1. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 Indirect Cost Facilities and Administrative (F&A) Costs

2. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 Introduction The Indirect Cost Study is the basis for calculating reimbursements received for Facilities and Administrative (F&A) costs. –F&A rate is a percentage of direct cost applied to sponsored program billings. –Federal cost principles, such as A-21, govern the way indirect costs are calculated and allocated.

3. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 Topics of Discussion Sponsored Programs Indirect Cost Proposals A-21 Cost Principles Indirect Cost Categories Service/Recharge Centers Base and Space Calculations

4. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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

5. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 Sponsored Programs Non-Federal Research, Training and Other Sponsored Programs –Foundations –State of Indiana –Non-Profit –Commercial/For Profit –Higher Education

6. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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

7. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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 contracts and grants. A-21 requires adherence to Cost Accounting Standards (CAS) and submission of a Disclosure Statement (DS-2).

8. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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.

13. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 Indirect Cost Categories Indirect Administrative Costs –General & Administrative –Departmental Administration –Sponsored Projects Administration –Student Administrative Services

14. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 Cost Categories Indirect Facilities Costs –Building Depreciation –Equipment Depreciation –Operations & Maintenance –Interest –Library

15. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 Service/Recharge Centers Recharge Centers are University operations that recharge for services or products primarily for university use. Financial Policies –Fund Balance in Recharge Centers –Formula for Setting Recharge Center Rates –Recharge Center Transfers Overall requirement to breakeven

16. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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.

17. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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.

18. Kuali Financial Systems – Financial Administrator Development Series - October, 2006 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.