Understanding Indirect CostsREC INFRASTRUCTURE RETREATAPRIL 7 , 2015

NANCY L . W ILK INSON, OFF ICE OF THE DEAN FOR RESEARCH ( I FAS )

Understanding Indirect Costs– Today’s Agenda

◦ Definition◦ Key Concepts – Facilities & Administrative◦ Facilities & Administrative Cost Pool Elements◦ F&A Formula

◦ Examples with and without Cost Sharing◦ UF Rate Agreement – comparisons to Peer Institutions◦ UF/IFAS Distribution of IDC annually◦ On vs. Off Campus◦ Your Questions◦ Next TOPIC ---- Capacity Funds

What are Indirect Costs? – Definition

◦ Costs that cannot be specifically identified to a sponsored activity ◦ Typically this cost is known as “Facilities & Administrative (F&A) Costs”

◦ UF uses different lingo – IDC

◦ Formula is used to determine the F&A “rate” at UF◦ Prepared by Cost Analysis

◦ UF calculations are submitted to Federal government (so called cognizant agency) for negotiations◦ Our “approved” F&A Rate Agreement is less than actual costs incurred

◦ DHHS negotiates down ◦ Even if we are paid the “full” federally negotiated rate - it is less than UF’s actual costs

Key Concept for F&A RateFacilities (examples)

◦ Building Depreciation◦ PO&M◦ Interest Expense on

Capital Items◦ Bond Payments

Administrative (examples) ◦ General Administration◦ Department and College

Administration◦ Sponsored Project

Administration

LimitedStrategies: • Fully depreciated buildings used for

Administrative purposes• Building divided into components (building

shell, service systems, fixed equipment, etc.) with various depreciation schedules

What are Indirect Costs? – Facilities Cost Pool

◦ Determination of Cost Pools and Distribution Base all governed by federal regulations

◦ “Facilities” cost pools are typically:◦ Building Depreciation◦ Equipment Depreciation◦ Capital Improvements to Land and Buildings at UF◦ Plant Operation and Maintenance costs◦ Interest expense on capital expenditures◦ Library costs (building)

What are Indirect Costs? – Administrative Cost Pools

◦ “Administrative” cost pools are typically:◦ General University Administration

◦ UF President; VP’s; CFO; HR; Development; ◦ Department/College Administration

◦ Deans; Departments; Centers◦ Sponsored Projects Administration

◦ Division of Sponsored Programs; Contracts & Grants; Cost Analysis◦ Interest expense on capital expenditures◦ Library costs for administration

◦ Limited – cannot exceed 26%

What are Indirect Costs? – Formula

1 year of Facilities Pools (Building & Equipment Depreciation + PO&M + Interest Expense + Library costs)

PLUS +

1 year of Administrative Pools (University Administration + Sponsored Programs Admin. + Colleges/Departments)

1 year of Expenditures on Research Grants (Funds 201 and 209)

PLUS +

Cost Sharing

Numerator

Denominator

What are Indirect Costs? – Example

Facilities Pools - $150,000,000 ++Administrative Pools $250,000,000=$400,000,000Expenses on Sponsored Programs = $800,000,000

Rate = 50%

Numerator

Denominator

What are Indirect Costs? – Example including C/S

Facilities Pools - $150,000,000 ++Administrative Pools $250,000,000

=$400,000,000Expenses on Sponsored Programs = $800,000,000+ Cost Sharing =$200,000,000

=$1,000,000,000

Rate = 40%

Cost Sharing impact is to reduce F&A Rate

Numerator

Denominator

What are Indirect Costs? – Comparison to Peers

F&A Rates Research (on campus)

University of Minnesota   52

University of Florida   50

Ohio State University   54

Penn State University   50.7

U California - Davis   55.5

Indirect Costs Distribution – Within IFAS

◦ IDC Expenses in Fund 201 (Federal) & 209 (non-Federal) accumulated by Contracts & Grants (CnG)◦ Total is “earned” IDC to IFAS

2014 IDC Earnings

• $10,904,855RCM • $5,099,298

Net to IFAS

47% of earnings to RCM

Indirect Costs Distribution – IFAS Distribution Percentages

Percentages:

50% Sr. VP 25% Dean(s)

15% Unit Leader(s) 10% PI

2/3 from Sr. VP

1/3 from Dean

IFAS Appro

ved Cente

rs

Key Concept for On/Off CampusOn Campus (criteria)

UF Owned FacilityDoes not have to be the Gainesville campus

Off Campus (criteria) Non UF Facility

Budget includes– rental costs

Remember - there is no “facility” cost in the IDC

It is not about

geography!!!

Questions & Comments?

Capacity (Formula)Funds in Fund 221/222REC INFRASTRUCTURE RETREATAPRIL 7 , 2015

NANCY L . W ILK INSON, OFF ICE OF THE DEAN FOR RESEARCH ( I FAS )

Capacity Funds– Today’s Agenda

• Definition

• Submission and Award Process

•New Uniform Guidance regulations (A-81)

•Specific restrictions

•Cost Principles• Allowable, Reasonable & Necessary, Allocable

•IFAS Management

•Your Questions

Capacity Funds–Definition

Capacity Funds (used to called Formula Funds) are VERY RESTRICTIVE. More than the typical USDA NIFA award.

Fund 221 – Research based capacity funds◦ Hatch Regular◦ Hatch Multistate◦ McIntire-Stennis◦ Animal Health

Fund 222 – Extension based capacity funds◦ Smith-Lever◦ Expanded Food & Nutrition Education Program (EFNEP)◦ Renewable Resources Extension Act (RREA)◦ Civil Service Retirement System (CSRS)

Funding Grant

Opportunity(FGO)

Issued with deadline to

submit application

Submit Application

(via Cayuse) to Grants.Gov

Award Face Sheet is

issued to UF

Capacity Funds– new Uniform Guidance (A-81)

2 CFR Part 200 – Uniform Guidance

Subpart A – Acronyms and Definitions

Subpart B – General Provisions (200.1xx)

Subpart C – Pre Award Requirements (200.2xx)

Subpart D – Post Award Requirements (200.3xx)◦ This was OMB Circular A-110 Administrative Requirements

Subpart E – Cost Principles (200.4xx)◦ This was OMB Circular A-21 Cost Principles

Subpart F– Audit Requirements (200.5xx)◦ This was OMB Circular A-133 Audit Requirements

This Award incorporates the following:1. Application in response to FY 2015 RFA.2. Formula Grants Terms and Conditions, http://nifa.usda.gov/business/awards/formula.html3. General Provisions, 2 CFR Part 400, Uniform Administrative Requirements, Cost Principles, and Audit Requirements adopts 2 CFRPart 200 - incorporated by reference. 2 CFR Part 400.1 adopts subparts A through F of 2 CFR Part 200; and 2 CFR Part 400.2 includes USDA department-wide conflict of interest policy in compliance with 2 CFR Part 200.112.4. Administrative Manual for Hatch Act Funds5. Administrative Guidance for Multistate Extension and Integrated Activities6. Guidelines for State Plans of Work7. Stakeholder Input Regulation (7 CFR 3418)8. This award will reach the statutory time limitation on 09/30/2016, the end date of this project. No-cost extensions of time will not be possible.9. One hundred percent matching is required for this award. All matching must directly benefit and be specifically identifiable with approved project objectives. The awardee is required to maintain complete, accurate, up-to-date records to support all matching activities under the award. Matching requirements may not be satisfied with Federal funds or with property or services provided under another Federal assistance award.

Office of Management and Budget

2 CFR Chapter I, Chapter II, Part 200, et al.

Uniform Administrative Requirements, Cost Principles, and Audit

Requirements for Federal Awards; Final Rule

Terms and Conditions

Big Picture – Key Concepts for Spending

Expense must be:

1. Allowability (200.403)

2. Reasonable and Necessary for the performance of the project (200.404)

3. Allocable to the project (200.405)

Big Picture – Key Concepts for Spending

What is Allowable?

Must be necessary and reasonable for the performance

Consistently treated expense in like circumstance

Cannot be included as a cost to meet cost sharing or matching of any other federal award

For RESEARCH capacity funds – must have an active REEport project too!

Big Picture – Key Concepts for Spending

What is Reasonable & Necessary?

• Regulations tell us that a cost is reasonable and necessary if the expense doesn’t exceed that cost incurred by a “prudent person under the circumstances prevailing at the time the decision was made to incur the cost.”

• Generally recognized as ordinary and necessary

• Use “market prices for comparable goods or services in the geographic area”

Big Picture – Key Concepts for Spending

Is the expense Allocable? Is the expense assignable to this award in accordance with the relative benefits received?

• 200.405(c) Any cost allocable to a particular Federal award under the principles provided for in this part may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for other reasons

• 200.405(d) Direct cost allocation principles. If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c) of this section, the costs may be allocated or transferred to benefitted projects on any reasonable documented basis.• Determining that methodology is the key!

Capacity Funds– Management within IFAS

Block Tuition Remission – prohibited

Require REEport project (CRIS) value for each expense in the Research Capacity Funds

CAS Exemptions will not be requested from the Division of Sponsored Programs (DSP)

Effort reported is aligned to salary charged on Capacity Funds

Working on fine tuning Cost Sharing to ensure detailed tracking

Questions & Comments?