Understanding F&A THE RESEARCH ADMINISTRATION IMPROVEMENT NETWORK. Presented by. TRAIN at the University of South Florida

Transcription

1 Understanding F&A Presented by THE RESEARCH ADMINISTRATION IMPROVEMENT NETWORK

2 Facilities & Administrative (F&A) Costs F&A (or Indirect Costs) are costs that are incurred for common or joint objectives of the University and therefore, cannot be identified specifically with a particular sponsored project. F&A costs are broad categories of costs: - "Facilities" is defined as depreciation and use allowances, interest on debt associated with certain buildings, equipment and capital improvements, operation and maintenance expenses, and library expenses. - "Administration" is defined as general administration and general expenses, departmental administration, sponsored projects administration, student administration and services, and all other types of expenditures not listed specifically under one of the subcategories of Facilities (including cross allocations from other pools). Refer to OMB Circular A-21, Section F:

3 How is the F&A Rate for the University Determined? The University negotiates the rate with the federal government. USF s cognizant agency, the federal agency with which our rate is negotiated, is the Department of Health & Human Services (DHHS). To determine that rate, a base period is selected where all costs are divided into cost pools. Refer to USF s Facilities and Administration (F&A) Agreement:

4 F&A Rate Base Period Example Unallowables Direct Cost Pool - Instruction Direct Cost Pool - Organized Research Direct Cost Pool - Other Sponsored Activities Direct Cost Pool - Other Institutional Activities Indirect Cost Pool - Depreciatation of Buidlings & Equipment Indirect Cost Pool - Operations & Maintenance Indirect Cost Pool - Library Indirect Cost Pool - General & Administrative Indirect Cost Pool - Departmental Administration Base Period Example Indirect Cost Pool - Sponsored Project Administration Indirect Cost Pool - Student Services Administration Source: NCURA 09 TV, F&A Rates for the Non-Accountant aired June 9, 2009.

5 Examples of Unallowable Expenses - Advertising (J1) - Alcoholic beverages (J3) - Bad debts (J6) - Entertainment (J17) - Fines and penalties (J19) - Fundraising / Alumni Activities (J20) - Lobbying (J28) - Donations (J15) Refer to OMB Circular A-21, Section J:

6 Examples of Direct Cost Pools - Instruction: The teaching and training activities of an institution, including departmental research that is not separately budgeted (Professors salaries, Teaching Assistants, training). - Organized Research: Research and development costs that are separately budgeted and accounted for, including sponsored research from the federal government, state governments, foundations, etc. Also includes research activities sponsored by the University that is separately budgeted and accounted for. (PI salaries, Post-docs, Research Assistants, lab supplies). - Other Sponsored Activities (OSA) Programs and projects financed by federal and non-federal organizations that do not meet the definition of instruction or organized research. (Community service projects, workshops, health service projects, nonfederal drug studies). - Other Institutional Activities (OIA) Athletics, dining halls, dorms, theaters, student unions, hospitals and clinics. Refer to OMB Circular A-21, B:

7 Examples of F&A (Indirect Direct) Cost Pools Depreciation - Buildings, capital improvements. Operations & Maintenance (O&M) - Utilities, janitorial, repairs, security, grounds. Library - Purchase of books and materials, Librarian salaries. General & Administrative (G&A) President s Office, Controller, HR, General Counsel, etc. Departmental Administration (DA) Academic Dean s offices, department chairs, administrative and clerical staff, phones (local), postage, office supplies. Sponsored Project Administration (SPA) Central research offices and staff salaries. Student Services Administration (SSA) Admissions, registrar, counseling and placement services, student advisers, student health services, catalogs, and commencements. An institution s cost groupings are determined on a case by case basis. Refer to OMB Circular A-21, Section F:

8 F&A Rate Cost Pool Examples Instruction Organized Research Other Sponsored Activities Other Institutional Activities Depreciatation of Buidlings & Equipment Operations & Maintenance Library General & Administrative Departmental Administration Sponsored Project Administration Student Services Administration Unallowables Direct Cost Pools Indirect Cost Pools Source: NCURA 09 TV, F&A Rates for the Non-Accountant aired June 9, 2009.

9 USF Organized Research F&A Cost Pools Administrative Component Library Operations & Maintenance Interest Equipment - Depr/Use Allow Bldg & Improv - Depr/Use Allow Cost of USF

10 USF F&A Rate Calculation F&A Costs (Overhead) Organized Research Base 49.5% F&A Costs (Overhead) = F&A Rate Organized Research Base (expressed as %)

11 The F&A Rate Can be Increased Through the Numerator or the Denominator F&A Rate = Facilities and Administrative Cost of Organized Research Modified Total Direct Cost (MTDC) of Organized Research Description Cost pools include: Facilities - Building depreciation - Equipment depreciation - Interest on debt - Operations and maintenance - Library Administrative - Sponsored projects administration - General administration - Departmental administration MTDC include Total Direct Costs minus: - Cost of equipment, - Buildings, - Patient care, - Off-campus rents, - Training, - Tuition, and - Sub-contracts over $25,000 -Includes cost sharing in Organized Research Methods to modify Place Organized Research activity in high cost space Place OR equipment in high cost space New construction to increase depreciation Careful classification of Organized Research Minimize cost sharing Reduce subcontracting where appropriate Source Huron Consulting Group, Presentation to the Research Advisory Board, October 4, 2010.

12 USF s Current F&A Rate (49.5%) is Somewhat Low vs. Benchmarks 70.0% 60.0% 50.0% 51.5% 55.0% 58.5% 57.0% 46.5% 53.5% 57.0% 59.5% 54.0% 52.5% 49.5% 52.7% Avg. F&A = 52.3% 51.3% 49.0% 45.0% 45.0% F&A Rate 40.0% 30.0% 20.0% 10.0% 0.0% A 1% point increase in USF s rate would translate into over $370K on the 2010 fully-funded federal MTDC expense base.

13 Cost Sharing (a.k.a. In-Kind, Matching) In general, Cost Sharing is the portion of allowable costs contributed to the project that are not paid for by the sponsor. In other words, it is the portion paid by USF and/or a third party. Cost sharing can be mandatory or voluntary: - Mandatory - Required by the sponsor and must be included in the proposal. - Voluntary - Resources offered which were not required for proposal consideration. Proposed cost share should be limited to the cost share requirements mandated by the sponsor and at the minimum level required. Voluntary cost sharing, other than salary cap related cost share, is highly discouraged and requires approval of Sponsored Research. Refer to USF System Policy 0-313, Sponsored Research Cost Sharing:

14 Impact of Cost Sharing on F&A Example Without Cost Sharing F&A Costs (Overhead) = $20M Organized Research Base (Without Cost Sharing) = $40M 50% $20M F&A Costs (Overhead) = F&A Rate $40M Organized Research Base (expressed as %) (without Cost Sharing) Source: NCURA 09 TV, F&A Rates for the Non-Accountant aired June 9, 2009.

15 Impact of Cost Sharing on F&A Example With Cost Sharing F&A Costs (Overhead) = $20M Organized Research Base (With Cost Sharing) = $42M 47.6% $20M F&A Costs (Overhead) = F&A Rate $42M Organized Research Base (expressed as %) (With Cost Sharing) The amount of cost share contributed by an institution has an inverse impact on its F&A cost recovery rate!

16 Organized Research is Narrowly Defined by USF and Cost Sharing Makes Up a Small Portion - The Organized Research base is strictly delineated at $56 million, of which $2.5 million was cost sharing. - Cost Sharing: Huron reviewed a sample of 15 project files containing cost sharing commitments. Some commitments were mandated by the sponsor. Some mandates were appropriately fulfilled by non-federal sponsored funds, often from USF Connect Hi-Tech Corridor matching funds. Some cost sharing was for salary over the cap. In other cases: o o PIs offered part of their time. Sponsor encouraged but did not require cost sharing. USF shared almost half of the total cost. - The opportunity to reduce cost sharing in Organized Research appears limited, although efforts to create a consistent review process for cost sharing of any type should be encouraged. Source Huron Consulting Group, Presentation to the Research Advisory Board, October 4, 2010.

17 Why Projects Pay F&A Costs The University incurs costs to support research. The sponsor reimburses the University for operating costs - infrastructure services including: - Facility costs (operating, utilities, communications, etc.). - Support of central research units. - Clerical/administrative personnel. - General purpose supplies (pens, paper, photocopies, printer cartridges). - Subscriptions. - Institutional memberships. - Individual memberships. - General purpose equipment (computers, calculators, furniture, file cabinets, fax machines).

18 Determining a Project s F&A Rate The following information is critical in determining an accurate F&A rate: Funding source (federal, state, local, etc.). Federal flow through (is any portion of the funding from the federal government?). Work being performed; research, training/instruction, other sponsored activities (OSA). Location of the work.

19 F&A Rate Resources The following resources are available to assist in determining F&A rates: What s My F&A Rate? Chart of Indirect Cost Rates (a.k.a. F&A) Indirect Cost Rates (a.k.a. F&A) Agreement Refer to the Sponsored Research Facilities and Administrative Cost Rates website:

20 F&A Cost Rates F&A costs are calculated on a percentage of the direct costs of the project. All proposals must use one of USF s negotiated indirect rates. - The appropriate USF negotiated F&A rate is applied to all federal or federal-flowthru awards using a Modified Total Direct Cost Base (MTDC). - For all awards other than federal and federal-flow-thru, the appropriate USF negotiated F&A rate is applied to the Total Direct Cost (TDC) base. - If a sponsor has formal guidelines indicating a lower rate, USF will accept the lower rate. - Letters indicating a sponsor's refusal to pay our negotiated rate is not acceptable. We must have reference to an official rule or published guideline. Contact Sponsored Research for assistance.

21 Modified Total Direct Costs (MTDC)

22 Total Direct Cost (TDC)

23 MTDC Example Modified Total Direct Cost (MTDC) consists of: Salary & Fringe $ 100,000 Material and Animal Costs $ 1,100 Travel $ 1,500 Subcontract (1st 25,000) $ 25,000 Excluded from the MTDC calculations are: Subtotal $ 127,600 Subcontract (amount over $25,000) $ 1,000 Laboratory Equipment $ 2,000 Tuition Remission for Grad Research Assistant $ 1,510 Alternations and Renovations $ 1,900 Patient Care Costs $ 1,200 Space Leasing $ 900 Utilities $ 890 Scholarships $ 1,000 Fellowships $ 1,000 Stipends $ 1,000 Subtotal $ 12,400 Total Direct Costs $ 140,000 A budget of $140,000 for direct costs and a negotiated 50% F&A rate would equal $70,000 F&A costs. However, MTDC excludes $12,400 from the direct cost base which F&A is applied. F&A is applied to the MTDC base of $127, % F&A rate does not mean that 50% of the total costs of research represent F&A costs. The Effective F&A rate is 46%. ($63,800 divided by $140,000). *F&A on applicable cost items - $127,600 X 50% $ 63,800 Total Direct and F&A Costs of Research $ 203,800 *Without MTDC exclusions F&A costs $70,000 **Effective F&A Rate 46%

24 TDC Example Total Direct Cost (TDC) consists of all: Salary & Fringe $ 100,000 Material and Animal Costs $ 1,100 Travel $ 1,500 Subcontract $ 26,000 Laboratory Equipment $ 2,000 Tuition Remission for Grad Research Assistant $ 1,510 Alternations and Renovations $ 1,900 Patient Care Costs $ 1,200 Space Leasing $ 900 Utilities $ 890 Scholarships $ 1,000 Fellowships $ 1,000 Stipends $ 1,000 Total Direct Costs $ 140,000 A budget for a non-federal sponsor with a published F&A rate of 10%. There are no exclusions with TDC. The F&A rate of 10% is applied to the total direct cost amount of $140,000. The Effective F&A rate is 10% ($14,000 divided by $140,000). F&A on applicable cost items - $140,000 X 10% $ 14,000 Total Direct and F&A Costs of Research $ 154,000 Effective F&A Rate 10%

25 MTDC Example on the Grant Budget Release (GBR) TDC $133, MTDC $ 25, (after exclusions) F&A Amount $ 11, (47% of $25,000) TDC $133, F&A Amount $ 11, Total Project Costs $144,750.00

26 TDC Example on the Grant Budget Release (GBR) TDC $133, F&A Amount $ 62, (47% of $133,000) Total Project Costs $195,510.00

27 Impact of Budget Transfers on F&A -MTDC If the F&A base is MTDC and involves both F&A bearing and F&A non-bearing budget amounts (such as tuition, equipment, etc.), one side of the transaction may have F&A while the other does not: The formula for MTDC: Transfer amount divided by 1. F&A Rate (2500/1.10) = $ decrease + $ F&A on decreased amount.

28 Impact of Budget Transfers on F&A - TDC If the F&A base is TDC, there is no impact to F&A (The F&A section need not be completed). The total amount of a budget transfer must be equal on both sides of the transaction.

29 Determining On-Campus vs. Off-Campus On-Campus = the preponderance of the program is conducted in University buildings using University facilities and resources. Off-Campus = 51% or more of the research will occur at off-campus locations. - The off-campus rate is lower than the on-campus rate because the cost of doing research off-campus is lower. - The off-campus rate should not be used merely to lower the overall cost of a project.

30 Off-Campus Adjacent vs. Off-Campus Remote - Off-Campus, adjacent includes locations within the commuting distance of Tampa, Florida. - Off-Campus, remote includes locations outside the commuting distance of Tampa, Florida.

31 Off-Campus Training, Data Collection or Other Sponsored Activity - If the majority of the effort and resources for a project are done oncampus, the project must be charged the on-campus rate. - If work is performed off-site, one must consider: Where was the prep work done? What resources were used? Where was the material prepared and printed? What effort and how much effort is being done at the office? Is there additional work to be done on-site?

32 Impact of Equipment Thresholds The University s equipment threshold complies with Florida state law (equipment over $5,000). - Sponsor equipment thresholds vary. Check the sponsor guidelines. For federal sponsors, the threshold is $5, The threshold to be used is always the more restrictive. Refer to CCHIP #018, Purchasing Equipment on Sponsored Awards :

33 Rental Space and F&A - If the project is MTDC based, rental space does not incur F&A.* - If the project is TDC based, rental space incurs F&A. *OMB Circular A-21 J.43 indicates rental costs of buildings and equipment are allowable Rental costs of buildings and equipment.

34 F&A on Subprojects - The F&A rate for subprojects should be the same rate as the primary project. - When budget is transferred from the primary project into a subproject, the applicable F&A is also moved to the subproject. Refer to ResearchCCHIP #015, Assignment of Contract and Project Numbers and the Sponsored Research Guidelines for Subawards and Subaccounts:

35 GL Expense Account Codes for Subcontracts For subcontracts, there are two General Ledger (GL) expense account codes that are used: for each subcontract up to and including the first $25k (F&A bearing) for each subcontract after the first $25k (non-f&a bearing).

36 Fixed Price vs. Cost Reimbursable Projects - Fixed Priced Projects: The awarded F&A amount is booked as an expense at the beginning of the budget period. - Cost Reimbursable Projects: F&A is assessed daily on all F&A bearing direct costs.

37 Is There an F&A Rate Exception Process? It is imperative that the F&A rate be sufficient to support the University goals and mission. - If a project s F&A costs limit the ability to perform the proposed tasks, the PI and his or her supervisor must determine whether or not the project is appropriate to pursue. - If appropriate, the PI may request a reduced F&A rate. - Reduction requests must be sent, with the proper rationale, to the Sponsored Research, Sponsored Research Administrator who will seek a decision from the Associate Vice President for Research & Innovation.

38 F&A Recovery - F&A recovery is based on the dollars invoiced and collected from the sponsor. - A portion of the recovered F&A is distributed to the colleges. - Each college has the ability to determine the allocation of funds to the Department /Principal Investigator (PI). Our research infrastructure is supported by the recovered F&A!

39 Recovered F&A According to Florida Statute (5), Divisions of sponsored research at state universities: Moneys received for overhead or indirect costs and other moneys not required for the payment of direct costs shall be applied to the cost of operating the division of sponsored research. Any surplus moneys shall be used to support other research or sponsored training programs in any area of the University. At USF, these surplus moneys are deposited into accounts Research Initiatives which may include other funds such as those received for internal awards or start-up commitments, as well as residuals from fixedprice contracts.

40 USF System s effective F&A recovery based on direct expenses has grown slightly since 2007 Project Research Expenditures by Fiscal Year, with Effective F&A Recovery Rates Direct Expense Indirect Expense Expenditures in Millions $250 $200 $150 $100 $50 14% F&A 15% F&A 17% F&A 16% F&A 16% F&A $ One reason behind the effective F&A increase is that federal and state F&A rates have increased in recent years. Note: Project research expenditures do not include convenience accounts Source: USF data, Research Expenditures FY2007-FY2010. Source: Huron Consulting Group, Presentation to the Research Advisory Board, October 4, 2010.

41 Spending Recovered F&A To ensure that recovered F&A is expended according to Florida law, USF developed the Office of Research & Innovation Guidelines for Allowable Expenses on Research Initiative Accounts (RIAs): - Recovered F&A is distributed to Research Initiative Accounts (RIAs). - USF provides guidelines related to allowable expenses on RIAs. - Simply said, all expenses must be research related.

42 Unallowable RIA Expenses Funds in Research Initiatives may not be used to pay for the following: - Costs related to instruction (class materials, instructor salaries, teaching assistants) - Extra Compensation - Bonuses - Alcohol - Flowers - Gifts - Food & Beverage

43 TRAIN F&A Project Team Special thanks to the following for their time and support in creating this workshop: Matthew Anderson College of Medicine Benjamin Chang College of Engineering Lynn Cooil Office of Research & Innovation Jennifer Du College of Behavioral & Community Science Kimberly Finch College of Medicine Patricia Geisler Talent Management Maricel Hernandez College of Behavioral & Community Sciences Sandra L. Justice College of Arts & Sciences Michael Melanson College of Education Rebecca Miro College of Medicine Mary Parrish College of Arts & Sciences Elida Porro College of Behavioral & Community Sciences Janet Reyes College of Behavioral & Community Sciences Doreen Shockley Research Financial Management Adam Tobias College of Medicine

44 Congratulations You have completed this module!