Facilities & Administrative (F&A) Cost Recovery Report

April 22, 2009

Carol Hollingsworth, Director, Grants & Contracts Financial Services &

Janet Parker, Associate Vice President, Financial Affairs

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”

1

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.

2

F&A Cost BasisUniversities 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, subcontract costs in excess of the first $25,000, rent, scholarships, fellowships, tuition.

F&A is recovered as the sponsor’s funds are expended (and billed) for direct cost items allowed per the project budget.

3

4

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.

5

F&A Cost Rate Agreement

6

F&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.

7

F&A Rate-Actual vs. NegotiatedActual Negotiated

General & Administrative 13.9 % 9.6 %Departmental Administration 13.7 9.6 Sponsored Projects Administration 9.8 6.8 Administrative Subtotal 37.4 % 26.0 %

Building Depreciation 12.2 % 4.0 %Equipment Depreciation 5.6 3.0 Interest 5.0 2.0 Operations & Maintenance 14.9 9.0 Library 0.5 0.5 Facilities Subtotal 38.2 % 18.5 %

On Campus Rate (FY 2007 Cost Study) 75.6 % 44.5 %

8

Net 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)

9

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

RateRateAll RestrictedAll Restricted $5,703,051 / $5,703,051 /

$31,442,181$31,442,18118.1%18.1% $6,055,402 / $6,055,402 /

$34,035,958$34,035,95817.8%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)

10

Why is F&A Recovery Important?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%

11

F&A Revenue Recovery by Source

FY 04FY 04 FY 05FY 05 FY 06FY 06 FY07FY07 FY08FY08FederalFederal $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.

12

Sources 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

13

Sources 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

14

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

15

F&A Recovery by Area

16

F&A Recovery by Area

17

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 change Flexible - has been amended twice with another change

pending.pending. TransparentTransparent

18

Allocations to Generating Units

The MOU currently 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. Provost & VPR are reviewing alternate models to

assure strategic usage of the funds.

19

Debt Service

A significant amount of F&A recovery is pledged towards servicing debt:

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

20

Debt ServiceFaculty 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.

Estimated remaining payments are: FY09 $1,383,495

FY10 1,251,908FY11 924,722FY12 34,795

21

Building Maintenance, Leases & Capital Improvements

Reserve for capital requirements, leases 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.

22

VP Administrative Overhead

The following VPs receive a base budget allocation to support salaries & related administrative overhead in support of research:

Academic AffairsAcademic Affairs ResearchResearch Business AffairsBusiness Affairs

23

24

FY 2008 Total F&A Allocations $7,090,575

Reallocation to Generating Units, $1,221,523 , 17%

Bldg Mtnc & Capital Imprvmts,

$278,087 , 4%

Debt Service - Faculty Startup

Loans, $1,348,693 , 20%

Debt Svc - West Campus (Tobin)

Lab, $667,600 , 9%

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

, 14%

Academic Affairs Support, $875,000

, 12%

Research Support, $1,130,580 , 16%

Business Affairs Support, $522,200

, 7%

CAR Staff Vac/Sick Leave,

$46,892 , 1%

25

FY 2009 F&A Budget $6,482,482

Ctr for Arch Res - Vac/Sick Leave,

$50,000 , 1%

Business Affairs Support, $522,200

, 8%

Research Support, $1,130,580 , 17%

Academic Affairs Support, $875,000

, 13%Faculty Start-Up Costs, $38,000 ,

1%

Debt Svc - West Campus (Tobin) Lab, $666,000 ,

10%

Debt Service - Faculty Startup

Loans, $1,383,495 , 22%

Bldg Mtnc, Leases & Capital Imprvmts,

$522,000 , 8%

Reallocation to Generating Units, $1,295,207 , 20%

FY 10 Budget Outlook

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

New allocation will cover a portion of the estimated utility costs for the new Engineering building.

Each VP area will receive an increased base budget allocation: VPR $ 95,000 Academic Affairs $100,000 Business Affairs $ 60,000

26

27

FY 2010 Proposed F&A Budget $7,550,188

Reallocation to Generating Units, $1,315,000 , 16%

Bldg Mtnc, Utilities, Leases & Capital

Imprvmts, $733,000 , 10%

Debt Service - Faculty Startup Loans,

$1,251,908 , 17%

Debt Svc - West Campus (Tobin) Lab,

$667,500 , 9%

Faculty Start-Up Costs, $750,000 ,

10%

Academic Affairs Support, $975,000 ,

13%Research Support, $1,225,580 , 16%

Business Affairs Support, $582,200 ,

8%

Ctr for Arch Res - Vac/Sick Leave, $50,000 , 1%