Oregon State University AN INTRODUCTION TO FACILITIES & ADMINISTRATIVE RATES

Oregon State UniversityOregon State University

AN INTRODUCTION TO AN INTRODUCTION TO FACILITIES & FACILITIES &

ADMINISTRATIVE RATESADMINISTRATIVE RATES

Outline of This PresentationOutline of This Presentation

Background on F&A Rate calculationBackground on F&A Rate calculation How rate is calculatedHow rate is calculated Cost components used in calculationCost components used in calculation How recovered indirect (F&A) monies How recovered indirect (F&A) monies

are usedare used How you fit into the processHow you fit into the process SummarySummary

What are F&A Rates?What are F&A Rates?

F&A = indirect cost or overheadF&A = indirect cost or overhead The rate allows recovery of costs incurred The rate allows recovery of costs incurred

for common joint use that cannot be for common joint use that cannot be readily identified to a specific projectreadily identified to a specific project

The rate is applied to sponsored projectsThe rate is applied to sponsored projects Rates are negotiated with the Department Rates are negotiated with the Department

of Health and Human Services (DHHS)of Health and Human Services (DHHS)

Why Should a Grant pay Why Should a Grant pay F&A?F&A?

The F&A rate is calculated by an The F&A rate is calculated by an averaging concept, as established in averaging concept, as established in OMB Circular A-21. Most projects require OMB Circular A-21. Most projects require resources from resources from allall F&A pools F&A pools

The F&A rate is a The F&A rate is a recoveryrecovery of costs of costs already paid from all OSU fund sourcesalready paid from all OSU fund sources

All projects incur 2 types of costs—those All projects incur 2 types of costs—those directly related and those required for directly related and those required for indirect support of the projectindirect support of the project

OMB Circular A-21OMB Circular A-21

OMB Circular A-21 guides the F&A OMB Circular A-21 guides the F&A process, stipulates the proposal process, stipulates the proposal format, and addresses both direct format, and addresses both direct and F&A costsand F&A costs

F&A rates are calculated from OSU’s F&A rates are calculated from OSU’s audited financial statementsaudited financial statements

Indirect Costs are Indirect Costs are Assigned to 1 of 9 Cost Assigned to 1 of 9 Cost

PoolsPools FACILITIESFACILITIES

Building Building DepreciationDepreciation

Interest on debtInterest on debt Equipment Equipment

DepreciationDepreciation Operations & Operations &

MaintenanceMaintenance LibraryLibrary

ADMINISTRATIONADMINISTRATION General General

AdministrationAdministration Departmental Departmental

AdministrationAdministration Sponsored Sponsored

Projects Projects AdministrationAdministration

Student ServicesStudent Services

The Administrative Components are subject to a 26% cap

The Facilities Components are not subject to a cap

Administrative ComponentsAdministrative Components General Administration costs include:General Administration costs include:

President, Provost and OUS Chancellor’s President, Provost and OUS Chancellor’s OfficesOffices

Business Affairs (except for Research Business Affairs (except for Research Acctng.)Acctng.)

Information Services/Computing CenterInformation Services/Computing Center Budget OfficeBudget Office PurchasingPurchasing Human ResourcesHuman Resources

Administrative ComponentsAdministrative Components

Departmental Administration costs Departmental Administration costs include:include: Deans’ officesDeans’ offices Departmental chairsDepartmental chairs Departmental administrative staffDepartmental administrative staff

Other Administrative Components Other Administrative Components are Sponsored Projects are Sponsored Projects Administration and Student ServicesAdministration and Student Services

A Simplified F&A Rate Calculation

If any of the variables change (numerator or denominator), then the F&A rate will also change. Example: OSU received $147M in research awards in FY04.

Sponsored Agreements + Cost Sharing/Matching

F&A Costs= F & A Rate

(variables)

MTDC Base and Allocable F&A Costs for On-Campus Research Rate*

Facilities

Administration

Research Base

0.010.020.030.0

40.0

50.0

60.0

70.0

80.0

Facilities Administration Research Base

26% Administrative Cap in Place from 1994 to present

*Source: OSU F&A Rate Proposals

(mill

ion

s)

8.2 10.710.8

F&A Costs Needed to Maintain or Increase our Rate

37.3

39.2

40.1

0 10 20 30 40

41.50%

43.50%

44.50%

(0% rateincrease)

(2% rate increase)

(3% rate increase)

F&A Costs Required in FY2005 (millions)Assumes $92.9M in Research Expenditures

8.3%

= Increase over FY00 F&A Costs

F&

A R

ates

6.4%

9.2%

*FY00 F&A costs were $30.9M

*

How Does Cost Share “Figure” into this Process?

• Cost sharing has a negative impact on the F&A 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 F&A rate

Historical View of OSU’s Rates

0

5

10

15

20

25

30

35

40

45

1976

-77

1978

-79

1980

-81

1982

-83

1984

-85

1986

-87

1988

-89

1990

-92

1993

-96

1997

-00

2001-

2006

Res.

Ext.

OSA

On-Campus F&A Rates

Agreement Dates (Agreement Start Dates Coincide with OSU’s Fiscal Year Dates)

(Per

cen

t)

F&A Cost CalculationF&A Cost Calculation Step 1: Start With Base-year Step 1: Start With Base-year AuditedAudited

Financial Statement and Identify Each Financial Statement and Identify Each Cost for Inclusion in Either a Direct Cost Cost for Inclusion in Either a Direct Cost Base (the major functions) or an Base (the major functions) or an Indirect Cost Pool (Indirect Cost Pool (Program CodesProgram Codes are are used)used)

Step 2: Remove Exclusions (tuition, Step 2: Remove Exclusions (tuition, facility rental, capital expenses, etc.) facility rental, capital expenses, etc.) and eliminate Federally Funded costs & and eliminate Federally Funded costs & unallowable costsunallowable costs

F&A Cost Calculation F&A Cost Calculation ((contd.contd.))

Step 3: Identify Any Indirect Costs Step 3: Identify Any Indirect Costs in Other Pools by in Other Pools by Account CodeAccount Code and Allocate to the Appropriate and Allocate to the Appropriate Indirect Cost PoolIndirect Cost Pool

Step 4: Allocate the Indirect Cost Step 4: Allocate the Indirect Cost Pools to the Major Functions of Pools to the Major Functions of Instruction, Organized Research, Instruction, Organized Research, Other Sponsored Activities and Other Sponsored Activities and Other Institutional Activities Other Institutional Activities ((numerator of the formulanumerator of the formula))

F&A Calculation (with Cross Allocations)

Interest; Building & Equipment Depreciation

Operations andMaintenance

General Administration

DepartmentAdministration

Sponsored ProjectsAdministration

Library

Student Services

Indirect Cost Pools

Allocated fromSpace Study &

Financials

Allocated fromMTDC in Operating

Ledger, Based onSupported Function

Allocated from Special Study or Population Usage

Allocated fromStudent FTE

Fac

ilit

ies

Por

tion

Adm

inis

trat

ive

Por

tion

Basis for Allocation Cross Allocation #1:

Bldg. & Equip. Depreciation

Cross Allocation #2:O & M

Cross Allocation #3:General Administration

F&A Cost Calculation (F&A Cost Calculation (contd.contd.)) Step 5: Identify the Direct Costs Step 5: Identify the Direct Costs

of Instruction, Organized of Instruction, Organized Research (including cost sharing), Research (including cost sharing), Other Sponsored Activities and Other Sponsored Activities and Other Institutional Activities Other Institutional Activities ((denominator of the formuladenominator of the formula))

Step 6: Perform the Calculations Step 6: Perform the Calculations to Arrive at a Proposed F&A Rate to Arrive at a Proposed F&A Rate for Organized Research and Other for Organized Research and Other Sponsored ActivitiesSponsored Activities

Computing the F&A Rates






Library

Student Services

Indirect Cost PoolsAfter Cross Allocations

Fac

ilit

ies

Por

tion

Adm

inis

trat

ive

Por

tion

OrganizedSponsoredResearch

OtherSponsoredActivities

OtherInstitutionalActivities

Instruction

Functions

MTDCOrganizedSponsoredResearch

MTDCOther

SponsoredActivities

DistributionBase

÷

÷

F&ARate

= %

= %

Note: Distribution BaseFor Instruction and OtherInstitutional Activities Are

Not Shown Since F&A RatesAre Neither Computed Nor

Negotiated for These Functions

FY 2000 Proposal Components – Research Rate

2.1

3.010.7

0.7

6.5

19.3

1.50.1

Bldg. UseEqpt. UseO&MLibraryGADASPAStu. Ser.

Facilities Components are shaded orange; Administrative Components are shaded green

How Does OSU Use Returned How Does OSU Use Returned Overhead (ROH)?Overhead (ROH)?

OSU must use some of its F&A OSU must use some of its F&A recoveries, as described in Section recoveries, as described in Section J.14.h of OMB Circular A-21, to J.14.h of OMB Circular A-21, to improve research facilitiesimprove research facilities Research facilities upkeep (BUC Research facilities upkeep (BUC

funds -- $0.5M in FY04)funds -- $0.5M in FY04) Research equipment (RERF fund -- Research equipment (RERF fund --

$3.18M in FY04)$3.18M in FY04) The remainder can be used at the The remainder can be used at the

discretion of OSUdiscretion of OSU

How Does OSU Use How Does OSU Use Returned Overhead (ROH)?Returned Overhead (ROH)?

Returned overhead (ROH) is allocated in Returned overhead (ROH) is allocated in OSU’s budget process for:OSU’s budget process for: Utilities, security, custodial, general Utilities, security, custodial, general

maintenance, inventory control, risk maintenance, inventory control, risk managementmanagement

Library supportLibrary support College accounting & administrative College accounting & administrative

support, and other usessupport, and other uses

How Does OSU Use How Does OSU Use Returned Overhead (ROH)?Returned Overhead (ROH)?

Sponsored program and compliance Sponsored program and compliance supportsupport

Human resources, payroll, purchasing, Human resources, payroll, purchasing, accounts payable, and cashiering accounts payable, and cashiering supportsupport

New research faculty start-up support New research faculty start-up support ($1.25M in FY04)($1.25M in FY04)

F&A Rates of Peer F&A Rates of Peer InstitutionsInstitutions

Institution Rate

Institution Rate

Cornell Univ.Cornell Univ. 58.058.0 Purdue Univ.Purdue Univ. 52.052.0

Univ. ArizonaUniv. Arizona 51.551.5 Ohio State Univ.Ohio State Univ. 49.549.5

Michigan State Michigan State Univ.Univ.

49.549.5 Univ. of IllinoisUniv. of Illinois 48.548.5

Univ. Cal., DavisUniv. Cal., Davis 48.548.5 Texas A&M Univ.Texas A&M Univ. 45.545.5

Univ. WisconsinUniv. Wisconsin 45.545.5 Oregon State Univ.Oregon State Univ. 41.541.5

Why are OSU’s F&A rates Why are OSU’s F&A rates low?low?

The newer buildings (Ag & Life Sciences The newer buildings (Ag & Life Sciences Bldg., Richardson Hall) received major Bldg., Richardson Hall) received major Federal funding, which must be excludedFederal funding, which must be excluded

Most buildings are old and have low Most buildings are old and have low construction costs. The last proposal used construction costs. The last proposal used a 2% use allowance (50-year life) a 2% use allowance (50-year life)

Maintenance costs incurred are lowMaintenance costs incurred are low Utilities on west coast are lower than Utilities on west coast are lower than

elsewhereelsewhere Oregon public institutions have a history of Oregon public institutions have a history of

low debt financinglow debt financing

How Can the F&A Rate be How Can the F&A Rate be Optimized?Optimized?

Properly code costs in Banner (HRIS and Properly code costs in Banner (HRIS and FIS)FIS)

Accurately complete the Space Study. Accurately complete the Space Study. The space study affects building The space study affects building depreciation, equipment depreciation, depreciation, equipment depreciation, and operations and maintenance and operations and maintenance

Accurately complete the Library StudyAccurately complete the Library Study

How Does Capital How Does Capital Equipment Impact the F&A Equipment Impact the F&A

Rate?Rate? Depreciation on capital equipment Depreciation on capital equipment

purchased with sponsored programs purchased with sponsored programs funds and cost share funds must be funds and cost share funds must be excluded from the calculation excluded from the calculation processprocess

Equipment Purchases for Organized Research by Source of Funds*

0

10

20

30

40

50

60

70

Equipment Value

Total

Amount Excluded

*Data from FY00 Proposal

(mill

ion

s)

$61.48MTotal

$29.05MSpon. Prog. & CS

Amount Available forEquipment portion

ofF&A Rate

Calculation:$32.4M

How Program Codes Relate to F&A Rates

Building & Equipment Depreciation





Library

Student Services

Indirect Cost Pools(Numerator)

Fac

ilit

ies

Por

tion

Adm

inis

trat

ive

Por

tion




Instruction

Functions(Denominator)

4xxxx – Auxiliaries20600 – Services/TestingUnallowable Expenses

01100—Instruction

11xxx – Ag. Ex. Sta. Res.12000 – FRL13000 – Other CIPs15xxx – Spon. Res.17xxx – Cost Share, Res.

5xxxx – O&M52500 – Facil. Maintenance

01800 – Dept. Aca. Support11200 – Ag. Exp. Sta. Admin.30600, 30800 – Dean’s Office

18xxx – Other Spon. Act.2xxxx – Spon. Pub. Ser.

How Costs are RecordedHow Costs are Recorded DoDo Matter Matter

The function of an expense should dictate The function of an expense should dictate where the cost is recorded.where the cost is recorded.

ExampleExample: A department chair charges travel : A department chair charges travel to an FS Foundation index. What is the to an FS Foundation index. What is the purpose of the travel? purpose of the travel? Dept. administration expense will go to an F&A Dept. administration expense will go to an F&A

cost poolcost pool Instruction expense will go to a major function Instruction expense will go to a major function

(direct cost activity)(direct cost activity) Fund raising/lobbying expense will go to a Fund raising/lobbying expense will go to a

major function (direct cost activity)major function (direct cost activity)

F&A Cost Pools vs. Major Functions

Building & Equipment Depreciation





Library

Student Services

Indirect Cost Pools(Numerator)

Fac

ilit

ies

Por

tion

Adm

inis

trat

ive

Por

tion




Instruction/Dept. Rsch.

Functions(Denominator)

FSxxxDExpense(01800)

FSxxxNExpense(01100)

FSxxxVExpense(30600)

305,000500,000

Illustration - F&A Pool vs. Function

• FSxxxD index— Puts the cost in an F&A cost pool

• FSxxxN index—Puts the cost in the instruction function

FSxxxNFSxxxD

Cost of travel is $5,000

300,000505,000

O&M Program CodeO&M Program Code

Use the O&M Program Code (52500) to Use the O&M Program Code (52500) to identify Operations & Maintenance costsidentify Operations & Maintenance costs

ExampleExample: A Building Manager’s salary is : A Building Manager’s salary is currently paid from a Dean’s admin. currently paid from a Dean’s admin. indexindex Change the salary expenses to the index Change the salary expenses to the index

with O&M program code 52500. This with O&M program code 52500. This program code “tracks” to the O&M cost program code “tracks” to the O&M cost pool rather than a capped department pool rather than a capped department administration pool.administration pool.

Illustration – New Bldg. Mgr. Prog. Code






Library

Student Services

Indirect Cost Pools

Program Code52500

Tracks Here

Program Code30600

Tracks Here

Fac

ilit

ies

Por

tion

Adm

inis

trat

ive

Por

tion

The Administrative Components are Capped at 26%

There is no Cap onFacilities Components

The Next ProposalThe Next Proposal The proposal will be based on FY09 The proposal will be based on FY09

financial data (financial data (July 2008 – June 2009July 2008 – June 2009)) Cost coding and FTE/salary will be Cost coding and FTE/salary will be

reviewed throughout FY09reviewed throughout FY09 OSU will start the F&A proposal at OSU will start the F&A proposal at

the close of FY09 (the close of FY09 (Aug 2009Aug 2009))

The Next ProposalThe Next Proposal Library Study will take place Library Study will take place

throughout FY09throughout FY09 Equipment inventory will be Equipment inventory will be

completed in the spring of FY09completed in the spring of FY09 Space survey will be completed by Space survey will be completed by

the spring of 2009the spring of 2009 New agreement should be negotiated New agreement should be negotiated

in the spring or early summer of in the spring or early summer of 20102010

How You Fit into this ProcessHow You Fit into this Process

As departmental staff, you are critical As departmental staff, you are critical to OSU’s successful preparation of the to OSU’s successful preparation of the next F&A rate proposal.next F&A rate proposal.

You are involved in:You are involved in: Space Study that will take place in spring Space Study that will take place in spring

‘09 (‘09 (appropriate coding of space is criticalappropriate coding of space is critical)) Equipment Inventory that will take place Equipment Inventory that will take place

in spring ’09 (in spring ’09 (identification of equipment identification of equipment location and condition is criticallocation and condition is critical))

How You Fit into this ProcessHow You Fit into this Process

You are involved in: (You are involved in: (contd.contd.)) Completion of PAR formsCompletion of PAR forms Processing payments for goods and Processing payments for goods and

servicesservices Processing payroll transactionsProcessing payroll transactions

YouYou can help by can help by correctly coding and correctly coding and identifying expensesidentifying expenses

RemindersReminders

Most costs are identified by account Most costs are identified by account code. code.

Example of allowable vs. unallowable costExample of allowable vs. unallowable cost: : 24611 is the account code for 24611 is the account code for

recruitment advertising (recruitment advertising (allowable costallowable cost)) 24612 is the account code for public 24612 is the account code for public

relations and institutional advertising relations and institutional advertising ((unallowable costunallowable cost))

Reminders (Reminders (contd.contd.))

Example of properly recording costs:Example of properly recording costs: 23522 is the account code for 23522 is the account code for

maintenance materials (maintenance materials (tracks to O&M tracks to O&M poolpool))

20102 is the account code for general 20102 is the account code for general operating supplies (operating supplies (????????))

Reminders (Reminders (contd.contd.))

However, some costs can However, some costs can onlyonly be be identified by use of indexes with identified by use of indexes with specific Program or Org Codes.specific Program or Org Codes.

ExampleExample: : SalarySalary and and traveltravel account account codes are not unique to any cost pool codes are not unique to any cost pool ((numeratornumerator) or function () or function (denominatordenominator). ). These costs must be placed in the These costs must be placed in the proper index to correctly identify their proper index to correctly identify their purpose.purpose.

Thanks for Your Efforts—It Can’t Be Done Without You!

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Oregon State University AN INTRODUCTION TO FACILITIES & ADMINISTRATIVE RATES