University Business Policies and Procedures Manual

2425
RECOVERY OF FACILITIES & ADMINISTRATION COSTS
Effective Date: July 15, 1998
Revised: 10/16/98, 12/08/99, 01/01/01, 08/01/06
Subject to Change Without Notice

Authorized by Regents' Policy 5.9 "Sponsored Research"

1. General

Recovery of indirect costs is a federal policy implemented to recognize that universities and other contractors providing contractual services to the federal government have costs indirectly associated with providing the contract services. The governing federal regulations now refer to indirect costs as facilities and administration (F&A) costs; this policy will use that terminology. The federal government has developed policies by which the University and others can document these support costs and add them to the total funding requirements as facilities and administration costs. The University requires recovery of both the direct and facilities and administration costs incurred when performing externally funded research, instruction and training, and other sponsored projects or programs. Principal investigators must include facilities and administration costs in proposal budgets for contracts, grants, and other awards.

2. Allocation of Facility and Administrative Cost Recovery Funds

Revenue resulting from the recovery of facilities and administration costs allowed on sponsored research and public service projects is recognized by the University as "unrestricted" income. It is the objective of the University maximize the use of this source of revenue for the benefit of the University's research and public service programs. Revenue may be allocated to:

• seed new faculty research projects;
• award cost sharing or matching funds on individual projects,
• support UNM's technology commercialization program,
• develop new research facilities; and
• build the University's sponsored research and public service program.

It is recognized that a portion of the facility and administrative cost recovery revenue must be committed to support the administration of sponsored programs in terms of allocations to specific administrative support functions and allocations to colleges and departments.

The Vice President for Research & Economic Development is responsible for the overall allocation plan for facility and administrative cost recovery revenue. The Executive Vice President for Health Sciences will be responsible for managing the allocation of facility and administrative cost recovery revenue earned through Health Sciences Center sponsored research and public service programs, in consultation with the Vice President for Research & Economic Development.

3. Facilities and Administration Costs

OMB Circular A-21, defines facilities and administration costs as "those [costs] that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project." Facilities and administration costs include, but are not limited to:

• general and administrative expenses,
• departmental administration expenses,
• sponsored projects administration expenses,
• student services administration expenses,
• building usage allowance,
• equipment depreciation,
• operation and maintenance expenses,
• interest expense,
• deferred maintenance expense, and
• library expenses.

Facilities and administration costs are charged to a project or program using the facility and administrative cost rates listed in Exhibit A. The rates are applied to the modified total direct costs (MTDC) of a project or program.

3.1. Modified Total Direct Costs (MTDC)

Modified total direct costs are total direct costs less the following:

• capital expenditures: buildings (including alterations and renovations) and equipment items costing $1,000 or more with a useful life of more than one (1) year;
  
• the portion of each subaward greater than $25,000;
  
• hospitalization and other fees associated with patient care whether the services are obtained from an owned, related, or third-party hospital or other medical facility;
  
• space rental or maintenance expense charged directly to projects; and
  
• student tuition remission and student support costs (e.g., student aid, stipends, dependent allowances, scholarships, fellowships). This does not include payments for services rendered, e.g., research assistant tuition.

4. Facility and Administrative Cost Rates

The University Financial Services' Office calculates on-campus and off-campus facility and administrative cost rates for each type of sponsored activity (see Section 8. herein) using actual costs incurred. Off-campus rates are applicable to projects performed at facilities not owned or maintained by the University. The Associate Vice President for Financial Services submits these detailed calculations and proposed rates to the cognizant federal agency for review and approval. The federal agency and the Associate Vice President for Financial Services, on behalf of the University, negotiate and agree on a rate and applicable time period. These rates are also applicable to non federally sponsored programs. The University's federally approved facility and administrative cost rates for sponsored projects and programs are listed in Exhibit A.

 4.1. Implementing New Facility and Administrative Cost Rates

When new facility and administrative cost rates are approved, the Office of Research Services or the HSC Pre-Award Administration Office negotiates amendments with funding agencies to modify ongoing contracts, grants, and other agreements to reflect the new rates. Amendments are not negotiated when:

• the old rate remains fixed during the award or
• the use of new rates is automatically authorized by contract, grant, and other agreement provisions.

5. Proposals to Funding Agencies

Proposals submitted to federal and non-federal agencies must include facilities and administration costs, using the cost rates listed in Exhibit A.

5.1. Exceptions to the University's Federally Approved Facility and Administrative Cost Rates

Some sponsors may have published guidelines prohibiting or limiting the recovery of facilities and administration costs. If the chairperson, dean, and/or director consider the program desirable, the Vice President for Research & Economic Development or the Executive Vice President for Health Sciences may approve use of a lower rate or amount. To request approval, the principal investigator must provide justification with the completed pre-award forms. The principal investigator must report any objection, refusal, or undue delay by a sponsor to recognize and/or incorporate the federally approved facility and administrative cost rates to the University Office of Research Services or the University HSC Pre-Award Administration Office immediately.

5.1.1. State of New Mexico Projects or Programs

Facility and administrative cost rates for State of New Mexico projects vary by agency. The principal investigator should contact the Office of Research Services or the HSC Pre-Award Administration Office for the appropriate rate. If the State of New Mexico specifically states in the proposal guidelines that it intends to fully one hundred percent (100%) finance a grant or contract with federal funds, the federally approved facility and administrative cost rates will be used.

5.1.2. Investigative New Drug (IND) Projects or Programs

Studies involving human subjects for an Investigational New Drug (IND) or device as defined by the FDA (clinical trials) qualify for a different facility and administrative cost rate. The principal investigator must contact the HSC Pre-Award Administration Office for the current rate.

 6. Facility and Administrative Cost Rate and Recovery Responsibilities

6.1. Financial Services' Office

The Financial Services' Office is responsible for:

• preparing the facility and administrative cost rate proposal,
• negotiating the facility and administrative cost rates with the cognizant federal agency,
• distributing the approved rate agreement to the campus, and
• acting as liaison with federal and non-federal auditors.

6.2. Principal Investigator

Each principal investigator is responsible for including facilities and administration costs at the University's approved rate (listed in Exhibit A.) in each proposal for external funding. All exceptions must be approved per Section 5.1. herein.

6.3. Office of Research Services/ Health Sciences Pre-award Administration Office

The Office of Research Services (main campus, branches) and the HSC Pre-award Administration:

• provide information to principal investigators on facility and administrative cost rates and policies and
  
• review and approve proposals and awards to ensure inclusion of approved facility and administrative cost rates.

6.4. Contract and Grant Accounting

Contract and Grant Accounting (main campus and HSC):

• calculate, record, and bill facilities and administration costs at the approved rates, and
  
• review contract and grant awards when facility and administrative cost rates change to determine if the awards should be amended.

6.5. Vice President for Research & Economic Development or the Executive Vice President for Health Sciences

The Vice President for Research & Economic Development and the Executive Vice President for Health Sciences:

• determine the allocation of recovered facilities and administration costs, and
  
• approve any exceptions to federally approved facility and administrative cost rates.

 7. Facility and Administrative Cost Components

The Financial Services' Office is responsible for preparing the facility and administrative cost proposal to the cognizant federal agency, in accordance with this section. Facilities and administration costs consist of a facilities component and an administrative component. These facility and administrative cost components are divided into the following categories (facility and administrative cost pools).

7.1. Facilities Component

7.1.1. Operations and Maintenance of Plant

Operations and maintenance of plant includes costs that have been incurred for the administration, supervision, operation, maintenance, preservation and protection of University facilities. Typical costs include security, utilities, custodial, grounds and landscaping, automotive, fuel management, property insurance, signs, locks/keys, metal shop, recycling, ordinary and normal repairs and renovations, maintenance and operation of buildings and other facilities, and administration. These costs are allocated to the appropriate indirect cost pool and major function, as described more fully in OMB Circular A-21, based on the square footage occupied.

7.1.2. Building, Land Improvement, and Equipment Costs

Building and land improvement costs are calculated using a two percent (2%) per year usage allowance. Equipment costs are calculated using depreciation methods. Equipment costs are not taken on loaned equipment and assets acquired with federal funds. Building, land improvement, and equipment costs are allocated to the appropriate indirect cost pool and major function based on the square footage occupied. Buildings and/or equipment must be in use to qualify.

7.1.3. Interest-UNM

This category includes interest costs incurred by the University for the acquisition of long-lived assets. These costs are allocated to the appropriate indirect cost pool and major function based on specific benefit.

7.1.4. Interest-New Mexico

This category includes interest costs paid by the state of New Mexico on behalf of the University. These costs are allocated to the appropriate indirect cost pool and major function based on specific benefit.

7.1.5. Deferred Maintenance

Deferred maintenance includes costs incurred repairing University property. These costs are allocated to the appropriate indirect cost pool and major function based on specific benefit.

7.1.6. Library

Library costs include the cost of operating University library systems, which includes the cost of books and library materials. These costs are allocated to the appropriate indirect cost pool and major function based on primary categories of users.

7.2. Administrative Component

Facilities and administration costs in the administrative component are allocated based on modified total direct costs which are defined in Section 3.1. herein.

7.2.1. Departmental Administration

Departmental Administration costs include costs incurred for the administration of instructional and sponsored activity in academic departments, colleges and divisions. These costs are allocated based upon the modified total direct cost of each sponsored activity and instruction.

7.2.2. General and Administrative

General and administrative costs include costs incurred for the central administration or institutional support of the University. This administration and support is provided by the Board of Regents, President's Office, Senior Executive offices, the Controller's organization, Budget Department, University Counsel, Department of Risk Management, Department of Human Resources, Purchasing Department, Internal Audit, and other administrative service departments. These costs are allocated based on modified total direct costs for instruction, sponsored activities, other institutional activities, and other facility and administrative cost pools.

7.2.3. Sponsored Projects Administration

Sponsored projects administration costs include costs incurred for the administration of sponsored projects, such as preparation and submission of proposals, contract negotiation, fiscal management, financial report preparation, and billings and collections. These costs are allocated based on the modified total direct cost for each sponsored activity.

 7.2.4. Student Services Administration

Student services administration costs include costs incurred for the administration of student affairs and student services, which include admissions, registration, counseling and placement services, and student advisement. These costs are allocated based on the modified total direct costs for instruction and sponsored instruction.

8. Sponsored Activities

There are different facility and administrative cost rates for each type of sponsored activity listed below.

8.1. Sponsored Research

Sponsored research is all research activities funded by grants, cooperative agreements, or contracts from federal or non federal sponsors. Examples include, but are not limited to, the following:

• awards in support of basic and applied research,
  
• research training grants, and
  
• faculty career awards to support the general research efforts of the faculty.

8.2. Sponsored Instruction

Sponsored Instruction is defined as the teaching and training activities funded by grants, cooperative agreements, or contracts from federal or non federal sponsors. These include sponsored agreements supporting curriculum development and all types of teaching and training activities (whether offered for credit toward a degree or certificate, or offered on a non-credit basis). Activities may be offered through regular academic departments or separate divisions. Examples include, but are not limited to, the following:

• all projects for which the purpose is to instruct any student at any location,
  
• curriculum development projects at any level, and
  
• projects which involve University students in community service activities for which the students receive academic credit.

8.3. Other Sponsored Activities

Other Sponsored Activities (generally referred to as public service) are programs and projects funded by grants, cooperative agreements, or contracts from federal and non federal sponsors that involve the performance of work other than sponsored instruction or sponsored research. Examples include, but are not limited, to the following:

• support for conferences, seminars or workshops;
  
• library projects such as cataloging or establishing library databases;
  
• patient care projects (e.g., clinics);
  
• technical assistance projects;
  
• information compilation or dissemination; and
  
• projects in support of the University's public service activities.

  9. References

• Office of Management and Budget (OMB):
  Circular A-21--"Principles for Determining Costs Applicable to Grants, Contracts, and Other Agreements with Educational Institutions."
  
• Rate Agreement between The Regents of the University of New Mexico and the Department of Health and Human Services (the cognizant agency representing the Federal Government).
  

 10. Attachments

Exhibit A. - Facility and Administrative Cost Rates

 Comments may be sent to UBPPM@UNM.edu
http://www.unm.edu/~ubppm