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Facilities & Administrative (F&A) Cost Recovery March 5, 2009 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” What is F&A? Facilities & Administrative (F&A) costs are

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what is f a
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”
what is f a3
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.
f a cost basis
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 and subcontract costs in excess of the first $25,000.
  • F&A is recovered as the sponsor’s funds are expended (and billed) for direct cost items allowed per the project budget.
how are f a rates calculated
How are F&A Rates Calculated?

Calculation is a ratio of:

F&A costs allocated to Organized Research

divided by

Organized Research Modified Total Direct Costs

f a rate calculation
F&A Rate Calculation
  • Rate Calculation Process
    • Each indirect cost pool is allocated to major functions (Instruction, Research, etc.) based on Cost Allocation methods
    • Amount allocated to each major function is divided by a ‘base’ – direct operations of the function
    • Resulting % is the indirect cost rate for that function
f a cost pools
F&A Cost Pools

F&A Rate ComponentExamples

General Administrative Costs Central administrative offices

(Payroll, accounting, disbursements, purchasing)

Department Administration Academic Departments/Colleges

Sponsored Administration VPR / Grants & Contracts Financial Services

Operation & Maintenance Repair & maintenance, utilities, custodial, grounds, police

Building and Equipment Depreciation Standardized asset classifications and lives

Interest Costs on Building & Equipment Debt Service on certain buildings

Libraries

Capped at 26%

Administrative

Facilities

f a rates
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 cost rate agreement10

F&A payments as a % of total NIH awards was stable at 28.5% for FY03-05 accdg to GAO.

Recent COGR survey: F&A rates have held relatively constant at ~51% for the past 6 yrs!

F&A Cost Rate Agreement

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.

2000 Rand study estimated that universities were subsidizing between $700M and $1.5B of F&A

comparison of cost study to the negotiated rate
Comparison of Cost Study to the negotiated rate

Administrative Costs are capped at 26%; the Facility rate component is negotiated down to less than half the computed ‘actual’ costs.

why is f a recovery important
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

$6,055,402

$7,000,000

$5,703,051

$6,000,000

$5,201,496

$5,000,000

$3,933,801

$4,000,000

$2,978,543

$3,000,000

$2,000,000

$1,000,000

$-

FY 04

FY 05

FY 06

FY 07

FY 08

UTSA F&A Revenue - 5 Year History

F&A revenue grew by $3.1M over the last 5 years, an increase of 103%

net effective f a rate
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)

f a net effective rate
F&A Net Effective Rate

We are subsidizing ~50% of the negotiated cost of overhead for restricted research (69% of cost study developed costs)

f a revenue recovery by source
F&A Revenue Recovery by Source

95% of F&A is from federally sponsored activities.

how is f a allocated
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 pending.
    • Transparent
allocations to principle investigators colleges centers and institutes
Allocations to Principle Investigators, Colleges, Centers and Institutes
  • The MOU 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.
debt service
Debt Service

29% of FY08 F&A recovery is pledged to debt

service:

  • 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

debt service24
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.
    • Remaining payments are:

FY09 $1,383,495

FY10 1,251,908

FY11 924,722

FY12 34,795

building maintenance capital improvements
Building Maintenance & Capital Improvements
  • $300,000 set aside as a reserve for capital requirements 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.
center for infrastructure assurance security lease costs
Center for Infrastructure Assurance & Security Lease Costs
  • During FY09, up to $222,000 of the annual lease costs will be paid from F&A to allow CIAS to move off campus (near Main campus).
    • Allocation is subject to annual escalation of 3%.
    • Allows TRIO to move to ITC
    • Allows Business Affairs staff to move from JPL to University Heights
  • Funds are not allocated directly to CIAS.
  • Lease term is 5 years.
vp administrative overhead
VP Administrative Overhead
  • The following VP areas receive a base budget allocation to support salaries & related administrative overhead:
      • Academic Affairs $875,000(14% of FY08 Actual)
      • Research $855,580(14% of FY08 Actual)
      • Business Affairs $522,200 (9% of FY08 Actual)
fy 10 budget outlook
FY 10 Budget Outlook
  • FY10 Budget will be set 2.5% higher than FY09 (1.6% higher than FY08 actual recovery)