Facilities and Administrative Rate (F&A Rate) Expense

In general F&A costs are identified as those costs, which are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity or any other institutional activity. The Federal Government provides for the allocation of a percentage of these costs to grants and contracts through approved F&A cost rates. The calculation process is complex, but in general involves a comparison of total allocable indirect costs to total direct costs, the ratio of which is expressed as the percentage identified as the F&A cost rate. Different rates are computed for different major functions within the University. F&A cost rates are calculated by AFR and approved annually. The F&A rate in effect at the time of the initial award should be used throughout the life of the sponsored agreement per OMB Circular A-21 (G)(7).

As a part of this allocation of costs, F&A costs are separated into cost pools. Each pool makes up a certain portion of the total F&A cost rate, and may be subject to Federally designated caps. The expenditures in Indexes (FOPALs) which make up the cost pools are subject to annual Federal audit and possible disallowance just as expenditures charged directly to grants and contracts Indexes (FOPALs).

Indirect Cost Recovery
As direct costs are charged to grant and contract accounts, an entry is either calculated automatically by the accounting system or computed manually by SPA to record an additional grant/contract expense in code 9810, representing the portion of F&A costs allocable to those direct costs. All expenses charged to this code as F&A costs must be supportable within the grant or contract records in FRS and billable to the external sponsor.

NMSU separately recognizes income as a part of this transaction. A portion of the F&A costs recovered through this charging mechanism are returned to the unit generating the direct costs as unrestricted income, to be used in support of the unit's research or public service function. The remainder of the F&A cost recovery is retained centrally within the University to help defray the costs associated with the central functions reimbursed in the F&A cost rate.

Unallowable F&A Cost Pool Expense
The Federal Government requires the University to certify that no unallowable costs have been included in any F&A cost expense pool. The guidelines in this section should be used in determining the allowability of any expense. Questions regarding the allowability of specific expenses should be forwarded to Accounting and Financial Reporting.

There are many expenses in these categories allowable from other NMSU Indexes (FOPALs), but not allowable components of our F&A cost pool. Special accounts have been established for recording these expenses, and should be used throughout the year for this purpose. Contact the appropriate fiscal monitor regarding the use of these Indexes (FOPALs).

Guidelines for Determining Allowability of Expense to F&A Cost Pools
In reviewing costs in each of these areas, please keep in mind that the Federal Government identifies "associated costs" with unallowable costs as equally unallowable; that is, costs which would not have been incurred except for the unallowable activity should be treated as are the expenses directly associated with the activity.

Advertising and Public Relations Costs - Advertising and public relations costs, including any related administrative costs, are unallowable except as noted below. Advertising media includes magazines, newspapers, radio and television, direct mail and exhibits. Public relations includes any activities dedicated to maintaining the image of the institution or promoting favorable relations with the community or any public segment. This also includes the cost of promotional items and memorabilia including models, gifts and souvenirs as well as costs of convocations or other events related to instruction or other institutional activities. The only allowable advertising costs are those which are solely for the recruitment of personnel or for the procurement of goods and services for the performance of sponsored agreements. The only allowable public relations costs are those pertaining to specific activities or accomplishments resulting from the performance of sponsored agreements, or costs of conducting general liaison necessary to keep the public informed on matters of public concern such as notices of grant/contract awards and financial matters.

Alumni Activities - costs incurred for, or in support of, alumni and similar activities are unallowable.

Bad Debts - collection costs and legal costs associated with bad debts are unallowable.

Compensation for Personal Services - the cost of University furnished automobiles that relates to personal use by employees is unallowable regardless of whether the cost is reported as taxable income to the employee.

Defense and Prosecution of Criminal and Civil Proceedings, Claims of, Appeals and Patent Infringements - costs incurred by the institution in connection with the defense of suits brought by its employees or ex-employees including the cost of all relief necessary to make such employee whole, where the institution was found liable or settled, are unallowable. Costs associated with claims against the Government are unallowable, as are costs associated with patent infringement litigation.

Donations and Contributions - donations or contributions made by the institution, regardless of the recipient, are unallowable.

Entertainment Costs - costs of entertainment, including amusement, diversion and social activities along with any related costs such as tickets to shows or sports events, meals, lodging, rentals,transportation and gratuities are unallowable.

Fines and Penalties - fines and penalties, including late fees/finance charges, are unallowable.

Goods and Services for Personal Use - Cost of goods or services for personal use of the institution's employees are unallowable regardless of whether the cost is reported as taxable income to the employee.

Housing and Personal Living Expenses - Costs of housing and personal living expenses for the institution's officers are unallowable regardless of whether the cost is reported as taxable income to the employees.

Interest, Fund Raising and Investment Management Costs - Costs of organized fund raising including financial campaigns, endowment drives, solicitation of gifts and bequests and similar expenses incurred solely to raise capital or obtain contributions are unallowable.

Lobbying - Costs associated with influencing the introduction or outcome of any Federal, State or local Legislation, election or referendum in any form is unallowable. Legislative liaison activities such as attending sessions or committee hearings or gathering information is unallowable.

Memberships, Subscriptions and Professional Activity Costs - Cost of the institution's membership in business, technical and professional organizations is allowable; all others are unallowable including membership in any civic or community organizations. Cost of the institution's subscriptions to business, professional and technical periodicals are allowable; all others are unallowable. Cost of meetings and conferences when the primary purpose is the dissemination of technical information are allowable, including the cost of meals and transportation.

Selling and Marketing - Costs of selling and marketing any products or services of the institution are unallowable.

Student Activity Costs - Costs incurred for student activities are unallowable.

Please keep in mind that these guidelines are to be used in determining allowability of F&A costs only. Direct cost items on grants or contracts may be treated differently. Some costs which would be unallowable in F&A cost may be allowable direct cost items if specifically allowed by the grant or contract.

It is important to remember that even if a particular cost would normally be allowable, it must still be reasonable and conform to the established practices of NMSU. The items listed above are not meant to be all inclusive. There are many other unallowable costs which will be removed from the rate, in total, by AFR such as student aid and equipment. The items listed are those that require screening at the departmental level. Any questions should be directed to AFR.

[ back to top]

3.15.25

3.15.30

Contract Course Awards

Contract Courses agreements will be considered restricted funds and monitored by the SPA office if:

1. There is an executed agreement between NMSU and an external party
2. The courses are only available to a specific group of students that is selected by the external party
3. The amount to be reimbursed is detailed in the agreement

SPA will follow the same guidelines and procedures on these Indexes (FOPALs) as it does for all other restricted Indexes (FOPALs). Distance Education Courses that do not meet the contract course definition will be considered unrestricted Indexes (FOPALs) and will be monitored by Accounting and Financial Reporting.

[ back to top]

3.15.35

Internal Awards

For those grants/contracts which are split between multiple NMSU organizational units, one unit will be informally designated as the primary unit for grant/contract administration. This unit will be responsible for documenting how under-recoveries, over-recoveries and disallowances are to be split between the primary unit and all secondary units. Unless otherwise documented, all such items will be divided by the same division as exists in the official grant/contract budget.

[ back to top]

3.15.40

Payroll Expenses - Restricted

Payroll expense must be charged to grants/contracts based upon the effort actually undertaken on the grant/contract during the grant/contract period, regardless of the budgeted line item for payroll expense or percentage of effort. Standard University time and Effort Reports must be certified semi-annually if employees are not otherwise reporting their time on an hourly time report system. Effort reports are generated for those employees charging time to Federal grants/contracts, multiple overhead Indexes (FOPALs), or from both direct and indirect funding sources. See section 3.35 for a discussion of Effort Reporting.

Grant/Contract Personnel
All personnel involved in a grant/contract's effort, whether faculty, professional and clerical staff, or student (research assistant) must be paid in accordance with University guidelines. The salary and wage categories and job classifications for employees on grant/contract Indexes (FOPALs) are the same as those established for all other employees of the University. Salary rates and increments are therefore subject to the regulations applied to all other University employees.

Payroll Expenses - Restricted
All NMSU personnel must be paid through the NMSU payroll system, even if they are considered as consultants but performing as employees. All personnel in non-exempt positions must be paid time-and-a-half for hours worked in excess of 40 hours per week. No exempt staff or faculty member may be hired to work on a grant or contract if that effort results in payment in excess of 100% FTE unless prior written approval is received from the sponsoring agency, and the Research Center Director. All faculty or staff members must be paid in accordance with their normal salary rate at the University. The E-Hire System should be used to initiate Additional Compensation to an employee. Please refer to subsection 5B.10 for additional information on E-Hire processing.

Fund Change Transactions
If the Indexes (FOPALs) to which an employee's pay has been charged must be corrected after-the-fact, a fund change transaction request should be processed either on a Human Resources(HR) Labor Redistribution form for salaried employees within 90 days of the pay date.

Fund Change Transactions More Than 90 Days From The Pay Date
The Indexes (FOPALs) Fiscal Monitor will review fund change transaction requests submitted more than 90 days from the pay date to determine if there is an external contractual reason why the fund change must be processed. This is the only type of Index (FOPAL) change transaction request over 90 days that will be processed. All other fund change transaction requests over 90 days will be processed by Journal Voucher using account 769600 to transfer expense to the departmental cost overrun Index (FOPAL). HR may not be updated. No fund change transactions will be processed if the employee's funding source and level of effort for that time period have been certified through the Effort Report that occurs on a semi-annual basis. Please be aware that if an employee's salary has not been charged to a restricted sponsored project fund within 90 days of the date of pay, the University will be unable to bill the sponsoring agency for the expense.

Acceptable Changes to Employee's Funding Source/Level of Effort

Changes of distribution of workload should not normally be made for any prior pay period. In the following exceptional situations, however, retroactive changes may be warranted:

• When necessary to correct clerical and data entry errors
• When subsequent information is received indicating an incorrect original entry
• When charges applicable to a continuing project have been charged to the old Index (FOPAL) because the new Index (FOPAL) was not established when the expense was incurred
• When a sponsor specifically authorizes in writing the charge of pre-award costs to a project
• When required to properly charge non-Federal funds for costs incurred in connection with an award that fails to materialize

When closely related work is supported by more than one funding source, costs may be transferred from the originally charged Index (FOPAL) to another Index (FOPAL), provided the cost is a proper and allowable charge to the receiving Index (FOPAL). If an over expenditure is being transferred to another project, especially strong supporting evidence is required for approval and the inter-relationship between the Indexes (FOPALs) must be fully explained in the request.

Unacceptable Changes

• When the change is for the purpose of utilizing the unexpended funds of another award
• When the change is for the purpose of circumventing award restrictions
• When the change is for the purpose of avoiding a cost overrun by charging another, unrelated agreement
• When a change unrelated to sponsored agreements applies to a closed fiscal year

3.15.45

Program Income

If additional income is generated through the production or use of grant/contract by products, during the life of the grant/contract, it will be separately recorded in a separate unrestricted fund Index (FOPAL) and administered according to sponsor guidelines.

If the grant/contract specifies that the program income must be deposited against the grant/contract Index (FOPAL), it will be treated as restricted income. Upon termination of the grant/contract, remaining unspent program income will be administered per sponsor guidelines.

[ back to top]

3.15.50

Transfers of Expense for Restricted Funds

Transfers for Expense cannot be made into or out of restricted Indexes (FOPALs), unless the original recording of an expense was recorded in error initially or unless an approved cost overrun transfer as discussed in subsection 3.15.25 is required. If this is the case, a Journal Voucher correcting the recording of these expenses or revenues may be made through the expense/revenue account. Under no circumstances can a transfer code be used. The following excerpt from Section C.4.b. of OMB Circular A-21 should be adhered to at all times regarding restricted Indexes (FOPALs):

NOTE: All personnel should be very careful to charge salaries, wages, and other operating expenditures to the correct Index (FOPAL) when the expenditures are incurred.

Transfer of Non-Payroll Expense for Restricted Funds
The most common need for a transfer of non-payroll (other than an error) expense is to clear an Index (FOPAL) of disallowed costs, over-expenditures, and charges outside of project dates.

NOTE: These costs cannot be shifted to other sponsored agreements (Circular A-21, C.4.b.).

Requests For Transfers Involving Grant/Contract Indexes (FOPALs)
Requests for transfers involving grant/contract Indexes (FOPALs) should be submitted to the appropriate fiscal monitor in SPA. The request should contain the following information:

• A copy of the transaction listing where the original transaction occurred, and in the case of restricted and related cost sharing or program incomes costs a copy of the original Purchase Requisition, Direct Pay Request or Reimbursement Voucher.

• The reason for the transfer. If the request is for transfer of expenditures to a grant/contract Index (FOPAL), the explanation should be such that an auditor or the sponsor could see that the expenditures were legitimate project costs for the Index (FOPAL) receiving the transfer. In many cases, the request for transfer is required to be forwarded to the sponsor along with other documentation for billing and reporting. It is the responsibility of the individual making the request to verify the expenditure is legitimate.

• When closely related work is supported by more than one funding source, costs may be transferred from the originally charged Index (FOPAL) to another Index (FOPAL), provided the cost is a proper and allowable charge to the receiving Index (FOPAL). If an over expenditure is being transferred to another project, supporting evidence is required for approval and there should be language in the request that explains the inter-relationship between the Indexes (FOPALs) and justifies allowability.

• Approval of the Department Head and Dean or Director (the same approvals as needed on requisitions).

• It is the responsibility of the individual requesting an expenditure transfer and/or Research Centers to verify that the transfer has been properly posted.

• All prior year corrections must be recorded at the F&A cost rate in effect for the life of the award. Research centers/departments should contact their fiscal monitor regarding all prior year corrections.