Understanding Indirect Costs REC Infrastructure Retreat April 7, 2015 Nancy L. Wilkinson, Office of the Dean for Research (IFAS)

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 Rate Facilities (examples) Building Depreciation PO&M Interest Expense on Capital Items Bond Payments Administrative (examples) General Administration Department and College Administration Sponsored Project Administration There are both allowable and unallowable activities and charges in Section J; it is important to note that if a particular item was not on the list, it does not imply that it is either allowable or unallowable; if you are uncertain, review the agency terms and conditions as well as the approved budget to see it the charge is allowed. ***Note that just because the agency approved the purchase does not mean it is allowable.*** Allowable charges : Travel, Lab Supplies, Approved and allowable equipment Now that we have determine the cost to be reasonable and allowable, lets now look at the allocability of an expense Strategies: Fully depreciated buildings used for Administrative purposes Building divided into components (building shell, service systems, fixed equipment, etc.) with various depreciation schedules Limited

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) Cost Sharing Numerator Denominator

What are Indirect Costs? – Example Facilities Pools - $150,000,000 + +Administrative Pools $250,000,000 =$400,000,000 Expenses 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 =$400,000,000 Expenses 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 $10,904,855 RCM $5,099,298 Net to IFAS $5,805,557 47% of earnings to RCM

Indirect Costs Distribution – IFAS Distribution Percentages IFAS Approved Centers 2/3 from Sr. VP 1/3 from Dean 50% Sr. VP 25% Dean(s) 15% Unit Leader(s) 10% PI

Key Concept for On/Off Campus On Campus (criteria) UF Owned Facility Does 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!!! There are both allowable and unallowable activities and charges in Section J; it is important to note that if a particular item was not on the list, it does not imply that it is either allowable or unallowable; if you are uncertain, review the agency terms and conditions as well as the approved budget to see it the charge is allowed. ***Note that just because the agency approved the purchase does not mean it is allowable.*** Allowable charges : Travel, Lab Supplies, Approved and allowable equipment Now that we have determine the cost to be reasonable and allowable, lets now look at the allocability of an expense

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Capacity (Formula)Funds in Fund 221/222 REC Infrastructure Retreat April 7, 2015 Nancy L. Wilkinson, Office of the Dean for Research (IFAS)

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)

(FGO) Issued with deadline to submit application Funding Grant Opportunity 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

Terms and Conditions Office of Management and Budget 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.html 3. General Provisions, 2 CFR Part 400, Uniform Administrative Requirements, Cost Principles, and Audit Requirements adopts 2 CFR Part 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 Funds 5. Administrative Guidance for Multistate Extension and Integrated Activities 6. Guidelines for State Plans of Work 7. 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. Terms and Conditions 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

Big Picture – Key Concepts for Spending Expense must be: Allowability (200.403) Reasonable and Necessary for the performance of the project (200.404) 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

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