Why Universities are Global • It is in our very nature
Discovery & Dissemination of Knowledge • Education • Research • Public Service & Outreach • Economic Development • Intellectual Leadership
Human Resource Pipeline • Faculty Recruitment & Retention • Student Recruitment and Retention • Alumni Participation • Partnerships & Collaborations
Education • Specialization & Integration • Experiential Learning • “Good Citizen” Imperative • Multi-dimensional Diversity • International Experience as a Critical Differentiator • Collaborative Teaching & Content Delivery • Joint and Dual Degrees
Research • Ideas know no boundaries • Interdisciplinary as a driver: Collaborative research teams • Unique Laboratories, Facilities, and Environments • Clinical Research Opportunities • The Foreign Culture, Society, and Location is the research
Public Service and Outreach • Enrichment of Society • Promote Education among the World’s Youth • Outreach via Life-Long Learning • Partnerships with Humanitarian Agencies
Economic Development • Technology Transfer, Innovation, and IP • Joint Projects with Foreign Governments, Universities, and Corporations • Growth of the consumer and the “idea” markets beyond US borders
Intellectual Leadership • Marketplace for ideas and leadership is global • Peer review is global • Open-ness to alternative systems and ideas: be flexible • Confidence in what we do without being arrogant
Opportunities & Challenges • US Tradition of Open-ness and Transparency vs. Individual/Organization Gain: IP • Open-ness vs. Security: the Post 9-11 challenge • US Legal/Financial Framework and the Interface with International Partners • The US Ethical/Moral Framework and Interface with International Partners
Introduction of Theme International Case Study: When Do Applications End, Negotiations Begin, and Contracts Take Effect. Contractual Terms & Conditions: Where to Begin
Richey’s List • Adapted from John B. Richey’s article on • “Crafting Contracts for International Projects” • (see resources for citation) • Who are the “parties” to the agreement (National Sovereignty, Power-Sharing) • Statement-of-Work • Principals and Scientific or Programmatic Direction • Contract Employees and Independent Contractors
Subcontractors Term (remember that period during which funds may be spent can differ from the work period) Cost ConsiderationsFees for Extraordinary Service * Settling-in CostsMake-Ready Costs * Saturday/Sunday Pay * Hardship Pay * Cost-of-Living Adjustments * Dependent Travel Educational Allowances * Medical Evacuation * Evacuation During Civil Disturbances* Insurance
PaymentLetter of CreditPayment in Dollars (other currency) Tax ConsiderationsAccounting and AuditingReports and ReportingWarrantiesTerminationArbitration and Applicable Law
Property Intellectual Property Force Majeure Publications Facilities
Budget Considerations (Direct Costs) Transport of Personal Items (freight forwarder service company fees) Storage costs of items not shipped Expediter costs for clearing shipments Home Leave (annual biennial) per institutional policy Rest and recuperation leave (quarterly, annually, other)
Budget Considerations (Direct Costs) Temporary residences (including upon arrival/departure) Domestic security personnel Maintenance agreements Insurance (driving/auto, household, liability) License & fees (driving, work permit, etc) Spare parts (vehicles, computers & research equipment)
Budget Considerations (Direct Costs) Medical examinations and vaccinations Orientation to country & culture Language training Currency exchanges & banking charges Airport and travel taxes or fees
Indirect Costs Severability Notices Confidentiality Modifications Assignment Publicity Independent contractors Export controls
Other Important factors and Considerations Expectations and Realities: A DiscussionResources & Web Resources see supplemental handout #1
Start with the standard university budget for a sponsored project. Costs should be budgeted and accumulated in a consistent manner.
Special Budget Considerations Payments Currency fluctuations (are you going to be paid in US dollars?) Faculty compensation Travel and per diem Tax costs F&A Audit costs Expectations and realities
Payments • Fixed Price vs. Cost Reimbursement • Advanced payments • Consider “escrowing” 6 months of funding from sponsor to serve as contingency • Payments by wire transfer
Currency • Costs should be invoiced in U.S. dollars and payments should be made in U.S. dollars. • If the transactions are not in U.S. dollars, costs should be indexed so that the universities actual costs are recovered. • Reference a published exchange rate • Currency conversion costs should be included in the budget
Currency • Currency fluctuation is particularly important for fixed-price agreements. • What happens if the dollar strengthens? • If the dollar weakens, what happens to the recovered costs?
Faculty Compensation(when overseas for extended period) • Where will the faculty member be paid? • Will the faculty member be paid in US dollars? • Living allowance vs. travel
Travel & Per Diem • Is the fee to expedite passport processing an allowable cost and other special questions regarding international travel?
Tax Costs • Consult tax advisor • If the U.S. university will be required to pay taxes in the country, budget for preparation of “tax returns” or other required filings and for the cost of taxes. • In some countries, taxes may be withheld from payment to the U.S. university. • Consult tax advisor!
Questions about costs or questionable costs • Special payments to individuals • Cash payments to contract performers and consultants
Two Cases • Singapore • Taiwan • Expectations & Realities
F&A • The university’s audited rate appropriate for the activity should be used. • Be prepared to explain how your rates are derived. • Do not compromise the university’s U.S. federal funding for research • The United States government is the “most favored nation”
Audit • Is an audit required? • When? • What is the scope? • Who will perform it? (Can this be part of a separate agreement?) • Alternatives • Often A133 will be acceptable • Inspection of financial records in U.S.
Audit • If an external audit is required: • Costs of audit should be a project cost, and • separately budgeted from programmatic and institutional F&A costs.
Bibliography • Richey, John B. (1994). Budgeting for International Projects: In-Country Business Operations and Long-Term Residential Assignments. SRA Journal, Vol 25, No. 4, Spring.
GOVERNED BY FOREIGN COUNTRY’S TAX LAWS AND U.S. TAX TREATIES • What Scope of Activities/Revenues Is Subject to Taxation? • Can Allocate Liability by Contract, But Can’t Eliminate Legal Liability
ASSESSMENT REQUIRES TAX EXPERTS: • Legal/Accounting • Consult Early to Facilitate Best Transaction Structure and Terms
COMMON FOREIGN TAX TRIGGERS • Creation of Permanent Establishment in Foreign Country by Owning/Leasing/Contracting Rights to Use Real Estate Establishing Office or Residence Opening Bank Account Signing Contracts Making Payments
COMMON FOREIGN TAX TRIGGERS • Exceedance of Per Person or Aggregated All Persons Days Limit in Foreign Country in Tax or Calendar Year • Earning IP Royalties/Revenues in Foreign Country
OCCASIONAL EXCLUSIONS • Purely Educational Activities (No Research) in Foreign Country • Limited Days in Foreign Country • Charitable Exclusion IF Qualify as Charity in Foreign Country
TAX LIABILITY TO FOREIGN JURISDICTIONS • Entity Taxation Withholding From Payments for Services (e.g., 5-10-30%) Corporate Income Tax on Percentage of Total Revenues Allocated to Foreign Jurisdiction
TAX LIABILITY TO FOREIGN JURISDICTIONS • Individual Taxation Percentage of Total Compensation Allocated to Foreign Jurisdiction Activities and Taxed Arises Whether Individual Acts as Entity Representative or In Personal Capacity How to Compensate Net Additional Tax to Individual Over Otherwise Applicable Tax Liability • Tax Accounting, Return Preparation, Filing May Pose Significant Costs
Regardless of Expert Opinions, There is Uncertainty • Politics • Regime Changes • Law Changes • Can Change Tax Liability
Research Agreements Should Allocate Tax Liability to Foreign Sponsor/Collaborator (Payments Net of Taxes) • Or Funding Must Cover Program Costs and Taxes • Consider Entity and Individual Taxes/Cost of Tax Accounting and Returns
Consider Limiting Scope of Revenues Subject to Taxation Through Service Blocker Corporation • Separate Entity Controlled by U.S. University for Purpose of Foreign Activity • But Must Honor Corporate Formalities Hard for Faculty • Foreign Sponsor/Collaborator May Misread as Lack of U.S. University Commitment
IRB Oversight: Roles & Responsibilities • Home Institution • Local IRB • Are modifications to FWA needed? • Consideration of local context
Foreign Laws, IRBs, Oversight • Does Foreign Organization/site have an IRB? • Laws of country • Situational specifics – university, hospital, clinic, field site
Protocol Management • Who gives approval for waivers of protocol? E.g. enrollment criteria • Record keeping • Confidentiality: Access to identifiable data