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Representative Reimbursements on the F
Component of the FA Rate

• Leading Excellence in Research Costing Practices

General Conference 11/2 11/4, 2016
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Representative Reimbursements on the F
Component of the FA Rate

• DISCUSSION TOPICS
• Recharge costs on
• Building Depreciation
• Equipment Depreciation
• OM Expenses
• Interest Library
• Data Requirement and the influence on FA
• Obtaining a representative FA recovery of
  depreciation while remaining consistent with
  University accounting policies and UG guidelines.

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Representative Reimbursements on the F
Component of the FA Rate

• Getting to know your presenter(s)
• Greg Sheahan, President, HCA Asset Management
  LLC. Previous life Greg worked in the
  construction industry - owner/operator of Sheahan
  Construction.
• Steve Cofield, Director Cost Analysis, Oregon
  Health and Science University. Previous life
  Steve worked in the FA department at the
  University of Idaho.

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Representative Reimbursements on the F
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• Things that HCA Asset Management and Greg have in
  common?
• HCA Asset Management, previously Hirons
  Associates is celebrating 31 consecutive years of
  providing client services in 2016.
• Greg is celebrating 31 consecutive years of
  marriage to the same women in 2016.

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Representative Reimbursements on the F
Component of the FA Rate

• This makes Greg a

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Representative Reimbursements on the F
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• Greg and Frances have two children
• Daughter married and currently living in Altus
  Oklahoma with her husband, a captain/pilot in the
  Air Force full blown adult(s)
• Son currently a junior at Utah State University
  not a full blown adult yet, we like to consider
  a work in process.

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Representative Reimbursements on the F
Component of the FA Rate

• Greg enjoys outdoor activities

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Representative Reimbursements on the F
Component of the FA Rate

• and family fun

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Representative Reimbursements on the F
Component of the FA Rate

• Steve and Nicole also have two children
• Two boys, 4th 6th Grade
• Hours spent at soccer, basketball, baseball and
  football practices, games, tournaments, etc.
• 4th Grader is easy Just does his thing!
• 6th Grader is a different story Cell phone,
  girls, attitude. Hopefully he makes it to 7th
  Grade.

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Representative Reimbursements on the F
Component of the FA Rate

• Also enjoy family time and the many outdoor
  activities the Pacific Northwest has to offer.

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Representative Reimbursements on the F
Component of the FA Rate

• Changes that have impacted building equipment
  depreciation with the introduction of the Uniform
  Guidance (UG) OMB 2 CFR 200
• Combines 8 circulars into one document
• Replaces OMB Circular A-21, 2 CFR 220
• Additional emphasis being placed on stewardship
  and accountability

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Representative Reimbursements on the F
Component of the FA Rate

• 2 CFR 200 200.12
• Reconciled to Financial System Fixed Asset Detail
• Interest Expenses for Buildings follows Building
  Cost
• Not intended to impose on an institution with
  specific accounting practices if compliant with
  generally accepted accounting practices

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Representative Reimbursements on the F
Component of the FA Rate

• Building Depreciation
• Componentization Segregation of building
  parts into components that roll up into
  Building shell, Building Services and Building
  Fixed Equipment.
• 1) Component costs represent original acquisition
  costs.
• 2) Federal funds are appropriately apportioned
  and deducted.
• 3) Fixed equipment costs are treated as a
  component of the building depreciation.
• 4) Depreciation generated from the cost
  distribution to component(s) is allocated to the
  entire building on an assignable square foot
  basis.

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Representative Reimbursements on the F
Component of the FA Rate

• Building Depreciation
• 5) On occasion, the component is not fully
  depreciated but is being replaced - floor cover,
  roof cover etc. layering effect addressed by
  componentization.
• 6) By depreciating at the component level and
  reviewing areas of renovation one now has the
  ability to remove only component costs that are
  being replaced accurate removal costs not a
  of project cost.
• 7) Not all buildings need to be considered for
  detailed cost segregation. Specific criteria can
  be set for buildings (i.e. buildings with 25 gt
  organized research with book cost of 20 million
  gt) as long as not cherry picking.

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Representative Reimbursements on the F
Component of the FA Rate

• Building Depreciation
• 8) Sub components (i.e. HVAC, electric etc.)
  roll-up
• 9) University data used to establish supportable
  lives
• 10) Life spans that reflect consumption at your
  institution
• 11) The impact component accounting lives have on
  FA
• A-21 section J.12.b.(4) now Uniform Guidance UG
  three general components
• When the depreciation method is used for
  buildings, a building may be divided into three
  general components. Each component item must
  then be depreciated over its estimated useful
  life.

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Representative Reimbursements on the F
Component of the FA Rate

• Building Componentization YES
• Depreciation already in place per GASB
  compliance
• Compliance with UG, A-21 A110 cost standards
  FA overhead recoveries
• Could help to facilitate a Room Rental Charge
• Plan Future Renovation Schedule
• Positive impact on FA rate calculations/recover
  ies

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Representative Reimbursements on the F
Component of the FA Rate

• Equipment Depreciation
• CFR 200.2
• Acquisition Cost The cost of asset including
  any additional cost to ready asset for its
  intended use.
• Ancillary charges, such as taxes, duty,
  protective in transit insurance, freight and
  installation may be included or excluded from the
  acquisition costs in accordance with current
  Universities regular accounting practice.
• Acquisition costs for software includes
  development costs capitalized in accordance GAAP.

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Representative Reimbursements on the F
Component of the FA Rate

• Equipment Depreciation
• CFR 200.12
• Tangible or intangible assets used in operations
  having a useful life of 1 year gt capitalized in
  accordance with GAAP.
• Land, buildings (facilities), equipment and
  intellectual property whether acquired by
  purchase, construction, manufacture, lease
  purchase, exchange or through capital leases.
• Depreciation computed in accordance with Section
  200.449 and Appendix III (IHE) formerly A-21
  section J.14 and F.2.

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Representative Reimbursements on the F
Component of the FA Rate

• Equipment Depreciation
• CFR 200.20
• Computing devices machines used to acquire,
  store, analyze, process and publish data and
  other information electronically.
• This includes accessories or peripherals for
  printing, transmitting and receiving or storing
  electronic information.
• These sensitive items, regardless of price, are
  recognized as assets that store private data and
  should be tracked (i.e. IT assets).

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Representative Reimbursements on the F
Component of the FA Rate

• Equipment Depreciation
• CFR 200.89
• Special purpose equipment equipment which is
  used only for research, medical , scientific, or
  other technical activities.
• Examples of special purpose equipment include
  microscopes, x-ray machines, surgical equipment,
  spectrometers etc.
• FA depreciation recovery on equipment using of
  research by room predicated on institutions
  ability to demonstrate accurate
  accountability/location of assets.

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Representative Reimbursements on the F
Component of the FA Rate

• Equipment Depreciation
  CFR 200.313
• Lesser of the capitalization threshold of
  institution or 5,000.
• Institutions have moved to a higher threshold
  (5,000 gt) in recent years periodic review is
  needed to confirm current accounting
  classification choices and lives.
• As research becomes more detailed and specific
  the lives associated with the instrumentation
  could be limited.
• Federally titled equipment tracked period not
  subject to entity thresholds (FAR) guidelines.
  University must submit annual inventory listing
  of federally-owned property in its custody.

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Representative Reimbursements on the F
Component of the FA Rate

• Equipment Depreciation
  CFR 200.313
• Federally-owned equipment must be used in the
  program or project for which it was acquired as
  long as needed.
• Managing requirements property records must be
  maintained that includes description of the
  property, serial , source of funding, who holds
  title, acquisition date, cost of property, of
  federal participation. Location, use and
  condition of the property and any ultimate
  disposition data including the date of disposal
  and sale price of property.
• A physical inventory must be taken and the
  results reconciled with financial records every
  two years

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Representative Reimbursements on the F
Component of the FA Rate

• Equipment Depreciation
  CFR 200.313
• A control system must be in place to ensure
  adequate safeguards to prevent loss, damage or
  theft of the property. Any loss damage or theft
  must be investigated.
• Adequate maintenance procedures must be developed
  to keep property in good working condition.
• Well-documented consistent treatment(s) of
  equipment accounting classification, useful lives
  and depreciation allocation in conjunction with
  Uniform Guidance guidlines should be utilized by
  institutions when submitting FA rate
  calculations for defensible methodologies.

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Representative Reimbursements on the F
Component of the FA Rate

• Equipment Depreciation F22 Raptor
  Fighters

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Representative Reimbursements on the F
Component of the FA Rate

• Equipment Depreciation, keep the data clean YES
• Provides assistance in space room function
  review/consistency
• Removal of ghost items
• Could result in positive impact on financial
  overhead rate calculations/recoveries
• ROI Management will be interested (they love
  these 3 letters)
• Audit confidence A-133, UG audits etc.

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Representative Reimbursements on the F
Component of the FA Rate

• Operations and Maintenance Expenses
• Expenses incurred for administration,
  supervision, operation, maintenance, preservation
  and protection of the institutions physical
  plant. The operation and maintenance expense
  category should also include its allocable share
  of fringe benefit costs, depreciation and
  interest costs.
• Expenses included in this category should be
  allocated in the same manner as described in
  subsection 2b. For depreciation.
• 
  CFR 200 Appendix III

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Representative Reimbursements on the F
Component of the FA Rate

• Operations and Maintenance Expenses
• Normally expenses in this category include
• Utilities
• Repair and Renovation
• Janitorial/housekeeping
• Grounds maintenance
• Safety and Security
• Environmental safety-Hazardous waste disposal
• Facility planning, Space Capital Leasing
• 
  
• CFR 200 Appendix III

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Representative Reimbursements on the F
Component of the FA Rate

• Operations and Maintenance Expenses
• This is typically the largest component of the
  FA rate and is usually somewhere between 10 -
  20
• Strategies to Maximize the OM Allocation
• Utilities EHRS Sub-Pools -
• Discrete methodology to allocate to specific
  buildings
• Reclassification from Institutional Support
• ITG Infrastructure
• Property Insurance
• Solid (somewhat aggressive) Space Survey
• Still must be defensible but dont be afraid to
  push the envelope a bit
• Use prior negotiations / other institutions /
  consultants feedback to know what areas
  government is focusing on

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Representative Reimbursements on the F
Component of the FA Rate

• Interest Expense
• Typically 0 - 4
• Includes debt related to Buildings and Equipment
• Can be a challenge to tie back to original bond
  issuance
• SWCAP - State Interest incurred on behalf of the
  university
• Allocated based on Space Survey (Usually at
  Building Level)
• Library
• Typically 0 - 4
• Library Study 12 month survey of actual use
• Separate cost pool for Scientific or Medical
  Library
• Allocation by FTE
• CAS wants to see an adjustment for Other Users

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Representative Reimbursements on the F
Component of the FA Rate

• Data Requirements and Impacts
• Financial Accounting Data
• General Ledger / Financial Data
• Payroll / FTE Data
• Asset Data
• Interest / SWCAP
• Recharge Billing Information
• Affiliated Hospital / Foundation
• Facility Management Data
• Utility Metering
• EHRS Utilization
• Space Management Data
• Space Survey Information
• 
  

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Representative Reimbursements on the F
Component of the FA Rate

• Data Requirements and Impacts
• Sponsored Projects Data
• Cost Sharing / NIH Salary Cap
• On vs Off Campus
• Capital Projections Data
• Design Construction / Space Planning / Capital
  Allocations Approved Projects
•