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Facilities and Administrative Costs

About this Policy

Facilities and Administrative Costs

Policy Number: 27025

Effective Date:

Last Updated:

Responsible Office:
UM System Controller’s Office

Responsible Administrator:
UM System Controller

Policy Contact:

Campus Sponsored Programs Office


  • Finance

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This policy applies to grants, contracts, agreements, cooperative agreements, memoranda of understanding and like documents which commit the University to conduct projects involving Research, Instruction, extension and public service or to perform services for outside sponsors.

Reason for Policy

To ensure the University has the capability of maximizing the amount of recovery costs relating to sponsored awards.

Policy Statement

Funds provided by outside sponsors of Research, Instruction, public service or other services must include an appropriate amount to offset Facilities & Administrative (F&A) Costs incurred by the University.  F&A rates are negotiated with the U.S. Department of Health and Human Services on a periodic basis and consists of a separate rate for Research, Instruction and other sponsored activity.  Additionally, each of the rates have an On-Campus and Off-Campus rate to reflect where the activities took place. 

As determined by the sponsor in agreement with the University, the University will apply a negotiated rate to a defined base of expenses incurred on awards to determine the amount of F&A to recover from the sponsor. A base is generally defined by sponsors, consequently the University uses several base definitions that vary in the inclusion and exclusion of certain types of expenses.  A commonly used base is Modified Total Direct Costs (MTDC) consisting of all salaries and wages, fringe benefits, materials, supplies, services, travel, and sub-awards up to the first $25,000 of each sub-award.  MTDC generally excludes equipment, capital expenditures, charges for patient care, tuition remission, rental costs of off-site Facilities, scholarships, and fellowships as well as the portion of each sub-award in excess of $25,000.

F&A Costs must be charged to an award in accordance with a predetermined schedule of rates as authorized by the Vice President for Finance and Administration.  F&A Costs recovered are credited to the General Operating budget of each participating campus or system unit based on the proportion of direct costs used to calculate F&A Costs. 

F&A Costs must be charged at a rate not less than the predetermined approved schedule of rates. The Chancellor or a designated representative may waive F&A Cost recovery upon the recommendation of the department chairman and concurrence of the divisional Dean or designated representative when the following occurs:

  • The sponsor does not provide for full payment, provided published literature of sponsor states that F&A Costs are not allowed for any sponsored projects, and provided the project will essentially support the mission of the University. Where there are not published guidelines and full recovery is contrary to general operational standards of the sponsoring group, the Vice President for Finance and Administration is authorized to negotiate a rate acceptable to both parties.
  • The project is sponsored by a Missouri: state, county or municipal agency, provided the project is in keeping with the mission of the University and in support of activities funded from state, county or municipal tax sources. However, if the agency acts as the designated agency for disbursing federal funds, F&A Costs are charged as if the project were funded directly by a federal agency.

Approval to waive F&A Cost recovery implies that the school and the campus or administrative unit involved has sufficient resources in money, personnel and Facilities to meet the needs of the project and no additional demand will be made on other University resources for this purpose.

When a commercial or industrial firm requires rights in data to the exclusion of the University and/or claims ownership rights to intellectual property developed by the University under such a project, F&A Costs must be charged at a rate not less than the scheduled rate and may be charged at a higher rate through negotiation by the campus.  The President must specifically approve any waiver of such intellectual property rights.

If allowable under the terms of the funding source, unrealized F&A Cost recovery may be used to satisfy matching requirements by prior approval of the Chief Research Officer of each campus involved, and provided that the project is in keeping with the mission of the University as determined by the Chancellor or designated representative.

NOTE: Funds provided by industrial or commercial firms which do not impose any restrictions on the conduct of a project and do not require reports, are treated as gift funds and are processed through the campus Development Office.  All such funds must be reported to the campus Chief Research Officer.

Project Conducted Partially Off Campus

Grant or Contract Award (Annual Level) of $100,000 or Greater in Modified Total Direct Costs. Projects with total annual modified total direct costs (MTDC) of $100,000 or more which are partially performed off campus are prorated between On-Campus and Off-Campus components for F&A rate application purposes in instances where the lesser component is greater than 20% of the MTDC of the project. If 80% or greater of the MTDC are determined to be On-Campus costs, the entire project is charged the On-Campus rate. If 80% or greater of the MTDC is determined to be Off-Campus costs, the entire project is charged the Off-Campus rate.

Grant or Contract Award (Annual Level) Under 100,000 n Modified Total Direct Costs. Projects with total annual MTDC of $100,000 or less which are partially performed off campus are not apportioned between their On-Campus and Off-Campus components for F&A rate purposes. If 50% or more of the project’s MTDC are to be expended on campus, the entire project is charged the On-Campus F&A rate. If more than 50% of MTDC are to be expended off campus, the entire project is charged the Off-Campus F&A rate. 


Facilities and Administrative (F&A) Cost - costs incurred in support of sponsored programs, in general, but not identifiable with any single project.  Sometimes referred to as indirect costs, overhead, or administrative costs.

Facilities - depreciation and use allowances, interest on debt associated with certain buildings, equipment and capital improvements, operation and maintenance expenses, and library expenses.

Administration - general administration and expenses, departmental and college administration, sponsored projects administration, and all other types of expenditures not listed specifically under one of the subcategories of Facilities.

On-Campus – Research, Instruction, or other sponsored activity that is conducted in space owned by the University and for which the University is bearing the space costs, from University funds.  For space used for on‐campus Research, the University has already included the costs associated with that space in the “Facilities” portion of the on‐campus F&A rate.

Off-Campus - Research, Instruction, or other sponsored activity that is conducted in space not owned by the University and not otherwise paid for by the University from University funds.  For space used for off‐campus sponsored activity, an external source (typically, a sponsor) provides funding, either paying directly for space, or reimbursing the University for its costs in renting or leasing the space, or otherwise directly providing space for sponsored activity at no charge to the University.  Accordingly, the Facilities portion of the on‐campus F&A rate does not apply to the rental or lease costs of such space. “Rented or Leased Space” is defined as space that is used for sponsored activity but not owned by the University, the costs of which are paid either from University funds or from funds provided by a sponsor.

Research - a systematic study directed toward fuller scientific knowledge or understanding of the subject studied.  Development is the systematic use of knowledge and understanding gained from Research directed toward the production of useful materials, devices, systems, or methods, including design and development of prototypes and processes.  R&D means all Research activities, both basic and applied, and all development activities that are performed by non-Federal entities. The term “Research” also includes activities involving the training of individuals in Research techniques where such activities utilize the same Facilities as other R&D activities and where such activities are not included in the Instruction function.

Instruction - the teaching and training activities of an institution established by grant, contract, or cooperative agreement. These activities may be offered for credits toward a degree or certificate or on a noncredit basis, and may be offered through regular academic departments or through separate divisions, such as summer school or extension. (Research training is not included; it is included under Research, above.)  “Instruction” is the proper code when the primary purpose of the project involves training, curriculum development, Instruction, or demonstration. Instructional projects may include some elements of Research, particularly if new techniques of Instruction or curriculum content are being developed. This does not change the definition of the project to “Research.”

Other Sponsored Activities (OSA) - programs and projects sponsored by federal and non-federal agencies which involve the performance of work other than Instruction and organized Research. Examples include health service projects, community service programs, service and technical assistance projects, such as student assistance to corporations and government, and conferences. This category also includes sponsor-designed testing, clinical trials, evaluations, non-credit community education.


UM System Controller’s Office:

  • Prepare, negotiate and distribute F&A rates

Sponsored Programs Office:

  • Ensure appropriate F&A rate is used on all proposals

Additional Details



Related Information

F&A Rate Agreements:


Formerly Business Policy Manual 203 – Facilities and Administrative Cost Recovery (Grants & Contracts) (revised 8/31/2012)


Reviewed 2020-11-30