Know the Basics for Facilities and Administrative Costs

Funding News Edition: December 22, 2022
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Workbench in NIAID intramural laboratory, with supplies and equipment.

Separating direct and indirect costs helps ensure that the reimbursements issued on NIH grants solely support the conduct of research.

Credit: NIAID

When applying for a research project grant, direct costs are the expenses you tabulate when mapping out the budget needed to conduct your research. Examples include salaries, travel, equipment, and supplies directly supporting the funded project or activity.

In your application, you also request facilities and administrative (F&A) costs, often called indirect costs, to pay for common or joint objectives that cannot be readily identified with an individual project or program. Examples include payroll, departmental administration, student services, building depreciation, and utilities.

Fortunately, you don’t need to itemize F&A costs each time you apply for a grant! Rather, F&A costs are calculated by applying your organization's negotiated F&A rate to your direct cost base.

Review What Is the Difference Between Allowable Direct Costs and Allowable Facilities and Administrative (F&A) Costs? as well as the key points below to refresh your understanding of F&A costs.

Most F&A Cost Rates Are Not Established by NIH

F&A cost rates for colleges, universities, nonprofits, hospitals, and state and local governments are established by the HHS Division of Cost Allocation or the Department of Defense’s Office of Naval Research. Once a federally-funded rate is negotiated and established, it applies to all government funding agencies that support your grantee institution.

NIH sets F&A cost rates only when the grantee is a commercial organization (e.g., small businesses). In these cases, the Division of Financial Advisory Services in NIH’s Office of Acquisition Management and Policy will set the rate for the grantee organization.

If a grantee institution does not have a negotiated rate at the time of its award and it does not wish to pursue negotiations to establish one, it can elect to receive a "de minimus" rate, which is 10 percent of Modified Total Direct Cost (MTDC).

Other Award Types

For several non-research project grant award types, NIH does not reimburse F&A costs. Examples include:

  • Individual fellowship awards
  • Conference grants
  • Construction and modernization grants
  • Shared equipment grants

NIH provides F&A costs without the need for a negotiated rate, generally at a rate of 8 percent of MTDC, under the following classes of awards:

  • Institutional research training grants
  • Education grants (e.g., R25)
  • Career development awards

Find additional details at Reimbursement of Facilities and Administrative Costs.

Foreign Grantees and Foreign Subawardees

NIH and its institutes fund F&A costs for grants to foreign organizations and foreign or international consortium participants of domestic grants at a fixed rate of 8 percent of MTDC, exclusive of tuition and related fees, direct expenditures for equipment, and subawards in excess of $25,000.

See Reimbursement of Facilities and Administrative Costs to learn more.

One Hundred Percent of NIH Research Funding Supports Research

NIH research funding supports both direct and F&A costs associated with research. But non-research and research activities costs must stay separated since NIH applies the F&A cost rate on the F&A costs associated with research activities only.

Additionally, facilities costs are limited to the spaces that are used only for research. Separating direct and indirect costs helps ensure that the reimbursements issued on NIH grants solely support the conduct of research.

To learn more about F&A costs, see Develop Your Budget and contact NIH’s Division of Financial Advisory Services (DFAS) with questions. Go to NIAID’s Plan Your Budget & Personnel for further instruction on crafting a budget.

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