1. Facilities & Administrative (F&A) Cost Recovery Report April 22, 2009 Carol Hollingsworth, Director, Grants & Contracts Financial Services & Janet Parker, Associate Vice President, Financial Affairs

2. What is F&A?   OMB Circular A-21 term for what was formerly referred to as indirect cost recovery.   Also known as “overhead”   Cost recovery mechanism – not a “tax”   OMB Circular A-21 term for what was formerly referred to as indirect cost recovery.   Also known as “overhead”   Cost recovery mechanism – not a “tax” 1

3. What is F&A?   Facilities & Administrative (F&A) costs are   “Costs 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.”   Not Direct Costs – direct costs are specifically identified to individual research projects, instructional programs or other major functions.   Examples: Salaries, fringe benefits, travel related to project, lab supplies, subcontracts, etc.   Facilities & Administrative (F&A) costs are   “Costs 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.”   Not Direct Costs – direct costs are specifically identified to individual research projects, instructional programs or other major functions.   Examples: Salaries, fringe benefits, travel related to project, lab supplies, subcontracts, etc. 2

4. F&A Cost Basis   Universities that receive $10M+ from federal sources must use a modified total direct cost (MTDC) basis for calculating F&A.   MTDC includes all project costs except equipment, renovations, subcontract costs in excess of the first $25,000, rent, scholarships, fellowships, tuition.   F&A is recovered as the sponsor’s funds are expended (and billed) for direct cost items allowed per the project budget.   Universities that receive $10M+ from federal sources must use a modified total direct cost (MTDC) basis for calculating F&A.   MTDC includes all project costs except equipment, renovations, subcontract costs in excess of the first $25,000, rent, scholarships, fellowships, tuition.   F&A is recovered as the sponsor’s funds are expended (and billed) for direct cost items allowed per the project budget. 3

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6. F&A Rates   F&A Costs are recovered based on F&A Rates   Rates are developed based on cost studies.   UTSA contracted with Huron Consulting Group to develop our most recent cost study.   Significant effort.   Proposals are submitted to cognizant federal agency for review, audit, negotiation & approval.   Once approved, rates are applied to each grant & contract to determine the amount of indirect costs to be charged/recovered.   F&A Costs are recovered based on F&A Rates   Rates are developed based on cost studies.   UTSA contracted with Huron Consulting Group to develop our most recent cost study.   Significant effort.   Proposals are submitted to cognizant federal agency for review, audit, negotiation & approval.   Once approved, rates are applied to each grant & contract to determine the amount of indirect costs to be charged/recovered. 5

7. F&A Cost Rate Agreement 6

8. Recent COGR survey: F&A rates have held relatively constant at ~51% for the past 6 yrs! F&A payments as a % of total NIH awards was stable at 28.5% for FY03- 05 accdg to GAO. 2000 Rand study estimated that universities were subsidizing between $700M and $1.5B of F&A FY06 NSF survey showed that universities contribute more than $9B of their own funds to support R&D activities or nearly 20% of total R&D expenditures. 7

9. F&A Rate-Actual vs. Negotiated ActualNegotiated General & Administrative 13.9 % 9.6 % Departmental Administration13.79.6 Sponsored Projects Administration 9.86.8 Administrative Subtotal 37.4 % 26.0 % Building Depreciation 12.2 % 4.0 % Equipment Depreciation5.63.0 Interest5.02.0 Operations & Maintenance14.99.0 Library0.5 Facilities Subtotal 38.2 % 18.5 % On Campus Rate (FY 2007 Cost Study) 75.6 % 44.5 % 8

10. Net Effective F&A Rate The net effective F&A rate is computed as follows: TOTAL F&A Recovery Revenue divided by Restricted Sponsored Program Expenditures (Net of F&A) The net effective F&A rate is computed as follows: TOTAL F&A Recovery Revenue divided by Restricted Sponsored Program Expenditures (Net of F&A) 9

11. F&A Net Effective Rate Includes all NACUBO Programs FY 07 Basis Net Effective Rate FY 08 Basis Net Effective Rate All Restricted $5,703,051 / $31,442,181 18.1% $6,055,402 / $34,035,958 17.8% Restricted Federal $5,404,985 / $26,194,640 20.6% $5,753,973 / $27,725,858 20.8% Restricted Non- Federal $298,066 / $5,247,542 5.7% $301,429 / $6,310,100 4.8% Restricted Research Only $4,973,465 / $20,283,600 $4,973,465 / $20,283,60024.5% $5,188,035/ $21,908,637 $5,188,035/ $21,908,63723.7% We are subsidizing ~50% of the negotiated cost of overhead for restricted research (69% of cost study developed costs) 10

12. Why is F&A Recovery Important?   Supports the cost of conducting research   If sponsors don’t pay, someone else must   Important new revenue source to UTSA   Supports the cost of conducting research   If sponsors don’t pay, someone else must   Important new revenue source to UTSA $2,978,543 $3,933,801 $5,201,496 $5,703,051 $6,055,402 $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 FY 04FY 05FY 06FY 07FY 08 UTSA F&A Revenue - 5 Year History F&A revenue grew by $3.1M over the last 5 years, an increase of 103% 11

13. F&A Revenue Recovery by Source FY 04 FY 05 FY 06 FY07FY08 Federal$2,872,068$3,781,347$5,032,063$5,404,985$5,753,973 State 31,627 31,627 68,132 68,132 52,261 52,261 65,799 65,799 65,992 65,992 Local16,32117,80530,17522,84237,325 Private58,52766,51786,997209,425198,112 TOTALS $2,978,543$3,933,801$5,201,496$5,703,051$6,055,402 95% of F&A is from federally sponsored activities. 12

14. Sources of F&A FY07 Revenue Federal94.8% State1.2% Local0.4% Private3.7% TOTAL100% 13

15. Sources of F&A FY08 Revenue Federal95% State1.1% Local0.6% Private3.3% TOTAL100% 14

16. FY08 F&A (Federal) Sources 15

17. F&A Recovery by Area 16

18. F&A Recovery by Area 17

19. How is F&A Allocated?   In FY07, the VPs for Research, Business Affairs and Academic Affairs entered into a formal Memorandum of Understanding (MOU) to document the allocation of F&A.   The MOU is:  Flexible - has been amended twice with another change pending.  Transparent   In FY07, the VPs for Research, Business Affairs and Academic Affairs entered into a formal Memorandum of Understanding (MOU) to document the allocation of F&A.   The MOU is:  Flexible - has been amended twice with another change pending.  Transparent 18

20. Allocations to Generating Units   The MOU currently allocates 10% of actual F&A recovery to PI’s, Colleges, Centers and Institutes based on prior year actual earnings.   These funds are allocated on a one-time basis   Not part of the recipient’s base budget due to year-to-year fluctuations in earnings.   Funds are currently treated as discretionary incentive.   Provost & VPR are reviewing alternate models to assure strategic usage of the funds.   The MOU currently allocates 10% of actual F&A recovery to PI’s, Colleges, Centers and Institutes based on prior year actual earnings.   These funds are allocated on a one-time basis   Not part of the recipient’s base budget due to year-to-year fluctuations in earnings.   Funds are currently treated as discretionary incentive.   Provost & VPR are reviewing alternate models to assure strategic usage of the funds. 19

21. Debt Service A significant amount of F&A recovery is pledged towards servicing debt:   Renovations to West Campus (Margaret Tobin) Lab Facility financed through bond series 2006B   will be retired August 15, 2036: FY07 debt service paid $665,350 FY08 debt service paid $667,600 FY09 payment due $666,000 A significant amount of F&A recovery is pledged towards servicing debt:   Renovations to West Campus (Margaret Tobin) Lab Facility financed through bond series 2006B   will be retired August 15, 2036: FY07 debt service paid $665,350 FY08 debt service paid $667,600 FY09 payment due $666,000 20

22. Debt Service Faculty Start-Up Costs   Beginning FY04, faculty start-up costs were financed with F&A to service the debt.   All debt under this program will be retired August 31, 2012.   Estimated remaining payments are: FY09 $1,383,495 FY10 1,251,908 FY11 924,722 FY12 34,795 Faculty Start-Up Costs   Beginning FY04, faculty start-up costs were financed with F&A to service the debt.   All debt under this program will be retired August 31, 2012.   Estimated remaining payments are: FY09 $1,383,495 FY10 1,251,908 FY11 924,722 FY12 34,795 21

23. Building Maintenance, Leases & Capital Improvements   Reserve for capital requirements, leases and building maintenance for research related facilities.  In FY08, funds were used for previously pledged faculty start-up costs to forego incurring additional debt.   Unused balances roll forward to reserves.   Reserve for capital requirements, leases and building maintenance for research related facilities.  In FY08, funds were used for previously pledged faculty start-up costs to forego incurring additional debt.   Unused balances roll forward to reserves. 22

24. VP Administrative Overhead   The following VPs receive a base budget allocation to support salaries & related administrative overhead in support of research:  Academic Affairs  Research  Business Affairs   The following VPs receive a base budget allocation to support salaries & related administrative overhead in support of research:  Academic Affairs  Research  Business Affairs 23

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27. FY 10 Budget Outlook   FY10 Budget will be set 2.5% higher than FY09 (1.6% higher than FY08 actual recovery)   New allocation will cover a portion of the estimated utility costs for the new Engineering building.   Each VP area will receive an increased base budget allocation:   VPR $ 95,000   Academic Affairs$100,000   Business Affairs$ 60,000   FY10 Budget will be set 2.5% higher than FY09 (1.6% higher than FY08 actual recovery)   New allocation will cover a portion of the estimated utility costs for the new Engineering building.   Each VP area will receive an increased base budget allocation:   VPR $ 95,000   Academic Affairs$100,000   Business Affairs$ 60,000 26

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