1. 12/11/20071 Indirect Cost Study Facilities and Administrative (F&A) Costs Indiana University Sally Link Cost Accounting Manager Financial Management Services

2. 2 Introduction The Indirect Cost Study is the basis for calculating reimbursements IU receives for Facilities and Administrative (F&A) costs. Overview of basic information to increase fiscal officer awareness of requirements and processes. Daily fiscal officer oversight on how funds are spent and managed.

3. 3 Topics of Discussion Sponsored Programs Indirect Cost Proposals A-21 Cost Principles Indirect Cost Categories Service/Recharge Centers Base and Space Calculations

4. 4 Overview Objectives for determination of costs applicable to research and development, training, and other sponsored work performed under grants, contracts and other agreements. Facilities and Administrative (F&A) costs are incurred for common or joint objectives and cannot be identified with a particular activity.

5. 5 Sponsored Programs Primary Federal Agencies for Research, Training and Sponsored Program Expenditures  Dept of Health & Human Services  National Science Foundation  Dept of Education  Veterans Administration  Dept of Defense  Dept of Energy

6. 6 Sponsored Programs Non-Federal Research, Training and Other Sponsored Programs  Foundations  State of Indiana  Non-Profit  Commercial/For Profit  Higher Education

7. 7 A-21 Cost Principles A-21 Office of Management and Budget (OMB) circular of cost principles for educational institutions. http://www.whitehouse.gov/omb/circulars/a021/a021.html A-21 applies to IU contracts and grants. A-21 requires adherence to Cost Accounting Standards (CAS) and submission of a Disclosure Statement (DS-2).

8. 8 A-21 Cost Principles Cost Accounting Standards Board Requirements for Educational Institutions.  9905.501 Consistency in estimating, accumulating and reporting costs  9905.502 Consistency in allocating costs incurred for the same purpose  9905.505 Accounting for unallowable costs  9905.506 Cost accounting period

9. 9 A-21 Cost Principles Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect (F&A) costs. Where an institution treats a particular type of cost as a direct cost of sponsored agreements, all costs incurred for the same purpose in like circumstances shall be treated as direct costs of all activities of the institution.

10. 10 A-21 Cost Principles Allowable costs  Costs must be reasonable, allocable, consistent and conform to any limitations or exclusions set forth in the cost principles (A-21). Unallowable costs  Costs must be identified and excluded from costs applicable to a sponsored agreement.  A-21 Section J includes general provisions for selected items of cost.

11. 11 A-21 Cost Principles Cost Objective  Major function, particular service or project, sponsored agreement or facilities & administrative (F&A) cost activity. Allocation  Process of assigning costs to one or more cost objectives  Reasonable, realistic and equitable.

12. 12 Indirect Cost Proposals Proposed Facilities & Administrative (F&A) Rates  Two separate rates calculated (F&A)  Administrative rate is capped at 26%  Allocated to four direct cost functions Certifications  Requires CFO signature  Assurance statements Federal Audit Negotiation Final Rate Agreement

13. 13 Indirect Cost Categories Indirect (F&A) costs are those that 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.

14. 14 Indirect Cost Categories Indirect Administrative Costs  General & Administrative  Departmental Administration  Sponsored Projects Administration  Student Administrative Services

15. 15 Cost Categories Indirect Facilities Costs  Building Depreciation  Equipment Depreciation  Operations & Maintenance  Interest  Library

16. 16 Service/Recharge Centers Recharge Centers are University operations that recharge for services or products primarily for university use. IU Financial Policies  I-370 Fund Balance in Recharge Centers  I-400 Formula for Setting Recharge Center Rates  I-410 Recharge Center Transfers Overall requirement to breakeven

17. 17 Base and Space Calculations Bureau of Facilities requirement for annual space survey by room Space functionalization should correlate closely with cost activities. On and off campus bases are calculated.

18. 18 Space vs. Base Analysis A detailed analysis of salaries and wages compared to assigned square footage and the percentage by department is required. Departmental interviews may be conducted to make sure accurate results are achieved.

19. 19 Summary Indirect costs consist of facilities and administrative (F&A) costs Indirect costs are allocated to final cost objectives (direct costs). Indirect costs allocated to organized research must exclude unallowable costs and comply with Cost Accounting Standards in accordance with OMB Circular A-21. Close attention to annual requirements for recharge center rates and the space survey are critical for an accurate study.