be maintained consistently throughout the University regardless of the source of funding. Duke's rates, are negotiated with the U.S. Department of Health and Human Services (DHHS).

Duke's F&A Rates

Duke's facilities and administrative cost rates are negotiated with the DHHS for the following categories:

• On Campus (Use Pro-Rated Matrix): Research and Instruction. Includes the Duke campus as well as the Duke University Marine Laboratory located in Beaufort, NC.
• Off Campus 26%: (Remote to Durham campus - outside 50 miles) Covers activities in facilities not owned by the University. To qualify, a project must be primarily conducted off-campus. A field component does not qualify a project for the off-campus rate.
• Off-Campus 28.5%: (Adjacent to Durham Campus - within 50 miles) Covers the V.A. Hospital and the Rankin Clinical Research Unit
• Research Vessels 25%: Applies to vessels owned by the National Science Foundation and operated by the Marine Lab. (Fuel costs are excluded from indirect cost recovery.)

According to Duke's rate agreement with DHHS, only one F&A cost rate category may be used for any given project.

Sponsor Rates

Some sponsors limit or eliminate the F&A rate an institution would ordinarily include in its sponsored projects' budgets. Duke will accept a different rate only when it is a stated policy of the sponsor. When this is the case, please supply a copy of the written policy to ORS when submitting the proposal for review.

Doing the Math: Calculating F&A Costs

SPS NOTE: A budget perparer can stop reading here and skip this task if he or she is using SPS. The MTDC and F&A costs are automatically calculated by SPS. If a sponsor requires a rate different from Duke's, the system can calculate at the specified rate.

Step 1: Calculate the Modified Total Direct Costs (MTDC).
This figure is the total of the direct costs, minus those categories which may not be assessed F&A Costs. Duke's F&A cost rate agreement provides that the following costs are excluded:

• Capital equipment (individual items which cost $5,000, or more, and have a useful life of more than two years).
• Subaward costs in excess of $25,000. F&A Costs are collected on only the first $25,000 of the total cost of each subaward. The total cost includes all the years a subaward will be funded during a given project period. Thus, if your budget has a subaward line item of $40,000 in each year of a four year project, F&A Costs are only applied to $25,000 in year one. No F&A Costs will be collected on the subaward for the remaining years of the project. However, if the subaward budget is only $10,000 per year, F&A Costs would be collected on the entire subaward amount for years 1 and 2, on $5,000 in year 3, and not at all in year 4. If your application is for a competitive renewal, even if you are using the same subrecipiants, you may again collect F&A Costs on the first $25,000 of each subaward.
• Research vessel fuel costs, for NSF-owned ships, only.
• Tuition and student support costs, such as fellowships, scholarships, and stipends. These costs can only be charged to projects for which student support is the primary intent, such as training grants (this does not include tuition paid to students working on a research project as part of their salary).

Step 2: Apply the correct F&A rate, taking into account Duke's rate and any restrictions imposed by the sponsor.

Equipment Fabrication

The final cost of fabricated equipment should be estimated, included in the equipment category, and excluded from F&A cost recovery. The budget narrative should clearly identify all of the costs which will be associated with the production of the equipment, such as materials, salaries, and travel. Sponsored Programs has post award accounting procedures to track expenses associated with fabrication. When the equipment is completed it will be tagged and inventoried.

Rate Changes

The federal government dictates that the F&A cost rate in effect at the time an award is made will be frozen throughout the life of the award. Even if the University negotiates a new set of rates with the government, those rates will not be used in non-competing continuations or supplements.