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February 23, 2015

Teresa A. CostantinidisBudget and Resource Management

UCSF Facilities & Administration

Presentation

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This presentation provides an overview of Facilities

and Administration (F&A) cost recovery at UCSF• Federal regulations• Simple rate calculation• Key issues in rate development• Rate history and comparisons• Actual recoveries• How recovered monies are used at UCSF

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The Federal government pays for direct costs of sponsored activities, then reimburses universities for allowable facilities and

administration expenses (aka F&A, indirect costs, or overhead) based on

negotiated rates

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• The relevant policy is: 2 C.F.R 200 Subpart E, (Officially – Title 2, Code of Federal Regulations, Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart E– Cost Principles)

– Formerly, Title 2, Code of Federal Regulations, Subtitle A, Chapter II, Part 220 and Office of Management and Budget (OMB) Circular A-21, define the principles for assigning facilities and administrative costs

• The University of California negotiates its rate with a “cognizant agency” of the Federal government, specifically the Division of Cost Allocation of the Department of Health and Human Services

To recover indirect costs from sponsors, a university must go through a rate development process in accordance with federal

regulations

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The rate evolution includes four phases, each reflecting an important part of the F&A process

The calculated rate The full cost of allowable facilities and administrative expenses as reported in the financial statements

The proposed rate The calculated rate adjusted by Federal limitations

The negotiated rate The rate established through the negotiation process and published in a formal negotiation agreement; this is the maximum allowable rate for federal awards

The effective recovery rate The actual rate of recovery the campus recovers from sponsored activity

76.9%Calculated

55.5%Effective

57.0%Negotiated

70.9%Proposed

2013-14 Rates for UCSF On Campus Organized Research:

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Example Direct Cost Bases:

• Instruction and Departmental Research ($223 million)

• Organized Research ($341 million)

• Other Sponsored Activities ($141 million)

• Other Institutional Activities ($99 million)

In the first step of rate development, Federal regulations require that all campus expenditures be classified into a

direct cost base

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Then, items not directly assigned to a base are associated with one of nine specific cost pools

Facilities Pools (5)• Building Depreciation • Interest (on external debt for buildings or equipment)• Equipment Depreciation• Operations and Maintenance • Library Administrative Pools (4)• General Administration • Department Administration• Sponsored Projects Administration• Student Services and Administration

“Indirect costs … are incurred for common or joint objectives, and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity.”

$224 millionfor OrganizedResearch

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In developing rates, the F&A team works with staff in campus departments to prepare a series

of analyses • How much of each base activity is occurring?• How are facilities and specifically rooms being

used?• How are we paying for each facility?• How much of each cost pool is occurring?• What about costs of future buildings?• Involves:

− Reviewing audited financial data− Reclassifying activities to appropriate bases− Allocating costs to base activities

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Then, the F&A rate is a simple calculation of indirect over direct costs

• Then, points are added for “future cost projections” Organized Research: 65.6% + 11.2% = 76.8%

• Separate calculations are conducted for each base and for on-campus versus off-campus locations

• The allocations of indirect costs are customized to each of the four bases

• Many adjustments are required based on various regulatory details

Allocated Facilities and Administrative Costs

Appropriate Direct Cost Base

$224m$341m = 65.6%=

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The proposed rate is the calculated rate adjusted by federal requirements and limitations

The Federal government:• Applies an Administrative Cap of 26% (implemented in

1991) • Limits utilities costs assigned to research according to

defined metrics• Makes other adjustments:

− Limits genomic arrays (F&A for up to $75,000/year per project)

− Limits sub-awards (F&A for first $25,000 for each sub-award per competitive project period)

− Requires cost sharing− Utilizes a salary cap

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F&A costs are typically greater than full negotiated rates for each component

UCSF 201450.00 pts

55.00 pts

60.00 pts

65.00 pts

70.00 pts

75.00 pts

80.00 pts

Calculated

Proposed

Negotiated

OR F&A Rate

Negotiating the highest rate possible is critical for UCSF

Organized Research Rate Components *

Calculated 2014

Proposed 2014

Negotiated FY 2014

Building Depreciation 18.43 pts 18.43 pts 9.00 ptsInterest 3.82 pts 3.82 pts 5.00 ptsEquipment Depreciation 2.45 pts 2.45 pts 2.30 ptsOperations & Maintenance 18.24 pts 18.24 pts 13.20 ptsLibrary 1.91 pts 1.91 pts 1.50 pts

Subtotal Facilities 44.85 pts 44.85 pts 31.00 pts

General Administration 6.77 pts 6.80 ptsDepartment Administration 22.19 pts 16.70 ptsSponsored Projects Admin 2.29 pts 2.20 ptsStudent Services Administration 0.75 pts 0.30 pts

Subtotal Administration 32.00 pts 26.00 pts 26.00 pts

Indirect Cost Rate 76.85 pts 70.85 pts 57.00 pts

Administrative costs over the Cap 6.00 pts

*Costs based on F&A Proposal using 2010 detail.

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Negotiations include a series of questions and responses

Frequent Asked Questions:o Are costs functionalized correctly? o Are allocations appropriate? o Are future costs reasonable? o How are you interpreting general regulations and trending?

• Adjustments are reviewed and allowances are made based on interpretation of regulations

• The campus must certify that its F&A proposal has been reviewed and is compliant with UCSF policy and Federal regulations

• If the Federal government finds discrepancies or inconsistencies with policy or regulation in the signed proposal, they can reduce the rate and levy penalties on the university

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Negotiations may set rates for multiple years

UCSF Organized Research Rate by Component2011-12 2012-13 2013-14 2014-15 2015-16

FacilitiesBuilding DepreciationInterestEquipment DepreciationOperations & MaintenanceLibrary

7.504.002.60

12.801.60

9.004.502.30

13.201.50

9.005.002.30

13.201.50

10.005.002.30

13.201.50

10.005.502.30

13.201.50

Facilities Subtotal: 28.50 30.50 32.50 32.00 32.50

Administration General AdministrationDepartment AdministrationSponsored Projects Administration Student Services Administration

7.0016.50

2.20.30

6.8016.70

2.20.30

6.8016.70

2.20.30

6.8016.70

2.20.30

6.8016.70

2.20.30

Administration Subtotal (Off Campus Rate): 26.00 26.00 26.00 26.00 26.00

On Campus (All F&A) 54.50 56.50 57.00 58.00 58.50

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58.50%

42.0%

26.00%

25.0%20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

App

rove

d F&

A R

ate

Facilities & Administration Rates On-Campus Research

Administration Rates without Facilities Off-Campus Research

UCSF approved F&A rates for Organized Research have been steadily increasing, but are held back by the 26%

Administrative CapThe rate trend shows both the increasing investment in research facilities at UCSF and the increasing costs of supporting research activity

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Because of growing facilities costs and our high intensity use, UCSF now has the highest F&A rate in

the UC System

SF- 2016 (future)

Santa Cruz

Santa Barbara

San Francisco

San Diego

Riverside

Merced

Los Angeles

Irvine

Davis

Berkeley

48.0% 50.0% 52.0% 54.0% 56.0% 58.0% 60.0%

2013-14

The cost to support the organized research activity is higher for UCSF than any other campus.

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UCSF organized research rates are now comparable to those of private research institutions

UCSF 2016 (future)

UC San Francisco

Univ. of Wash., Seattle

Univ. of Michigan

Stanford

Harvard

Wash. Univ., St Louis

U Penn

Johns Hopkins

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

2013-14

Public

Private

The investment in research facilities and infrastructure without federal or state support has pushed UCSF F&A rates into the ranks of private institutions

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Effective F&A recovery is far short of negotiated rates

The University must cover the difference between the negotiated rate and the effective rate with other unrestricted discretionary funds• Cost Sharing and/or waivers are among the controllable reasons• Timing, sponsor or federal policy are among the uncontrollable reasons

UCSF FY 2013-2014 Final

CP A-21 FUNCTIONFederal

C&GState & CIRM

Local Gov

Private Clinical

Private C&G

UCSF Total

CAMPUS TOTALS -- All Sponsored AwardsSPONSORED INSTRUCTION ON-CAMPUS 8.8% 13.6% - - 1.9% 6.6%SPONSORED INSTRUCTION OFF-CAMPUS 26.3% - - - 26.0% 26.2%SPONSORED RESEARCH ON-CAMPUS 55.5% 39.2% 15.0% - 29.7% 47.8%SPONSORED RESEARCH OFF-CAMPUS 26.1% 17.1% - - 19.6% 22.9%SPONSORED RESEARCH CCRCS ON-CAMPUS 15.4% - - - - 15.4%OTHER SPONSORED ACTIVITIES ON-CAMPUS 13.5% 8.9% 11.1% - 14.1% 12.0%CLINICAL TRIALS PRIVATE ON-CAMPUS - - - 32.0% - 32.0%CLINICAL TRIALS FEDERAL ON-CAMPUS 35.9% - - - - 35.9%OTHER SPONSORED ACTIVITIES OFF-CAMPUS 25.9% 13.9% 26.0% - 25.4% 24.6%CLINICAL TRIALS PRIVATE OFF-CAMPUS - - - - - - CLINICAL TRIALS FEDERAL OFF-CAMPUS 26.0% - - - - 26.0%NCIRE JOINT PERSONNEL APPOINTMENTS - - - 26.0% 26.0% 26.0%

Campus Totals 41.3% 16.7% 1.3% 32.0% 21.5% 26.5%

OH % MTDC

NegotiatedRate57%

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In 2013-14, our actual F&A recovery of $197 million was half the calculated cost of $397 million

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F&A provides UCSF with facilities and administrative funding for ongoing activities

• F&A recovery ($197 million) flows to the Core Financial Plan

• Schools and ORUs are allocated a share of recovered funds for departmental administration ($27 million)

• Remaining funds are used to help pay for a variety of core-funded activities including:− Debt service on facilities ($49 million)− Facilities investment needs and renewal ($37 million)− Operation and maintenance of plant ($34 million)− Administrative support - EVCP, FAS, URel ($112 million)− UCOP Assessment and Initiatives ($52 million)− Allocations for salary and benefit cost increases ($7 million)− Strategic initiatives ($3 million)

Total 2013-14 F&A recovery of $197 million made up 36% of the $547 million allocated from the Core Financial Plan