When the new fiscal year rolls around at UVA, a new, higher Facilities and Administrative (F&A) rate will be in place. This may not sound terribly exciting until you consider how many moving pieces are involved, and what’s at stake.
Sara Tarkington, Director of Cost Analysis in Financial Planning & Analysis, calls the entire thorny process of securing an F&A rate for UVA “almost like a strategy game.”
If you’re wondering what an F&A rate is, exactly, you’re probably not alone, even if you’re in Finance.
The F&A rate is the mechanism used by the federal government to reimburse the University for its fair share of the costs in support staff, equipment, buildings, and utilities required for performing federally-sponsored research. It’s essentially an “overhead rate.”
Research grant sponsors will pay for the salaries, wages, fringe benefits, supplies, and services necessary to do the research, and they also pay the University an F&A rate. Because UVA does research, we have more faculty, staff, grad assistants, dedicated equipment, and highly specialized buildings than we would if we were a teaching-only institution.
The cost of doing that research increases our overall support costs in areas like Human Resources, Procurement, Sponsored Programs, Facilities management, and utilities, to name a few.
So what’s involved in securing a new F&A rate? A lot of legwork and tough judgment calls!
The UVA F&A rate is reviewed and approved by the Mid-Atlantic office of the US Department of Health and Human Services (HHS). Every four years, the University negotiates a new F&A rate proposal.
Tarkington led her team in the enterprise of securing the new, favorable rate, and she’s become adept at making the right judgments to keep UVA within federal regulations while still securing the highest rate possible.
“There are always changes in interpretation of the rules by the government, and then, people in the field change – it’s always something different,” she says.
“You make a judgment today that may not be appropriate in four years, because of any number of factors.”
The key, she says, is to stay flexible and work within the room the rules have for interpretation, while still staying between those legal guardrails. Flexibility is a strength of Tarkington’s, along with her strong skills in analysis and statistics, which she honed during years of auditing work for companies such as Arthur Andersen.
“We look at all the costs in the University, all the square footage in the University, all the full-time employees (FTEs) in the University, and all of the compensation by department, and then we allocate all of these costs based on either footage, FTE, or compensation by department,” says Tarkington.
“These represent the costs that are added by doing federally-funded research, and so the federal government helps pay for them,” she says.
Tarkington notes that all universities have to be careful when calculating and submitting F&A rate proposals because even honest mistakes in coding how space is used (how much of it is for federally funded research vs. teaching, for instance) can result in heavy questioning, or even indictment and fines.
“Even one room can have multiple uses, and maybe ten different classifications besides its use as a research space. Even the smallest mistake can throw the whole proposal off,” Tarkington says.
“My team is a line of defense with departments and units, helping to make sure things get coded properly, so they stay well within the legal guidelines.”
That spirit of cooperation and helpfulness means that Tarkington’s work is not all about paper and spreadsheets. She and her team go out to the schools and units and help them take a look at their space.
“It’s about people and building bridges,” she says.
“We work with all the departments in the University. It’s taken some of them a while to get over the idea of us being bean counters who come out and look at their space, and understand that we are people who can help them get necessary revenue from F&A.”