University of Arkansas at Little Rock
Policy Name: Indirect Costs (F & A) Reduction/Waiver Requests for Sponsored Programs
Policy Number: LR 302.3
Effective Date: April 1, 2010
I. POLICY STATEMENT
This policy describes the conditions under which a waiver or reduction of finance and administration (indirect) costs will be permitted and the requirements for requesting the reduction or waiver of these costs associated with a sponsored program. This policy does not apply to vendor agreements as defined in this document.
Facilities and administrative (F&A) costs, also known as indirect costs (IDC), are those costs incurred by an organization conducting sponsored programs which cannot be readily identified with a specific project, program, or activity, but are necessary for the general operation of the organization. Indirect costs are associated with operating the facilities and may include the costs of maintenance, utilities, depreciation, general and departmental administration, janitorial services, accounting and purchasing services, research and grants administration, accounting services, library operations, etc. Indirect cost rates at UA Little Rock for federal programs are set through negotiation with the federal government. Collecting F&A costs is important to ensure that sufficient funds are received to pay all sponsored program costs, not only the most obvious, such as salaries, travel, and equipment. Occasionally, a reduction in or waiver of the indirect costs may be allowed. When a reduction in or waiver of indirect costs occurs due to sponsoring organization policy, the rates charged to sponsored projects must reflect those that are predefined and universally applied.
Sponsored Programs versus Vendor Agreements
Characteristics indicative of a sponsored program include arrangements in which the recipient organization:
- determines who is eligible to receive what financial assistance;
- has its performance measured against whether the objectives of the program are met;
- has responsibility for programmatic decision-making;
- has responsibility for adherence to applicable program compliance requirements; and
- uses the funds to carry out a program of the organization as compared to providing goods or services for a program.
Types of sponsored programs include:
- sponsored instruction or training;
- sponsored research, research and development activities; and
- other sponsored activities, programs and projects that involve work other than instruction and research.
Characteristics indicative of a payment for goods and services received by a vendor are when the recipient organization:
- provides the goods and services within normal business operations;
- provides similar goods or services to many different purchasers;
- operates in a competitive environment;
- provides goods or services that are ancillary to the operation of the program; and
- is not subject to compliance requirements of the program.
Use judgment in making determination. There may be unusual circumstances or exceptions to the listed characteristics. In making the determination of whether a sponsored program or vendor relationship exists, the substance of the relationship is more important than the form of the agreement. It is not expected that all of the characteristics will be present and judgment should be used in making a determination.
IV. WHEN LIMITS EXIST ON THE AMOUNT OF INDIRECT COSTS THAT SPONSORS WILL REIMBURSE
Although it is advantageous to UA Little Rock to be reimbursed for the full indirect costs of a sponsored program, it is recognized that some sponsors may not cover indirect costs or, if they do, it may be at a rate below the full federally-negotiated rate. When the sponsoring agency’s operational policies restrict or prohibit payment of full indirect costs and/or administrative costs, a written copy of the policy must be provided to ORSP at the time the proposal is submitted for institutional review and approval. If no such policy exists in writing, a letter stating the universal application of restrictions on indirect cost reimbursement from either the chief executive officer (CEO) or the chief financial officer (CFO) of the sponsoring agency may be substituted. When a written copy of the sponsoring agency’s policies or letter from the CEO or CFO accompanies the proposal, there is no need to contact the vice provost for research and dean of the Graduate School for prior approval nor is it necessary to complete a Request for Indirect Cost Reduction or Waiver Form.
V. CRITERIA FOR INDIRECT COST REDUCTION OR WAIVER
UA Little Rock may consider a reduction in or waiver of indirect costs and/or administrative fees in certain situations when:
- the benefit of the proposed project to the university, in terms of institutional capacity building, is deemed to outweigh the loss of indirect cost revenue;
- the proposed project is relatively small, will not require extraordinary effort and/or resources to administer, and will significantly assist the investigator in beginning or enhancing his/her research career;
- the project requires significant institutional cost-sharing that cannot be fully met by other sources;
- ninety percent (90%) or more of the project funds are for student research assistantships or materials and supplies for student projects; and
- the assessment of the full indirect cost rate on a project with a maximum allowable total cost would reduce the amount of direct funds available for project implementation to such an extent that the scope of work or deliverable could not be accomplished.
VI. DISTRIBUTION OF RECOVERED INDIRECT COSTS
If a waiver is approved for reasons listed under Section VI, the standard distribution of indirect cost in the university will apply. It is possible for a reduction or waiver in indirect costs for reasons other than those stated in Section VI (reasons which may not benefit the university as a whole.). If a reduction or waiver is approved under this circumstance, the portion of overhead returned to the college and/or department may be reduced by the amount of the reduction or waiver.
The principal investigator (PI) is not authorized to negotiate a reduction in the F&A rate with the funding authority on any sponsored project. Principal investigators must make requests for reduction or waiver of indirect costs in writing using the “Request for Indirect Cost Reduction or Waiver” form.
Vice Provost for Research and Dean of the Graduate School
The vice provost for research or her/his designee is the only person on campus who can give institutional approval for a request for an F&A reduction or waiver.
The investigator should contact the vice provost for research or his/her designee at least three (3) weeks or as soon as absolutely possible in advance of budget development and proposal submission if the need for negotiation of the F&A is anticipated.
IX. PROCEDURES AND FORMS
Request for Indirect Cost (IDC) Reduction or Waiver Form
- OMB A-21 “Federal Administrative Requirements for Grants with Institutions of Higher Education.”
- OMB Circular A-110, “Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations.”
- OMB Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations”
Source: Initial Policy (Vice Provost for Research and Dean of the Graduate School)
Approved By: Chancellor Joel E. Anderson, April 1, 2010
Custodian: Graduate School