UNDERSTANDING FACILITIES & ADMINISTRATIVE (INDIRECT) COSTS AT GEORGIA STATE UNIVERSITY

Transcription

1 UNDERSTANDING FACILITIES & ADMINISTRATIVE (INDIRECT) COSTS AT GEORGIA STATE UNIVERSITY I. What is the difference between Direct Costs, and Facilities & Administrative (Indirect) Costs? Georgia State University relies heavily on external funds to accomplish its mission as a research university. In 2003, the University was awarded $52.8 million, which represents approximately 12% of the total GSU budget. Our successful competition for these funds reflects the high quality of our faculty and research facilities. Table I Sponsored Program Awards at GSU ($ in thousands) FY97 FY98 FY99 FY00 FY01 FY02 FY03 Instruction: $7,009 $6,083 $5,302 $9,394 $11,094 $12,358 $10,328 Public Service: $9,507 $21,180 $8,855 $6,065 $8,380 $12,057 $8,689 Research: $20,581 $37,705 $25,050 $23,342 $27,379 $32,987 $33,780 Total $37,099 $64,968 $39,209 $38,803 $46,853 $57,403 $52,798 Because the University receives a significant amount of federal funds, we must comply with federal cost accounting standards and, therefore, our policies reflect the federal requirements. Costs involved in conducting projects can be categorized in two ways: as direct costs or as indirect costs, which are referred to as Facilities and Administrative (F&A) costs (formerly referred to as ICR). Direct costs are defined as those costs that can be identified specifically with a particular sponsored project relatively easily with a high degree of accuracy. For example, the purchase of a chemical reagent for a specific experiment is a direct cost to the project. Direct costs must be reasonable what a prudent person would spend; allocable limited to that portion of expenses directly benefiting the project; and consistently treated as direct charges. By contrast, F&A costs are defined as those that are incurred for common or joint objectives. They reflect the costs incurred by GSU in support of our research infrastructure. Examples of F&A costs include the services of the accounting staff, the cost of a roof or utilities for a building housing several research projects, office supplies, postage, local telephones, and salaries of personnel engaged in providing a broad range of departmental support activities. In other words, F&A costs cannot be specifically attributed to an individual project. In unusual circumstances, costs ordinarily claimed as F&A might be considered direct. The mitigating circumstances relate to the size, nature, or complexity of the project. For example, although administrative and clerical staff salaries are ordinarily defined as F&A costs, if the duties required for a project are of a highly technical nature, then those salaries might be considered direct costs to the project. Typical F&A costs, like postage, photocopying, office

2 supplies, and local telephone service might be considered a direct cost if justified by the nature of the project, e.g., mail or telephone surveys or supplies for participants. Principal Investigators determine whether a cost should be direct or F&A on a case-by-case basis, and justifications are reviewed by the Office of Sponsored Programs. II. How is the F&A Rate Calculated? The F&A rates that can be charged to federally sponsored projects are determined through negotiations with the US Department of Health and Human Services (DHHS). For these negotiations, the University categorizes all F&A costs as either facilities or administrative, based on the use codes. Costs for building depreciation, equipment depreciation, libraries, and operations and maintenance are categorized as facilities, while costs for general, departmental, and sponsored project administrations are categorized as administrative. Some of the many institutional resources that are covered include accounting, affirmative action monitoring, animal and human subject protection, computer facilities, custodial services, departmental administration, environmental health and safety, employee benefits, purchasing services, stockrooms, libraries, and security services. Once all of the F&A costs are identified, the total of those costs attributable to the research enterprise is calculated. This total is converted to a rate by dividing it by the total of all costs attributable to organized research (i.e., total direct costs that include salaries and wages, fringe benefits, materials and supplies, the first $25,000 of subcontracts, services, travel, and mandatory/committed cost-sharing by the university), and this is expressed as a percentage. Equipment over $1,000, capital expenditures, tuition benefits, rental costs, scholarships, and all fellowships are excluded, and no F&A costs are associated with these. Our actual and the DHHS allowed percentages for, F&A costs are compared by category in Table II. The DHHS caps administrative costs at 26% for all educational institutions, so although the University can document spending 32.6% of its costs for research administration, it is only allowed to charge 26%. Table II: Development of F&A Rate Related to Sponsored Research. Negotiated Actual FACILITIES: Building Use/Depreciation 3.8% 5.76% Equipment Use/Depreciation 3.9% 6.46% Utilities 1.8% 1.8% Interest 2.0% 2.79% Operation & Maintenance 6.5% 6.41% Library 1.5% 1.52% [Total Facilities 19.5% 24.74%] ADMINISTRATION: 26% 32.59% Total: 45.5% 57.33%

3 III. What F&A Rates are Applied? The F&A cost component of a sponsored project is intended to reimburse the University for the costs it incurs to support research. Unfortunately, as shown in Table II, even when the standard 45.5% rate is applied, about 12% of the actual costs are not recovered. The University further subsidizes the actual costs of research when non-standard F&A rates are applied. Reduced F&A costs are collected from the State, and awarding agencies often limit the allowable F&A costs (see Table III). When the standard F&A rate is applied, the costs of graduate student fringe benefits, subcontracts, and major equipment are subtracted from the direct costs before the percent is applied. The F&A costs are then added to the direct costs to obtain the total cost for the project. The university negotiates different F&A rates for the different types of sponsored program activities. The different rates are shown in Table III. Table III F&A Rates *Research 45.5% *Instruction 50.4% *Other sponsored activity (fewer facilities) 33.8% *Off campus ** 26% Dept. of Agriculture (majority) 14% DHHS &USDA Training Grants 8% GA State and local government 10% Foundations/Associations (published) 10% * Standard negotiated rates ** More than 50% of the direct salaries and wages of personnel are incurred at a site neither owned nor leased by GSU Where agencies have a policy of allowing only a reduced or zero F&A rate, Principal Investigators should provide a copy of this policy to the Office of Sponsored Programs when they are submitting their proposals to ensure prompt institutional approval. In exceptional cases of great importance to the University, part of the F&A rate can be waived for proposals being submitted to agencies that allow full F&A costs. Such requests for F&A cost modifications or waivers for proposals being submitted to agencies that allow full F&A costs should be submitted to the Office of the Vice President for Research. The written request from the PI requires signatures of the appropriate unit head(s) and dean(s), any written statements from the agency that documents why this should be provided, a budget, and a rationale for the request. Per GSU policy, such requests will typically not be granted without strong justification. IV. How are the F&A Funds Used at GSU? F&A funds are awarded to institutions based on their sponsored expenditures that year (Table IV). There are no federal or state restrictions as to the types of research recovered F&A funds can be used for by the receiving institution. F&A funds need not be spent in the same categories and proportions used in determining the F&A rate. For example, although operation and

4 maintenance accounted for 6.5% of the total 45.5% calculated research F&A rate, that same portion of recovered funds does not have to be allocated for this purpose. Table IV indicates that in FY2003, with sponsored expenditures of $48,682,319, GSU collected a total of $7,783,471 in F&A funds. Thus, the average effective rate for GSU was 16% of each dollar of sponsored program activity. If the full amount were collected based on the rates in Table III, GSU would have collected $21,448,000; thus GSU uses $13,665,000 of institutional funding to cover the uncollected F&A costs required to provide the infrastructure supporting the FY03 sponsored expenditures. Table IV. Sponsored expenditures and F&A collected by GSU ($ in thousands) FY97 FY98 FY99 FY00 FY01 FY02 FY03 Sponsored Expenditures Instruction $4,947 $5,592 $6,354 $7,907 $9,612 $11,747 $11,227 Public Service $4,664 $7,489 $10,209 $7,893 $7,940 $9,341 $10,714 Research $14,563 $16,750 $20,909 $21,006 $18,476 $22,665 $26,747 TOTAL: $24,174 $29,831 $37,471 $36,806 $36,028 $43,753 $48,682 F&A: $3,013 $4,625 $5,478 $5,533 $5,552 $6,966 $7,783 The policy regarding the use of ICR at Georgia State University is to return 50% of the F&A funds to the college that generated them; the college then distributes these funds that can only be used for research-related activities. The remaining 50% has been used to fund various institutional activities including the Research Office, and partial support of the internal grants programs. Thus, a significant amount of non-f&a institutional monies are used to subsidize the cost of research at GSU as these funds cover the 50% F&A returned to the units, the 12% of the F&A costs that the Feds do not reimburse with the 45.5% F&A rate for research, and the 29.5% of uncollected F&A costs ($13.6 million) resulting from the effective F&A rate for GSU of 16%. Acknowledgements: With acknowledgements to Indiana University-Purdue University Indianapolis, and Stanford University.

5 [For bottom of back page] Office of the Vice President for Research Georgia State University University Plaza Atlanta, GA ( Office of Sponsored Programs ( Office of Grants & Contracts Services (