When applying for research grants, faculty often encounter Facilities & Administrative (F&A) costs, also known as indirect costs. These funds support the infrastructure necessary for research but are often misunderstood. Below is an explanation of what F&A costs cover, how they are determined, how they are distributed at the University of Nebrasak-Lincoln and how they affect non-federal projects and colleges with limited sponsored research.
What Are F&A Costs?
F&A costs cover expenses that cannot be directly assigned to a specific project but are essential to conducting research. While direct costs include salaries, equipment and materials, F&A costs fund the broader infrastructure that makes research possible. This includes lab space, utilities, maintenance, grant management, compliance, IT support, library access and campus security. Without F&A recovery, UNL would need to reallocate funds from other sources, limiting available resources for faculty research and innovation.
How Are Federal F&A Rates Determined?
F&A rates for federally funded grants are determined through a formal negotiation process with the federal government. The university submits data on its research-related expenses to a designated federal agency, such as the Department of Health & Human Services, which audits these costs and establishes an appropriate reimbursement rate. This ensures that universities receive funding for the actual costs of supporting research.
UNL’s F&A rate is calculated according to federal cost principles and is renegotiated every three to four years. The F&A rate applied to sponsored projects represents a recovery of costs the university has already incurred.
Current F&A Rates at UNL
F&A rates are a percentage of certain project costs based on a calculation called Modified Total Direct Costs (MTDC). Some expenses, such as equipment, building improvements, patient care, tuition, off-campus rent, scholarships and subcontract portions exceeding $25,000, are excluded from MTDC since they are one-time costs or do not require the same level of university support.
These rates, effective July 1, 2021, remain in place until a new agreement is negotiated:
On-Campus Rates | |
| Organized Research | 55.5% |
| Agricultural Research Division | 48.5% |
| Instruction | 52.0% |
| Other Sponsored Activity | 44.0% |
| Cooperative Extension Services | 33.5% |
Off-Campus Rate | |
| All Programs | 26.0% |
For example, if a research project has $100,000 in eligible costs under the organized research category, the university would receive an additional $55,500 in F&A funding to support research infrastructure. Learn more about F&A rates here.
How F&A Funds Are Distributed at UNL
Each fall, the university distributes recovered F&A funds based on the previous fiscal year’s recovery to directly support research. The first $700,000 is allocated to the university’s general operating budget as required by the State Legislature. After this, 20.5% of the remaining funds are held centrally, with the first $2 million supporting the university’s libraries and any additional funds directed toward future research infrastructure and projects.
The remaining F&A is split into three equal portions. One-third is retained centrally for research-related costs such as computing infrastructure, library access, faculty travel, compliance and research operations. Another third is allocated by the Chancellor and Vice Chancellor for Research and Innovation to fund strategic research initiatives, including seed grants, faculty start-up packages, cost sharing and bridge funding. Faculty securing large-scale research grants of $1 million or more per year receive an additional 5% return of recovered F&A. The final third is distributed to colleges and departments based on the grant’s administrative unit, with funds directed to colleges, centers and departments depending on the project’s classification and scale.
In FY 24, the university recovered $36.5 million in F&A. It was distributed as follows:
Learn more about F&A disbursement here.
F&A Costs for Non-Federal Sponsored Projects
Federal F&A rates apply to all sponsored research, including non-federal projects. In rare cases, the Vice Chancellor for Research and Innovation may grant a waiver if the benefit to the university outweighs the financial loss. Waivers may be considered if a sponsor has a policy limiting F&A, a project requires significant cost sharing, or there are other compelling reasons. Corporate sponsors, however, must always pay UNL’s full F&A rate.
To request a waiver, faculty must provide justification, secure department chair and dean approval, and submit the request to the Office of Sponsored Programs well before the proposal deadline. If a federal, state, or foundation sponsor has a published F&A limit, faculty must provide documentation, but department chair and dean approval is not required. Learn more about F&A waivers here.
What Is Unrecovered F&A?
Unrecovered F&A refers to the portion of Facilities & Administrative (F&A) costs that a university incurs but does not receive reimbursement for from a funding agency. This can occur when a sponsor has policies that limit or prohibit F&A recovery or when the university voluntarily waives or reduces F&A for a particular project. For example, if a university’s federally negotiated F&A rate is 55.5%, but the funding agency allows only 10%, the remaining 45.5% becomes unrecovered F&A.
Why Does Unrecovered F&A Matter?
Unrecovered F&A represents real expenses that are critical to supporting research, such as maintaining facilities, providing IT infrastructure, ensuring compliance and administering grants. When these costs are not reimbursed, the university must absorb them through its own budget, reducing the resources available for other priorities like faculty research support, infrastructure improvements and strategic initiatives.
Although some grants allow the use of unrecovered F&A as part of cost-sharing requirements, significant amounts of unrecovered F&A can strain a university’s financial resources. This is why it is crucial to recover the full F&A rate whenever possible, ensuring the institution’s long-term ability to sustain its research operations.
Does F&A Reduce Grant Awards?
Some faculty hesitate to include F&A in their grant proposals, believing it takes away from their research funding. However, this is a misconception—F&A does not reduce the amount of funding available for direct research expenses.
Most funding agencies expect F&A to be included in grant budgets. When a faculty member submits a proposal, the total amount requested should include both direct costs (salaries, equipment, materials) and F&A costs (facilities, administration, compliance). If a proposal excludes or reduces F&A, the funding agency does not typically reallocate that amount to direct costs—instead, the university loses essential funding that supports research infrastructure.
A strong F&A recovery system benefits faculty by maintaining research facilities, compliance resources, administrative support and funding opportunities. The structured disbursement model at our institution ensures that these funds directly support faculty and their research efforts.
Why F&A Matters for Our College
Although our college engages in limited sponsored research and received only $1,986 in F&A return in 2024, these funds remain critical to our work. Most F&A funds are generated and distributed to other units, but they support university-wide infrastructure that benefits our faculty and students. This includes access to academic journals, IT services and compliance support, which maintain a strong research and learning environment.
F&A also enables cross-college collaboration. Many of our faculty work with colleagues in research-intensive disciplines who rely on grant funding. The F&A system ensures these collaborations have the necessary administrative and facility support, creating opportunities for our faculty to contribute to major research initiatives.
Beyond direct funding, F&A strengthens the university’s overall reputation. UNL’s ability to attract top faculty, secure external funding and maintain high-quality research facilities enhances the value of our programs and degrees.
Conclusion
F&A costs are an essential part of sustaining research at UNL. While faculty may focus on their direct project budgets, F&A funding ensures the university can maintain research facilities, administrative support and compliance services necessary for success. Whether supporting federally funded projects, non-federal grants or research at smaller colleges, F&A plays a crucial role in maintaining a strong academic and research environment. Understanding how F&A is generated, distributed, and reinvested allows faculty to better appreciate its impact and the resources it provides to support their work.
