2. Facilities & Administrative Costs (F&A) F&A Rate Process and Timeline F&A Definitions: Direct, Indirect, and Unallowable Costs FY2011 F&A Rate Proposal & Negotiations Collections & Distributions Intro to A-21: Facilities & Administration Rate

3. The A-21 Timeline 3/1/11 Begin Space & Equipment Survey 6/30/11 FY Ends; Complete & Scrub Surveys 9/15/11 Books Closed; Data Downloads Begin 12/31/11 Submit F&A and FB Proposals 1/15/12 Begin Aux Admin Fee Study 03/12 DCAA performs Audit 04/12 DCAA Submits Audit Report to ONR 6/30/12 Complete Negotiations; Sign Agreement

4. Space Survey Evolution 19992002 & 2005 2008 ASPIRE Oracle 2011 ASPIRE

5. What are F&A Costs? Michigan Tech’s $81 million of “real” incurred costs to support work on sponsored agreements from the necessary human and physical infrastructure. Costs sponsors can reimburse based on a calculated average rate developed and negotiated in accordance with OMB Circular A-21. In a nutshell, this $81 million represents the university’s general support for sponsored projects and the resulting expenses. Intro to A-21: Facilities & Administration Rate Institution-wide and/or department overhead expenses not specifically assignable to a project/activity, yet essential to Michigan Tech’s research activities.

6. Common Misunderstandings The F&A rate includes profits (markup %) F&A costs are not real costs Inaccurate (either too high or too low) F&A rates don’t have consequences The uncapped rate subsidizes the capped rate

7. Guidelines for Reimbursement Circular A-21 outlines three fundamental criteria: Intro to A-21: Facilities & Administration Rate

8. Unallowable Costs If in doubt, scrub it out Unallowable Direct Costs: Clerical salaries General office supplies Travel Unallowable Indirect Costs: Fundraising and Alumni Activities Advertising Entertainment Memberships

9. Composition of Direct Costs Project-Related Materials & Supplies Project-Related Travel PIs Cost-shared Salary Subcontract Costs Research Associates and Assistants Fringe Benefits Lab Techs Costs directly assignable to one project

10. Composition of Indirect Costs Pre/Post-award (SPA) Accounting, Budgeting, HR (GA) Registrar (SAS) Payroll/ Purchasing (GA) Library Deans’ Offices/ Departmental Admin (DA) Bldg/Equip Depreciation Utilities (O&M) Not directly assignable to one project

11. Definition: F&A Components F&A Rate ComponentsExamples General Administrative (GA)Central administrative offices (Payroll, accounting, purchasing) Department Administration (DA)Deans Offices/Academic Departments Sponsored Projects Administration (SPA)VPR Office (Pre & Post-Award) Student Administration & Services (SSA)Enrollment Management Building and Equipment DepreciationStandardized asset classifications and lives Interest Costs on Building & EquipmentMTU’s interest costs State-paid interest on behalf of MTU Operation & MaintenanceRepair & maintenance, utilities, grounds, public safety LibrariesVan Pelt Library Administrative Facilities Intro to A-21: Facilities & Administration Rate

12. MTDC (Modified Total Direct Cost) MTDC is the direct costs charged to an index/project. It excludes: –Subcontracts over $25,000 –Renovation costs & equipment –Participant support costs –Scholarships, fellowships, and tuition remission Intro to A-21: Facilities & Administration Rate

13. F&A Cost Pools F&A Costs Distribution F&A Cost Allocated To Base Rates Allocation Bases F&A Cost Calculation (Tech & MTRI) MTDC Other Institutional Activities

14. F&A Rate Formula & Concept Indirect Costs (Allocated Organized Research F&A Costs) Direct Costs (Sponsored Research Direct Costs + Cost-Sharing = “BASE”) Concept: Changes to either the Numerator or Denominator Affect the Rate = Research Rates Proposed to Cognizant Agency Intro to A-21: Facilities & Administration Rate

15. Multiple F&A Rates Analyses Calculation applied to 9 MTU activity areas: –MTU Houghton on and off campus –Michigan Tech Research Institute (MTRI) on and off campus –Other Sponsored Activities on and off campus –Instruction on and off campus –Other Institutional Activities on campus Intro to A-21: Facilities & Administration Rate

16. General Modifications Criteria Facilities being constructed, renovated or purchased. Identify Costs to be incurred after the base year. Specify/Quantify New facilities to come on-line during the rate period. Analyze Timelines New facilities to substantially impact F&A rate(s). Determine % of Research Direct base costs to change materially from the base year. Quantify & Timeline Intro to A-21: Facilities & Administration Rate

17. ARRA’S Impact on MTDC Intro to A-21: Facilities & Administration Rate The University’s On-Campus Organized Research Modified Total Direct Cost (MTDC) has increased by only 3.6% since the 2008 proposal with most of that increase due to ARRA funds. There has also been a trend of increased space requirements for the Organized Research activities.

18. Negotiations Intro to A-21: Facilities & Administration Rate

19. F&A Rate: Base, Proposed, Negotiated Intro to A-21: Facilities & Administration Rate General & Administrative Departmental Administration Sponsored Project Administration 26% Admin Cap Adjustment Administrative Subtotal Building Depreciation Equipment Depreciation Interest Operations & Maintenance Library Facilities Subtotal On-Campus Capped Rate On-Campus Uncapped Rate 13.5 13.913.7 14.6 14.7 14.4 14.2 14.514.3 -16.3 -17.1 -16.4 26.0 26.026.0 4.67.5 6.0 3.03.5 3.1 3.17.9 6.4 12.8 12.5 12.1 1.71.6 1.4 25.2 33.0 29.0 51.2 59.0 55.0 67.5 76.0 71.0 Base Proposed Negotiated

20. Past & Currently Approved F&A Rates 2012 2013-2016 Capped Research* 56.0%55.00% MTRI 47.5%50.75% Instruction 57.0%52.25% Other Sponsored Activities30.0%36.00% Uncapped Research* 69.0%71.00% MTRI 86.5%84.50% Instruction 57.0%52.25% Other Sponsored Activities30.0%36.00% *Research generates most of total F&A $ recoveries Intro to A-21: Facilities & Administration Rate

21. MTU and Other Institutions Intro to A-21: Facilities & Administration Rate

22. Budgets to MTDC Total Org. Research Modified Total Project Budgets Direct Costs $87.4 million $47.6 million Intro to A-21: Facilities & Administration Rate

23. MTDC to F&A Collections MTDCNet F&A Collected $47.6 million $18.4 million Intro to A-21: Facilities & Administration Rate

24. Collections to Distribution Intro to A-21: Facilities & Administration Rate Deans Chairs PIs Centers General Fund 2¢ 5¢ 10¢ 21¢ collected in F&A

25. What Did We Learn Today? How F&A costs are defined. How the Space & Equipment Surveys directly impacts the F&A Rate. How the F&A cost rate is calculated. How the Project Payroll Certification substantiates the A-21 proposed rates How the negotiation process works. How the effective rate (38.6%) is more important than the negotiated rate (55%). How collected costs are distributed. Intro to A-21: Facilities & Administration Rate

26. Resources: Michigan Tech’s current A-21 proposal: http://www.admin.mtu.edu/acct/dept/controller/FandA/FY2011 a21fanda.pdf The F&A Rate agreement: http://www.mtu.edu/research/references/facts- figures/pdf/predetermined_f_and_a_rates_fy13_16.pdf Michigan Tech’s Disclosure Statement: http://www.mtu.edu/research/references/pdf/disclosure- statement-fall-2011.pdf

27. Contact Information Mike Hendricks 487 – 2155 mfhendri@mtu.edu Intro to A-21: Facilities & Administration Rate

28. Fringe Benefits Composite Rate Components* Fringe Benefit=Traditional & Expense PoolMisc. Fringes Intro to A-21: Facilities & Administration Rate Social Security/Medicare Retirement Contributions Health Insurance Workers Comp Unemployment Insurance RSVP** Tuition Assistance** Sabbatical Leave** Divided by Salaries Expense Base * Computed annually ** Miscellaneous fringe benefits currently treated as salaries