Facilities & Administrative (F&A) Cost Recovery March 5, 2009

Facilities & Administrative (F&A) Cost Recovery March 5, 2009

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”

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? 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.

F&A Cost BasisF&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.

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:Calculation is a ratio of:F&A costs allocated to Organized ResearchF&A costs allocated to Organized Research

divided bydivided byOrganized Research Modified Total Direct CostsOrganized Research Modified Total Direct Costs

Calculation is a ratio of:Calculation is a ratio of:F&A costs allocated to Organized ResearchF&A costs allocated to Organized Research

divided bydivided byOrganized Research Modified Total Direct CostsOrganized 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

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 Rate Component ExamplesGeneral 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

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F&A Cost PoolsF&A Cost Pools

Capped at 26%

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 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 AgreementF&A Cost Rate Agreement

F&A Cost Rate AgreementF&A Cost Rate Agreement

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.

Comparison of Cost Study to the negotiated rateComparison of Cost Study to the negotiated rate

0.50%

14.90%

5.00%

5.60%

12.20%

9.80%

13.70%

13.90%

0.50%

9.00%

2.00%3.00%

4.00%

6.80%

9.60%

9.60%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Actual Negotiated *

General Administration

DepartmentalAdministration

Sponsored ProjectsAdministration

Building Depreciation

Equipment Depreciation

Interest

Operations & Maintenance

Library

75.6%

44.50%

26.00%

23.50%

0.50%

14.90%

5.00%

5.60%

12.20%

9.80%

13.70%

13.90%

0.50%

9.00%

2.00%3.00%

4.00%

6.80%

9.60%

9.60%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Actual Negotiated *

General Administration

DepartmentalAdministration

Sponsored ProjectsAdministration

Building Depreciation

Equipment Depreciation

Interest

Operations & Maintenance

Library

75.6%

44.50%

26.00%

23.50%

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 researchIf sponsors don’t pay, someone else mustImportant new revenue source to UTSA

Supports the cost of conducting researchIf sponsors don’t pay, someone else mustImportant 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 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 RateNet Effective F&A Rate

The net effective F&A rate is computed as follows:

TOTAL F&A Recovery Revenuedivided by

Restricted Sponsored Program Expenditures (Net of

F&A)

The net effective F&A rate is computed as follows:

TOTAL F&A Recovery Revenuedivided by

Restricted Sponsored Program Expenditures (Net of

F&A)

F&A Net Effective RateF&A Net Effective Rate F&A Net Effective RateF&A Net Effective Rate

Includes all Includes all NACUBO NACUBO ProgramsPrograms

FY 07 FY 07 BasisBasis

Net Net Effective Effective

RateRate

FY 08 FY 08 BasisBasis

Net Net Effective Effective

RateRate

All RestrictedAll Restricted $5,703,051 / $5,703,051 / $31,442,181$31,442,181

18.1%18.1% $6,055,402 / $6,055,402 / $34,035,958$34,035,958

17.8%17.8%

Restricted Restricted FederalFederal

$5,404,985 / $5,404,985 / $26,194,640$26,194,640

20.6%20.6% $5,753,973 / $5,753,973 / $27,725,858$27,725,858

20.8%20.8%

Restricted Non-Restricted Non-FederalFederal

$298,066 / $298,066 / $5,247,542 $5,247,542

5.7%5.7% $301,429 / $301,429 / $6,310,100$6,310,100

4.8%4.8%

Restricted Restricted Research OnlyResearch Only

$4,973,465 / $4,973,465 / $20,283,600$20,283,600

24.5%24.5% $5,188,035/ $5,188,035/ $21,908,637$21,908,637

23.7%23.7%

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

FY 04FY 04 FY 05FY 05 FY 06FY 06 FY07FY07 FY08FY08

FederalFederal $2,872,068$2,872,068 $3,781,347$3,781,347 $5,032,063$5,032,063 $5,404,985$5,404,985 $5,753,973$5,753,973

StateState 31,62731,627 68,13268,132 52,26152,261 65,79965,799 65,99265,992

LocalLocal 16,32116,321 17,80517,805 30,17530,175 22,84222,842 37,32537,325

PrivatePrivate 58,52758,527 66,51766,517 86,99786,997 209,425209,425 198,112198,112

TOTALSTOTALS $2,978,543 $3,933,801 $5,201,496 $5,703,051 $6,055,402

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

Sources of F&A FY07 RevenueSources of F&A FY07 Revenue

FederalFederal 94.8%94.8%

StateState 1.2%1.2%

LocalLocal 0.4%0.4%

PrivatePrivate 3.7%3.7%

TOTALTOTAL 100%100%

Sources of F&A Revenue FY 2007

Federal, $5,404,985 ,

95%

Local, $22,842 , 0%

Private, $209,425 ,

4%

State, $65,799 , 1%

Federal State Local Private

Sources of F&A FY08 RevenueSources of F&A FY08 Revenue

FederalFederal 95%95%

StateState 1.1%1.1%

LocalLocal 0.6%0.6%

PrivatePrivate 3.3%3.3%

TOTALTOTAL 100%100%

Sources of F&A Revenue FY 2008

State, $65,992 , 1%

Private, $198,112 ,

3%

Local, $37,325 , 1%

Federal, $5,753,973 ,

95%

Federal State Local Private

FY08 F&A (Federal) Sources FY08 F&A (Federal) Sources 0.6%

0.7%0.9%

0.1%0.2%

1.2%

0.4%

0.3%

3.3%

8.3%

4.4%

55.1%

17.5%

3.2%

3.2%

0.5%

USAID HUD

Interior Energy

EPA Labor

Transportation Agriculture

NASA Homeland Sec

SBA Commerce

Education NSF

DOD DHHS

$7,493

$17,926

$12,370

$25,575

$27,770 $32,971

$38,158 $53,283

$71,524 $181,283

$182,672 $192,594

$250,513

$1,009,757

$476,779

$3,173,306

F&A Recovery by College, Institute, Center, Program

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.Flexible - has been amended twice with another pending. TransparentTransparent

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.Flexible - has been amended twice with another pending. TransparentTransparent

FY 2008 F&A AllocationsPrincipal

Investigators, $519,200 , 8%

Colleges , $191,173 , 3%

Ctrs, Institutes & Major Pgms,

$511,150 , 7%

Bldg Mtnc & Capital Imprvmts, $278,087 ,

4%

Debt Service - Faculty Startup Loans,

$1,348,693 , 19%Debt Svc - West Campus (Tobin) Lab,

$667,600 , 10%

Faculty Start-Up Costs, $1,000,000 ,

14%

Academic Affairs Support, $875,000 ,

13%

Research Support, $855,580 , 13%

Business Affairs Support, $522,200 ,

8%

Ctr for Arch Res - Vac/Sick Leave,

$46,892 , 1%

Allocations to Principle Investigators, Colleges, Centers and InstitutesAllocations 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.

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 ServiceDebt 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

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 ServiceDebt 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 1,251,908FY11 924,722FY12 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.

Remaining payments are: FY09 $1,383,495

FY10 1,251,908FY11 924,722FY12 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 In FY08, funds were used for previously pledged

faculty start-up costs to forego incurring additional faculty start-up costs to forego incurring additional debt.debt.

Unused balances roll forward to reserves.

$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 In FY08, funds were used for previously pledged

faculty start-up costs to forego incurring additional faculty start-up costs to forego incurring additional debt.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 ITCAllows TRIO to move to ITC Allows Business Affairs staff to move from JPL to University Allows Business Affairs staff to move from JPL to University

HeightsHeightsFunds are not allocated directly to CIAS.Lease term is 5 years. Lease term is 5 years.

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 ITCAllows TRIO to move to ITC Allows Business Affairs staff to move from JPL to University Allows Business Affairs staff to move from JPL to University

HeightsHeightsFunds are not allocated directly to CIAS.Lease term is 5 years. Lease term is 5 years.

VP Administrative OverheadVP Administrative Overhead

The following VP areas receive a base budget allocation to support salaries & related administrative overhead:

Academic AffairsAcademic Affairs $875,000 (14% of FY08 Actual)

ResearchResearch $855,580$855,580 (14% of FY08 Actual)

Business AffairsBusiness Affairs $522,200 $522,200 (9% of FY08 Actual)

The following VP areas receive a base budget allocation to support salaries & related administrative overhead:

Academic AffairsAcademic Affairs $875,000 (14% of FY08 Actual)

ResearchResearch $855,580$855,580 (14% of FY08 Actual)

Business AffairsBusiness Affairs $522,200 $522,200 (9% of FY08 Actual)

FY 10 Budget OutlookFY 10 Budget Outlook

FY10 Budget will be set 2.5% higher than FY09 (1.6% higher than FY08 actual recovery)

FY10 Budget will be set 2.5% higher than FY09 (1.6% higher than FY08 actual recovery)