Oregon State University

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Oregon State University

• AN INTRODUCTION TO FACILITIES ADMINISTRATIVE
  RATES

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Outline of This Presentation

• Background on FA Rate calculation
• How rate is calculated
• Cost components used in calculation
• How recovered indirect (FA) monies are used
• How you fit into the process
• Summary

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What are FA Rates?

• FA indirect cost or overhead
• The rate allows recovery of costs incurred for
  common joint use that cannot be readily
  identified to a specific project
• The rate is applied to sponsored projects
• Rates are negotiated with the Department of
  Health and Human Services (DHHS)

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Why Should a Grant pay FA?

• The FA rate is calculated by an averaging
  concept, as established in OMB Circular A-21.
  Most projects require resources from all FA
  pools
• The FA rate is a recovery of costs already paid
  from all OSU fund sources
• All projects incur 2 types of coststhose
  directly related and those required for indirect
  support of the project

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OMB Circular A-21

• OMB Circular A-21 guides the FA process,
  stipulates the proposal format, and addresses
  both direct and FA costs
• FA rates are calculated from OSUs audited
  financial statements

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Indirect Costs are Assigned to 1 of 9 Cost Pools

• FACILITIES
• Building Depreciation
• Interest on debt
• Equipment Depreciation
• Operations Maintenance
• Library

• ADMINISTRATION
• General Administration
• Departmental Administration
• Sponsored Projects Administration
• Student Services

The Administrative Components are subject to a
26 cap
The Facilities Components are not subject to a cap
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Administrative Components

• General Administration costs include
• President, Provost and OUS Chancellors Offices
• Business Affairs (except for Research Acctng.)
• Information Services/Computing Center
• Budget Office
• Purchasing
• Human Resources

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Administrative Components

• Departmental Administration costs include
• Deans offices
• Departmental chairs
• Departmental administrative staff
• Other Administrative Components are Sponsored
  Projects Administration and Student Services

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A Simplified FA Rate Calculation
FA Costs
F A Rate
Sponsored Agreements Cost Sharing/Matching
(variables)

• If any of the variables change (numerator or
  denominator), then the FA rate will also change.
  Example OSU received 147M in research awards
  in FY04.

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MTDC Base and Allocable FA Costs for On-Campus
Research Rate
(millions)
8.2
10.7
10.8
26 Administrative Cap in Place from 1994 to
present Source OSU FA Rate Proposals
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FA Costs Needed to Maintain or Increase our Rate
Increase over FY00 FA Costs
9.2
(3 rate increase)
8.3
FA Rates
(2 rate increase)
6.4

(0 rate increase)
FY00 FA costs were 30.9M
FA Costs Required in FY2005 (millions) Assumes
92.9M in Research Expenditures
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How Does Cost Share Figure into this Process?

• Cost sharing has a negative impact on the FA
  rate since it must be included in the base
• When preparing proposals, cost sharing
  commitments that are not mandatory should be
  carefully weighed against the negative effect
  they have on the FA rate

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Historical View of OSUs Rates
On-Campus FA Rates
(Percent)
Agreement Dates (Agreement Start Dates Coincide
with OSUs Fiscal Year Dates)
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FA Cost Calculation

• Step 1 Start With Base-year Audited Financial
  Statement and Identify Each Cost for Inclusion in
  Either a Direct Cost Base (the major functions)
  or an Indirect Cost Pool (Program Codes are
  used)
• Step 2 Remove Exclusions (tuition, facility
  rental, capital expenses, etc.) and eliminate
  Federally Funded costs unallowable costs

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FA Cost Calculation (contd.)

• Step 3 Identify Any Indirect Costs in Other
  Pools by Account Code and Allocate to the
  Appropriate Indirect Cost Pool
• Step 4 Allocate the Indirect Cost Pools to the
  Major Functions of Instruction, Organized
  Research, Other Sponsored Activities and Other
  Institutional Activities (numerator of the
  formula)

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FA Calculation (with Cross Allocations)
Basis for Allocation
Indirect Cost Pools
Cross Allocation 1 Bldg. Equip. Depreciation
Interest Building Equipment Depreciation
Allocated from Space Study Financials
Operations and Maintenance
Facilities Portion
Cross Allocation 2 O M
Allocated from Special Study or Population Usage
Library
Cross Allocation 3 General Administration
General Administration
Allocated from MTDC in Operating Ledger, Based
on Supported Function
Department Administration
Administrative Portion
Sponsored Projects Administration
Student Services
Allocated from Student FTE
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FA Cost Calculation (contd.)

• Step 5 Identify the Direct Costs of Instruction,
  Organized Research (including cost sharing),
  Other Sponsored Activities and Other
  Institutional Activities (denominator of the
  formula)
• Step 6 Perform the Calculations to Arrive at a
  Proposed FA Rate for Organized Research and
  Other Sponsored Activities

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Computing the FA Rates
Indirect Cost Pools After Cross Allocations
FA Rate
Distribution Base
Functions
Interest Building Equipment Depreciation
MTDC Organized Sponsored Research
Organized Sponsored Research



Facilities Portion
Operations and Maintenance
MTDC Other Sponsored Activities
Other Sponsored Activities



Library
General Administration
Other Institutional Activities
Department Administration
Note Distribution Base For Instruction and
Other Institutional Activities Are Not Shown
Since FA Rates Are Neither Computed
Nor Negotiated for These Functions
Administrative Portion
Sponsored Projects Administration
Instruction
Student Services
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FY 2000 Proposal Components Research Rate
Facilities Components are shaded orange
Administrative Components are shaded green
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How Does OSU Use Returned Overhead (ROH)?

• OSU must use some of its FA recoveries, as
  described in Section J.14.h of OMB Circular A-21,
  to improve research facilities
• Research facilities upkeep (BUC funds -- 0.5M in
  FY04)
• Research equipment (RERF fund -- 3.18M in FY04)
• The remainder can be used at the discretion of OSU

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How Does OSU Use Returned Overhead (ROH)?

• Returned overhead (ROH) is allocated in OSUs
  budget process for
• Utilities, security, custodial, general
  maintenance, inventory control, risk management
• Library support
• College accounting administrative support, and
  other uses

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How Does OSU Use Returned Overhead (ROH)?

• Sponsored program and compliance support
• Human resources, payroll, purchasing, accounts
  payable, and cashiering support
• New research faculty start-up support (1.25M in
  FY04)

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FA Rates of Peer Institutions
Institution Rate Institution Rate
Cornell Univ. 58.0 Purdue Univ. 52.0
Univ. Arizona 51.5 Ohio State Univ. 49.5
Michigan State Univ. 49.5 Univ. of Illinois 48.5
Univ. Cal., Davis 48.5 Texas AM Univ. 45.5
Univ. Wisconsin 45.5 Oregon State Univ. 41.5
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Why are OSUs FA rates low?

• The newer buildings (Ag Life Sciences Bldg.,
  Richardson Hall) received major Federal funding,
  which must be excluded
• Most buildings are old and have low construction
  costs. The last proposal used a 2 use allowance
  (50-year life)
• Maintenance costs incurred are low
• Utilities on west coast are lower than elsewhere
• Oregon public institutions have a history of low
  debt financing

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How Can the FA Rate be Optimized?

• Properly code costs in Banner (HRIS and FIS)
• Accurately complete the Space Study. The space
  study affects building depreciation, equipment
  depreciation, and operations and maintenance
• Accurately complete the Library Study

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How Does Capital Equipment Impact the FA Rate?

• Depreciation on capital equipment purchased with
  sponsored programs funds and cost share funds
  must be excluded from the calculation process

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Equipment Purchases for Organized Research by
Source of Funds
(millions)
61.48M Total
Amount Available for Equipment portion of FA
Rate Calculation 32.4M
29.05M Spon. Prog. CS
Data from FY00 Proposal
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How Program Codes Relate to FA Rates
Indirect Cost Pools (Numerator)
Functions (Denominator)
11xxx Ag. Ex. Sta. Res. 12000 FRL 13000
Other CIPs 15xxx Spon. Res. 17xxx Cost Share,
Res.
Building Equipment Depreciation
Organized Sponsored Research
Facilities Portion
Operations and Maintenance
5xxxx OM 52500 Facil. Maintenance
Other Sponsored Activities
Library
18xxx Other Spon. Act. 2xxxx Spon. Pub. Ser.
General Administration
01800 Dept. Aca. Support 11200 Ag. Exp. Sta.
Admin. 30600, 30800 Deans Office
Other Institutional Activities
Department Administration
Administrative Portion
4xxxx Auxiliaries 20600 Services/Testing Unall
owable Expenses
Sponsored Projects Administration
Instruction
Student Services
01100Instruction
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How Costs are Recorded Do Matter

• The function of an expense should dictate where
  the cost is recorded.
• Example A department chair charges travel to an
  FS Foundation index. What is the purpose of the
  travel?
• Dept. administration expense will go to an FA
  cost pool
• Instruction expense will go to a major function
  (direct cost activity)
• Fund raising/lobbying expense will go to a major
  function (direct cost activity)

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FA Cost Pools vs. Major Functions
Indirect Cost Pools (Numerator)
Functions (Denominator)
Building Equipment Depreciation
Organized Sponsored Research
FSxxxD Expense (01800)
Facilities Portion
Operations and Maintenance
Other Sponsored Activities
Library
General Administration
FSxxxV Expense (30600)
Other Institutional Activities
Department Administration
Administrative Portion
Sponsored Projects Administration
FSxxxN Expense (01100)
Instruction/ Dept. Rsch.
Student Services
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Illustration - FA Pool vs. Function
Cost of travel is 5,000
FSxxxN
FSxxxD
305,000 500,000
300,000 505,000

• FSxxxD index Puts the cost in an FA cost pool
• FSxxxN indexPuts the cost in the instruction
  function

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OM Program Code

• Use the OM Program Code (52500) to identify
  Operations Maintenance costs
• Example A Building Managers salary is
  currently paid from a Deans admin. index
• Change the salary expenses to the index with OM
  program code 52500. This program code tracks
  to the OM cost pool rather than a capped
  department administration pool.

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Illustration New Bldg. Mgr. Prog. Code
Indirect Cost Pools
Interest Building Equipment Depreciation
Program Code 52500 Tracks Here
Operations and Maintenance
Facilities Portion
Library
There is no Cap on Facilities Components
General Administration
Program Code 30600 Tracks Here
Department Administration
Administrative Portion
Sponsored Projects Administration
The Administrative Components are Capped at 26
Student Services
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The Next Proposal

• The proposal will be based on FY09 financial data
  (July 2008 June 2009)
• Cost coding and FTE/salary will be reviewed
  throughout FY09
• OSU will start the FA proposal at the close of
  FY09 (Aug 2009)

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The Next Proposal

• Library Study will take place throughout FY09
• Equipment inventory will be completed in the
  spring of FY09
• Space survey will be completed by the spring of
  2009
• New agreement should be negotiated in the spring
  or early summer of 2010

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How You Fit into this Process

• As departmental staff, you are critical to OSUs
  successful preparation of the next FA rate
  proposal.
• You are involved in
• Space Study that will take place in spring 09
  (appropriate coding of space is critical)
• Equipment Inventory that will take place in
  spring 09 (identification of equipment location
  and condition is critical)

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How You Fit into this Process

• You are involved in (contd.)
• Completion of PAR forms
• Processing payments for goods and services
• Processing payroll transactions

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You can help by correctly coding and identifying
expenses
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Reminders

• Most costs are identified by account code.
• Example of allowable vs. unallowable cost
• 24611 is the account code for recruitment
  advertising (allowable cost)
• 24612 is the account code for public relations
  and institutional advertising (unallowable cost)

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Reminders (contd.)

• Example of properly recording costs
• 23522 is the account code for maintenance
  materials (tracks to OM pool)
• 20102 is the account code for general operating
  supplies (????)

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Reminders (contd.)

• However, some costs can only be identified by use
  of indexes with specific Program or Org Codes.
• Example Salary and travel account codes are not
  unique to any cost pool (numerator) or function
  (denominator). These costs must be placed in the
  proper index to correctly identify their purpose.

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Thanks for Your EffortsIt Cant Be Done Without
You!