Underrecovery

Definition: F&A Underrecovery (UR) is the difference between the current negotiated F&A rate that MIT charges to a sponsored research project and the rate that the sponsor is willing to pay. Underrecovery may result because a sponsor dictates a rate and/or base that is less than the F&A recovery that would be produced using the federal research rate.

MIT Policy on Research Underrecovery: At the time of research proposal development, the total anticipated underrecovery of F&A for each year of the award must be noted in Kuali Coeus along with the specific source(s) of funds (Department, Center, School, or VPR) that will cover the underrecovery. (This estimate is for internal purposes only and is not submitted to the sponsor with the proposal.) This policy does not apply to underrecoveries that might result from the application of rates that are fixed to the rates in existence at the time of award on federally funded awards.

In addition, underrecoveries of research F&A may arise because of specific federal caps on F&A recovery. However, Uniform Guidance requires federal agencies to obtain approval for such caps. If you see cases where federal sponsors are limiting F&A in their solicitations, notify your OSP Contract Administrator. 

Important UR topics for DLCs:

Note: Facilities & Administrative (F&A) costs are also referred to as Overhead (OH) or Indirect costs. The terms overhead and F&A may be used interchangeably throughout MIT documents and various sponsor guidelines and program solicitations. MIT prefers the term F&A to be consistent with the federal government, but the SAP system refers to “overhead.”

References:

FAQs:

Does the PI have to budget the MIT federal research F&A rate on a non-federal research proposal?

No, the PI uses the non-federal sponsor’s rate in the proposal budget if the non-federal sponsor has a policy that limits the recovery of research F&A (overhead). This frequently occurs with non-federal sponsors that are charitable foundations, but does not commonly occur with other types of non-federal sponsors. However, MIT policy dictates that the difference between the sponsor’s F&A rate and the current MIT negotiated research rate is treated as underrecovery (UR). The F&A UR amount for each year of the proposed project and the source of the DLC, Center, School, or VPR funds that will cover the UR is shown in Kuali Coeus. If the non-federal sponsor does not have an established policy that limits the recovery of research F&A (overhead), the PI should use the current MIT-negotiated research rate in the proposal budget.

How do I find out who is responsible for underrecovery on non-research (e.g., education, service) sponsored projects?

The policy and practices described at the Research F&A Underrecovery section of the site only relate to organized research-sponsored programs. The Institute has different policies and practices related to the recovery of the non-research overhead and fund fee. Please contact your OSP Contract Administrator for questions related to non-research overhead and fund fee recovery.

When a federal agency specifies a fixed F&A rate that is less than the MIT federal F&A rate, is this still an underrecovery situation if the funds that comprise the difference must be identified at the proposal?

Anticipated underrecoveries associated with NIH Training Grants are funded by the Institute and do not need to be analyzed at the proposal stage. Other federal research proposals being prepared with fixed or capped research F&A rates that are less than the current MIT negotiated research rate should be discussed with your OSP Contract Administrator.