Tips for PIs

BOR Policy 404

When considering Facilities and Administration (F&A) costs, it’s important to note that Montana Board of Regents Policy 404 states:

  • The federally-negotiated F&A Rate, or the maximum rate allowed, will be used for federal and private grants and contracts; and
  • For state grants and contracts:
    • 25% of total direct costs for research activities;
    • 8% of total direct costs for training activities; and,
    • The federally-negotiated rate for federal pass through funds.

F&A Rate ... how is it calculated?

An institution’s Facilities & Administration (F&A) Rate is negotiated for multiple years and is determined when the institution’s cognizant agency reviews and analyzes information collected from an extensive gathering of campus-wide costs that support the research endeavor (examples below).  These costs are gathered from a prior year, known as the “base year.” 

While the collection, preparation, and review is onerous, the F&A Rate is the result of a simple calculation:   

F&A Costs (allocable to organized research) / Direct Costs (related to organized research) =  F&A Rate

F&A Take Away:  
Elementary math skills demonstrate that the larger the bottom number, the smaller the percentage: 

100 (F&A Costs) / 25 (Direct Costs) = 4


100 (F&A Costs) / 50(Direct Costs) = 2

The calculation is made using expenses that have already been paid, and becomes the basis for future cost recovery; as a result, it is good business practice for institutions to recover as much as possible.  Public institutions are particularly cognizant of this fiduciary responsibility and many – including The University of Montana – are mandated to recover F&A Costs to the extent allowable.

What is F&A?

Facilities and Administration (F&A) is also known as indirect or overhead.  F&A represents the recovery of real  costs incurred by an institution during the course of contract, grant, and cooperative agreement activities that cannot be allocated to the sponsored project accurately or efficiently.  F&A is charged at a federally-negotiated rate determined by HHS, our cognizant agency.  Research institutions across the nation all have F&A rates, and UM’s current agreement is posted on our website.  

Real-life correlation:  Your neighbor is selling a very nice, older car for $800, and your 16-year-old recently got her driver’s license.   She’s saved money from her paper route and babysitting and excitedly approaches you with a plan to buy it.  You patiently explain that driving a car isn’t free and there are a lot of other expenses to consider:  license, insurance, gas, tires, oil, filters, belts, wipers, wiper fluid, etc.  These are real costs.

F&A rates represent the myriad of maintenance and facility services that all research universities provide to individuals involved in sponsored outreach, instruction, and research.  These calculations reflect expenses that cannot be allocated to an individual activity:  electricity, heat, telephone land lines, internet ports, general office supplies, administrative/clerical salaries, the cost to operate central offices (e.g., ORSP, Business Services, IT, Mansfield Library), snow removal, etc.  These are real costs. 

UM seeks to recover all F&A allowed by the sponsor and, in fact, is mandated to do so per MUS Board of Regent Policy 404 – Indirect Cost Recover Rate.

The reality:  If F&A isn’t paid by your activity, someone else’s activity pays it.  

Administration of External Funding

 The Office of Research & Sponsored Programs is responsible for the administration of all contracts, grants, and cooperative agreements.  For more information, see Administration of External Funding.

Capital Expenditures

Per OMB A-21 Section J.18:  “Capital expenditures” means expenditures for the acquisition cost of capital assets (equipment, buildings, and land), or expenditures to make improvements to capital assets that materially increase their value or useful life.

Acquisition cost means the cost of the asset, including the cost to put it in place.

Acquisition cost for equipment, for example, means the net invoice price of the equipment, including the cost of any modifications, attachments, accessories, or auxiliary apparatus necessary to make it usable for the purpose for which it is acquired.

Ancillary charges, such as taxes, duty, protective in-transit insurance, freight, and installation may be included in, or excluded from, the acquisition cost in accordance with the institution’s regular accounting practices. See Capital Expenditures for more information.

Department Responsible for Expenditure Documentation 

A department’s project file must contain documentation (e.g., original receipts) for every expense paid from a sponsored activity.  Such documentation is retained as long as the project is active and for five (5) years following project close-out, unless otherwise specified by the sponsor.  See Research Records Retention for details and more information.

F&A Rate for the Life of the Sponsored Agreement

Per MUS Board of Regent Policy 404, The University seeks to recover all Facilities & Administrative (F&A) costs allowed by the sponsor. 

UM will apply the appropriate F&A rate for the life of the sponsored agreement.  As a result, when budgeting a multi-year project, UM’s F&A Rate in effect for the first year of the project will be applied for each competitive segment.  

Requesting a Program Income Index

When requesting a new Program Income Index, provide to ORSP both a budget and statement of revenue assumptions/projections (sources, amounts, timing).

If anticipated that a current Program Income Index will be cash negative at any point, provide a revenue projection to ORSP.  Remember that if a project closes with a negative balance in the Program Income account, the department will be responsible for any expenses.

Program Income

Program Income is earned in connection with a sponsored project during the period of the main award.

Often Program Income is earned after expenses (e.g., putting on a conference).  A recent change in ORSP:  Rather than expecting Program Income accounts to operate on a cash basis, they may now run a negative balance when income is anticipated.  This change eliminates the need for cost transfers when revenue is received after expenses are incurred.    

 However, if a project closes with a negative balance in the Program Income account, the department will be responsible for any expenses. 

Program Officer vs Grants Officer

A typical program officer only handles programmatic issues and development. 

 As a result, when contacting a sponsor with financial questions, be sure to communicate with the grants officer assigned to the project.  Per the terms of the award, all financial decisions (e.g., budget revisions, purchase permission or allowability) are handled by the grants officer


Institutional routing and approval is accomplished via E-Prop.  A routed and approved Checklist for Proposal Approval represents institutional approval and is a requirement for proposal submission.  


The process of grant-getting – sponsored programs – is heavily laden with acronyms.  The chart below translates some of those frequently used, but there are many, many more!


ARRA – American Reinvestment and Recovery Act

CAS – Cost Accounting Standards

CFDA – Catalog of Federal Domestic Assistance

CFR – Code of Federal Regulations

COI – Conflict of Interest

DoD – Department of Defense

DoE – Department of Energy

ED – Department of Education

EPSCoR – Experimental Program to Stimulate Competitive Research

F&A – Facilities and Administrative (also known as indirect cost or IDC)

FAR – Federal Acquisition Regulations

HIPAA – Health Insurance Portability and Accountability Act

NEA – National Endowment for the Arts

NIH – National Institutes of Health NSF – National Science Foundation

OMB – Office of Management and Budget

SF – Standard Form (Used before the number of a form, like SF 270)


IACUC – Institutional Animal Care & Use Committee

IBC – Institutional Biosafety Committee

IDC – Indirect Costs (See F&A)

IRB – Institutional Review Board for the Use of Human Subjects

MOA – Memorandum of Agreement

MOU – Memorandum of Understanding

MTDC – Modified Total Direct Costs (Contact ORSP for more information)

NOFA – Notice of Funding Availability

PA – Program Announcement

PI – Principal Investigator

RCR – Responsible and Ethical Conduct of Research

RFA – Request for Application

RFP – Request for Proposal

S&W – Salaries and wages

TDC – Total Direct Costs


 AIR – Additional Information Request (ORSP Form)

BIN - Banner Index Number

EOG – End of Grant

ORSP – Office of Research & Sponsored Programs

OPAS – Organizational Prior Approval System (ORSP Form)

RAT – Request and Authorization to Travel (UM Form)

RPT – Request for Personnel Transaction (UM Form)

NOTE:  Always go to the website to download ORSP-specific forms as these are updated as needed.

Signature Authority

When a grant proposal requires an institutional signature, it is the signature of UM’s Authorized Official.  This authority is delegated from the President to the Vice President for Research, who delegates to individuals in ORSP. A principal investigator cannot sign on behalf of the University.