On December 7, 2001, we informed you that the University had reached an agreement with the Department of Health and Human Services (DHHS) that established predetermined F&A cost rates (i.e. indirect cost rates) for the fiscal years 2002 through 2004. This memo describes additional information as to how those rates will be charged to individual awards and how they should be used in preparing federal proposals.

Federal regulations have changed since the University last increased its F&A rate. The regulation change requires that an award's F&A rate remained linked for the life of its competitive segment (project period) to the approved rates in the Rate Agreement at the time of the initial competing segment award. Accordingly, new or competitive awards that began prior to July 1, 2001 will not have their F&A rates changed during the period of the approved project. (But see the animal care cost discussion below.) New or competing renewal federal awards that began July 1, 2001 or later, however, will have F&A rates charged in accordance with the rates in the current Rate Agreement, including increased rates that begin July 1, 2002. Please refer to the attached table to determine what F&A rates will be charged to an individual award.

Also refer to the attached table to determine what F&A rate to use in a federal proposal. For non-competing continuation proposals, the appropriate F&A rate is a function of when the new or competitive renewal award began.

In our December 7, 2001, memo, we stated that for the current fiscal year (July 1, 2001-June 30, 2002), and at the deans' request, animal expenditures on federal projects would be charged an F&A rate limited to the financial equivalent of the Animal Facility Charge of 35%, but that after June 30, 2002, animal costs would be charged at the new fiscal year 2003 F&A rate of 52.5%. What we should have clarified, is that the F&A rate that will be charged after June 30, 2002 will depend upon both the begin date of the new or competitive segment of the award and the type of award (research, instruction, or other sponsored agreement). Federal research awards whose new or competitive awards began before July 1, 2001, will be charged 51%, while research awards that began on July 1, 2001 or later will be charged 52.5%. Please refer to the attached table for rates that will apply to instruction and other sponsored agreement awards.

We apologize for any inconvenience this clarification regarding the charging of the new F&A rates may cause. On May 8, 1996 modifications were made to OMB Circular A-21 that changed the way in which negotiated F&A rates could be charged to each continuing, non-competitive period of an existing award. Our failure to focus appropriately on this change in the regulations necessitates this clarification to our December 7, 2001 announcement of the new negotiated rates.

If you have any questions or need assistance in preparing proposal budgets, please contact University Research Administration. Any questions regarding F&A charges to award accounts should be directed to the Comptroller's Office.