Policy: Application of Facilities and Administrative (F&A) Rates for Sponsored Activities

Policy Statement

The application of the appropriate Facilities and Administrative (F&A) Rate in all proposal submissions and the charging of the appropriate F&A Rate for the activity(ies) being performed on sponsored awards ensures consistent application and recovery of infrastructure and operational costs that support the University’s research enterprise. These are actual costs to the University and directly support the performance of Lehigh University sponsored projects. To reflect the total operational cost of such activities, approved grants, contracts and special programs must fully reflect the direct and indirect costs that are incurred by the University.

Funding sources for research and other sponsored activities at Lehigh include the federal government, state and local governments, private entities and in some cases international entities. And while Lehigh’s federally negotiated F&A rates must be used for sponsored proposals with the federal government, as well as for federal pass-through entities for which the federal government is the prime sponsor, a number of Lehigh’s non-federal grants come from funders without indirect or overhead cost guidelines, or with lower written, publicly available policies that limit or prohibit F&A Rates or F&A Cost recovery. This policy ensures appropriate recovery of F&A costs relating to all sponsored awards.

Who Should Read This Policy 

• Principal Investigators who submit proposals and negotiate contracts for externally sponsored funds
• Department administrators and staff within all schools, departments and centers who support PIs in preparing sponsored proposal and contract budgets
• Corporate and Foundation Relations
• Office of Research Support Services
• Office of Research and Sponsored Programs

Scope

This policy applies to all sponsored awards received by Lehigh University and to all individuals and offices involved in creating sponsored award proposals and administering sponsored awards.

Definitions

Procedures

1. Federal Sponsors and Federal Pass Through
   1. Federally approved F&A Rates must be used for sponsored proposals with the federal government as well as for pass-through entities, unless otherwise restricted. Lehigh’s current negotiated rate can be found on the ORSP website Resources Page. Lehigh currently negotiates our rate with the Office of Naval Research every three years.
2. State of Pennsylvania
   1. State of Pennsylvania awards provide for F&A Rates between 0% and 20% depending on the specific program or activity. Other city and local governments similarly provide for F&A Rates between 0% and 20%. Lehigh generally accepts these awards.
3. For-Profit Industry/Corporate Grants and Contracts:
   1. Grants and contracts funded by for-profit sponsors must apply Lehigh’s current federally negotiated rate for all research-related activities. In instances where funding is directed toward Lehigh programs or projects or any funding in direct support of students, and the annual grant budget is $50,000 or less, no indirect costs will be applied. If the annual grant amount is $50,001-$100,000, a 10% F&A rate will be applied. Anything over $100,000 will require approval as outlined in the Special Situations and Exceptions section below. In all cases, it is expected that sponsors pay directly for costs that are normally F&A costs if the terms and conditions do not specifically prohibit such costs and the costs benefit the award. Programs and projects that fall under this category are subject to review by the ORSP and Corporate and Foundation Relations. 
4. Non-Profit Sponsors:
   1. Proposals from non-profit sponsors should follow the sponsor’s published policy, uniformly applying their rates. Lehigh will generally accept reduced F&A rates when the sponsor has a written, publicly available policy that limits F&A Rates or prohibits F&A Cost recovery. 
   2. For-profit entities may partner with non-profit foundations/organizations or establish nonprofit foundations that are separate legal entities. In the event a sponsor is such a foundation/organization and is designated as a 501(c)(3) entity, Lehigh will generally accept F&A Rates consistent with the provisions of this section.
   3. For grants from non-profit sponsors with existing indirect rate guidelines, the team applying for the grant will make a determination prior to applying for the grant whether the terms are acceptable and still allow for the grant to be used effectively without significant, and potentially unfunded, additional cost to the University.
   4. For grants from non-profit sponsors without existing indirect rate guidelines,
      1. If the annual grant budget is $50,000 or less, no indirect cost will be applied
      2. If the annual grant amount is more than $50,000, a 10% F&A rate will be applied
         1. When applying the F&A rate, it is expected that sponsors pay directly for costs that are normally F&A costs if the terms and conditions do not specifically prohibit such costs and the costs benefit the award.
         2. When costs that are normally F&A costs cannot be applied, the 10% F&A rate will be applied on a Total Direct Cost basis 

If a non-profit sponsor has a publicly published F&A rate policy of less than 10% and the total annual direct costs on the award are greater than $250,000, recovery of the equivalent of a minimum F&A rate of 10% is required. The recovery of F&A costs may be accomplished by:

• direct charging of F&A type costs to the award (if permitted by the sponsor)
• charging a departmental account
• utilizing the college unrecovered indirect costs (with Dean approval)
• a combination of these sources

Responsibilities

The Assistant Vice Provost of Research and Sponsored Programs initiates annual reviews of the University’s non-negotiated F&A rates. The review will include discussion with the Executive Director, Corporate and Foundation Relations and may result in recommendations for changes to the application of F&A rates. The recommendations will be made to the Vice Provost for Research and the Provost.

Special Situations/Exceptions

Under exceptional circumstances, requests for waivers of F&A Rates or the acceptance of a reduced F&A rate can be made at the time a proposal is submitted. Requests for exceptions require prior approval as follows:

• For an annual grant budget up to $250,000, requests for exceptions require review by the Assistant Vice Provost, Research and Sponsored Programs and prior approval of the Vice Provost for Research.
• For annual grant budgets above $250,000, requests for exceptions require prior approval of the Provost.

In both instances, clearly documented justification of the request for the waiver is required. For requests for annual grant budgets above $250,000, recovery of the equivalent of a minimum F&A rate of 10% is required and may be accomplished as stated above.

Related Resources

Lehigh University Rate Agreement
Uniform Guidance, 2 CFR Part 200.414 Indirect (F&A) Costs
[Under development] Facilities and Administrative (F&A) Rate Reduction/Waiver Request