Key Concepts for Budgeting Fringe Benefits and F&A (Indirect) Costs at Boston University
To prepare budgets, keep in mind some important details about the project, such as where it will be performed, how many years’ duration, whether a substantial body of project work will be performed at another institution (necessitating a subcontract), or whether the proposal is being submitted to NIH under its modular budget format.
Rates by Employee Classifications. According to the University’s rate agreement with the Department of Health and Human Services (DHHS), separate rates have been negotiated for professional, non-professional, consultant, and graduate student employees. These fringe benefit rates are negotiated annually for a specific period of time.
Rates for Federal and Federal Pass-Through Awards. BU’s negotiated rates are for use on all grants, contracts and other agreements with the federal government and, when the prime award is from a federal agency, for all awards from non-federal sponsors.
Rates for Non-Federal Awards. Under federal regulations governing the calculation of fringe benefit rates, the costs associated with tuition remission for family members of professional and non-professional employees may not be included in the federal fringe benefit cost pool. Separate non-federal fringe benefit rates (that include the costs of this employee benefit) are consequently established for professional and non-professional employees. These non-federal rates are for use in all proposals for non-federal awards which do not involve funding under a federal prime.
F&A (Indirect) Costs
Rates for Research/Training/Other Sponsored Activities. According to the DHHS rate agreement, separate Facilities & Administrative cost rates (also known as indirect cost) are periodically negotiated for projects involving research, training, and other sponsored activities. F&A rates are normally re-negotiated every three years.
Rates for On-Campus and Off-Campus Projects. Within each of these categories, separate on-campus F&A rates are also negotiated. For all off-campus projects, a single F&A rate, set at the maximum rate permitted by federal regulations (26.0% MTDC), is applied. The off-campus rate is for use in calculating F&A costs for projects in which effort is performed at locations that are not owned or leased by Boston University. Investigators must apply either the on-campus or the off-campus rate to their budget. Only one rate may be used in a proposal budget.
F&A rates are applied on a preponderance of effort basis. The determination of the “on-campus” versus “off-campus” character of the project is based on an analysis of where the preponderance of budgeted personnel effort will occur over the entire project period. The percentage of on (or off) campus effort is determined by dividing the total on (or off) campus salaries for the project by the total budgeted salary costs for the project. When 50% or more of budgeted effort is performed on campus, use the on-campus rate; when more than 50% of a project is performed off campus, the off-campus rate applies. For additional information about the correct determination of F&A cost rate or to discuss your particular project, please contact the OSP representative assigned to your school or department.
Base for Calculating F&A
- MTDC. For most types of research projects, F&A cost rates are applied on a modified total direct costs (MTDC) basis. MTDC is defined as total direct costs less the sum of the following expenses:
- Room and / or board allowance
- Patient services
- Moveable capital equipment costing $5,000 or more with a useful life of more than one year
- Student aid
- Subcontract costs exceeding $25,000 on each subcontract
- External rent
- Alteration and renovation costs
Note on subcontracts: F&A costs are only charged on the first $25,000 of a subcontract. If a subcontract has a multi-year period of performance, F&A charges are applied each year to the balance, for as many years as appropriate, until the $25,000 threshold has been reached.
- TDC. For industry clinical research, F&A rates are applied on a total direct cost (TDC) basis. All budgeted direct costs are included in the TDC base.
F&A Rates for Projects Involving Boston Medical Center (BMC) Investigators. Generally, if 50% or less of a project is performed in BMC space, then a subaward is established for the portion of BMC work. If a project is designed such that more than 50% of its performance is located in BMC space, then the principal investigator must apply for project funding through BMC. Contact BMC Grants Administration for guidance on establishment of subawards on BU prime applications.