1. The Mysteries of Indirect Costs Revealed Lee Williams Vice-President for Research Faculty Brown-Bag Seminar November 14, 2006

2. 1. Indirect Costs Indirect Costs, aka –Overhead –Facilities and Administration (F&A) Costs What are they? Why are they so high? Why are they going up? Aren’t they just a funny money way to soak the research grants??

3. Components of a Research Grant Budget Direct Costs –Personnel Salary Fringe benefits –Travel –Supplies –Equipment –Etc.

4. Components of a Research Grant Budget Does this cover all the costs of conducting the research? No! It doesn’t cover: –Space Rental/Depreciation Repairs/upkeep Utilities Janitorial –Administrative Support Personnel office Payroll office Purchasing office Accounting services Office of Research Services– Proposal Development Specialists, Contract services, Post Award Financial Services

5. Components of a Research Grant Budget Added together, these additional expenses constitute the “Indirect Costs”, the costs the university incurs to support the research beyond the direct costs of the grant activities themselves How do we Charge for these? –Direct Bill? Ugh! Complicated, awkward and expensive –Instead, we average out the costs over all the research done, and charge a set percentage

6. Components of a Research Grant Budget Every few years, we conduct a study of the total cost of all research (both sponsored and non-sponsored) conducted on the campus, and the total cost of supporting the research. Indirect Cost rate = Total Cost to support the Research x 100 % Total Value of the Research

7. Indirect Cost Rate Determination The rate has two components Facilities –Covers the depreciation and operating costs for the space used to support the research Administration –Covers the administrative costs to support the research, e.g. ORS, Payroll, Purchasing So, IDC is also referred to as F&A

8. Indirect Cost Rate Determination We completed a calculation and renegotiation of our rate in 2003, so the rates for FY’04 – FY’07 are: –Facilities Our new calculated Facilities rate is 22% –Administration The new calculated Administration rate is 33.24% So, our F&A or IDC rate should be 22 + 33.24 = 55.24% However, the Federal government limits the Administration rate to 26% So, our actual negotiated rate will be 22+26 = 48%

9. How IDC is charged on a grant The IDC rate of 48% is charged on the total Modified Total Direct Costs (MTDC) (Total Costs minus a few items like Equipment, Participant Costs, etc) –So, if a grant has $150k in Direct Costs (of which $50k is equipment, giving an MTDC of $100k), it will be charged $48k in Indirect Costs, for a total project cost of $150k + 48k = $198k If the work is conducted off-campus, we only charge the Administration rate of 26% Some agencies limit the IDC they will allow, effectively requiring the University to share in the cost of supporting the research

10. How much IDC is charged to research grants, and how is it used? IDC is ‘recovered’ from each grant, and the funds collected in a central account The University’s budget includes an “IDC” income line, to reimburse the university for the costs of supporting the sponsored research

11. INPUTS State Appropriation Tuition Fees IDC Etc. EXPENSES Salaries Benefits Utilities Supplies Etc. The OU Budget

12. INPUTS State Appropriation Tuition Fees IDC $9.8 million Etc. Research Support SRI Research Council Research Matching ORS Research Space and Support Services Etc. The OU Budget

13. How is the IDC spent? The IDC income is budgeted into general university budget lines (i.e. the 122 – accounts) Some of it reappears in various research support lines –Office of Research Services –Office of the Vice-President for Research –Sponsored Research Incentive –Research matching funds –Research Council –Research Space and Support The balance supports general university services

14. Research Support Items in the OU Budget (FY06) Office of Research Services$1.39million Office of the VP for Research$478k SRI - Sponsored Research Incentive $2.23million Major Research Facilities$400k Research Equipment$412k Research Equipment Reserve$151k Faculty Research$283k –Research Council –Junior Faculty Research –Reprint Faculty Travel$250k GLC Professor$186k Microscopy Lab$170k Microprobe Lab$76k Stephenson Research Center$292k TOTAL$6.32million

15. Research is Growing, What about the Increases in IDC? Prior to 2000, informally half the IDC growth went to research-related lines, half to the general university budget lines 2000 through 2003, this was formalized From 2003 on, ALL growth goes into research support –The ‘extra’ half goes towards Facilities construction and renovation, e.g. Stephenson Research and Technology Facility Nielsen Hall expansion

16. Stephenson Research and Technology Center

17. Sponsored Research Incentive (SRI) SRI is a mechanism to provide funds to Departments to support their research mission SRI funds are E&G funds allocated by the VP- Research The funds are distributed based on the net IDC recovery credited to that Department’s faculty and researchers during the previous year The amount is calculated at 20% of the net IDC recovery Net IDC recovery is the total IDC less VP-R cost-sharing

18. SRI distribution The distribution of ‘credit’ on a grant is based on the proposal routing sheet E.g. if two faculty have equal share of credit for a grant, this will show as 50% credit for each, and the SRI accruing to that grant will be split equally between them The SRI distribution to departments then tracks the PI’s base appointment E.g. if a faculty member is split 0.5FTE in Dept. A and 0.5FTE in Dept. B, then each department will receive one-half the SRI accrued to that faculty member.

19. SRI Payments The total SRI for a Department is the sum of the SRI amounts credited to their faculty (or their portion of the faculty!) SRI calculations are made after the final fiscal year research stats are compiled, and distributed to Departments in September. Departments choose how to use and disburse the SRI funds

20. Double SRI As an added incentive to promote interdisciplinary research, approved Interdisciplinary Centers are eligible to receive an additional 20% SRI for proposals routed through the Center and where the proposal includes multiple PI’s from different academic units