MIT annually negotiates its F&A rate with the Office of Naval Research (ONR), its cognizant federal audit agency. The F&A rate is set through Uniform Guidance 2 CFR 200, whereby universities calculate their actual rate, apply future estimated costs, and apportion them to various activities – research, instruction, other sponsored activities, and other institutional activities.
The F&A rate for sponsored research is the total allowable indirect (F&A) cost divided by modified total direct cost (MTDC). For example, if the Institute incurs an average of 70 cents in indirect costs for every dollar of “modified” direct research expenditures, the F&A rate would be 70 percent.
Allocation of Indirect (F&A) Costs to Research
Indirect costs are incurred for the benefit of the Institute’s primary functions, or direct cost objectives:
- Instruction and departmental research
- Organized research
- Other sponsored activities
- Other institutional activities
The allocation of F&A components to the direct cost objectives is based on actual expenditure data and statistics such as:
- Expenditure dollars
- Square footage of space occupied and population—the number of faculty, students, and staff
- Salaries and wages
Modified Total Direct Cost (MTDC) of Research
Modified total direct cost (MTDC) consists of total direct costs less certain categories of exclusions (or modifiers) as specified in Uniform Guidance Subpart E.
Standard exclusions include expenditures for:
- Equipment
- Capital expenditures
- Tuition remission
- Renovation costs when included in capital expenditures
- Rental of space
- Scholarships and fellowships
- The subcontract portion in excess of $25,000
When budgeting for sponsored research projects, excluded expenditures are not subject to application of the F&A rate.
Updated December 19, 2024