Presentation Notes - Human Resource Services

4/3/2015
Understanding F&A Costs
Facilities and Administrative Costs
Revised April 2015
1
Welcome!
Presenters:
Preston Comstock
[email protected]
Grant & Contract Manager, Office of Research
509-335-8539
Karen Breese
[email protected]
F&A Rate Specialist, General Accounting
509-335-2056
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F&A Topics
•What are the "F&A" costs – the "Facilities & Administrative" or overhead costs?
•Source of terminology, definitions and guidance.
•How does the F&A rate impact WSU?
• Distribution of F&A returns, i.e. recoveries
• Questions from audience
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Total Direct Costs –
recorded in WSU accounting for a Sponsored Project
Direct Expenses:
Salaries & Wages
Fringe benefits
Services
Supplies
Travel
Equipment
Subcontracts
Interest
Rent
Utilities
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Indirect Costs –
Not specific to a sponsored project.
Examples of Indirect Expenses:
Utilities
Building Maintenance
Building Depreciation
Care of WSU grounds
Custodial
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What are F&A Costs?
Incurred for common or joint objectives;
Identifiable at a high level, but not easily
identifiable at a project or activity level; and
Benefit the total institution.
Slide 6
Understanding F&A Costs Apr2012
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For Research at WSU
And
For Other Sponsored Activities
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Organized Research
Separately budgeted “Project" accounts
to record the activity for our sponsors:
Federal
State
government,
governments
 Corporations,
Foundations, Businesses
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Calculation of Research F&A Rate
All direct (MTDC) expenses related
to organized research
Sponsored
project costs
Overdrafts
Committed
Cost Sharing
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F&A Cost Calculation
Total Costs
Financial Statement
Operating Expenses
Capitalized Items
Exclusions
Federal Expenditures
Unallowable Costs
Adjustments
Less: Credits or
Plus: Allowable Interest
Modified
Total Direct
Costs
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Calculating the Base for the F&A Rate
Modified Total Direct Cost (MTDC)
MTDC include Total Direct Costs minus:
•Cost of equipment
•Buildings
•Patient care
•Off-campus rents
•Training Stipends
•Student Tuition / Scholarships and
•Sub-contracts over $25,000
Includes cost sharing in Organized Research
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Sponsored Project View – Example
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Simple Sponsored Program Project Example
One Project’s MTDC:
Total Direct Costs:
 Salaries/benefits:
 Supplies:
 Scholarships:
 Capital Equipment:
$130,000
$95,000
$ 5,000
$10,000
$20,000
Modified Total Direct Costs = ?
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Simple Sponsored Program Project continued
Total Direct Costs:
 Salaries/benefits:
 Supplies:
 Scholarships:
 Capital Equipment:
$130,000
$95,000
$ 5,000
$10,000
$20,000
Modified Total Direct Costs:
= $130,000 - $10,000 - $20,000
= $100,000 MTDC
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Rate
51%
Rate
$51
$100
Example F&A Rate
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Simple Sponsored Program Project continued
Modified Total Direct Costs = $100,000
•
Accounting System (the mainframe)
calculates and applies the 51% F&A Rate
(If project’s rate is Organized Research 51%)
And
• Posts the F&A Expense to ‘Object 13.’
• Sponsored Programs personnel
periodically review and confirm.
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What is the context – Why is there F&A?
Within the University – Various Projects
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Federal OMB A-21 Direct & Indirect (F&A) Costs
Direct – Major Functions F&A (Indirect or Overhead)
Instruction/Dept. Research Depreciation
Organized Research
Interest
Other Sponsored Activity
Departmental Administration
Other Institutional Activity Operations & Maintenance
Library
Sponsored Programs
Administration
General Administration
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Why are there F&A Rates?
To formalize Reimbursement
of University overhead costs from sponsors of research, instruction and training.
Context: Federal Cost Accounting
Reference: OMB Circular A-21
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OMB Circular A-21
• Guide to help universities properly cost
projects and calculate F&A costs.
• Circular issued by the Office of Management
and Budget that contains federal cost principles.
• Sets basis
•Cost Allowability and
•Cost Accounting Standards.
• Defines Direct and F&A costs.
• Defines methodologies for allocating
F&A to direct functions.
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Example:
A lab is used in
several projects.
• If Records could finitely track–then
we could differentiate between the uses.
Estimation is used when it is not possible to track:
• Joint Costs are pooled and allocated.
F&A costs are not charged as a direct cost.
How are F&A costs handled?
• Calculated indirectly to represent a return or recovery
of costs already incurred by the institution.
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Direct Costs
Costs that can be identified
specifically with a particular project.
or activity, or
Direct Costs –
Costs can be
directly assigned
to an activity with
relative ease and
a high degree of
accuracy.
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Cost Sharing – University Costs towards the Project
All contributions towards accomplishing a sponsored project, including Cash and In‐kind.
Personnel Costs are generally the majority of Cash
Costs (Cost Share) borne by the University.
Necessary, Allowable, Verifiable and
Measurable Resources used.
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Many LocationsMany Activities
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What are Examples of F&A Costs?
•Janitorial Services
•Repairs and Renovation
•Buildings & Grounds Maintenance
•Physical Plant
•Environmental Safety
•Facility Planning
•Utilities
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What are F&A Costs?
•Research Compliance
•Animal Care Review
•Human Subjects Review
•Office of Grant & Research Development
•Sponsored Programs
• Purchasing
•Payroll
• Human Resources
•Accounts Payable
• General Accounting
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What is an F&A Rate?
• A percentage.
• Ratio of the Indirect portion to the Direct costs.
If the F&A rate is 50% ‐
for every $1 spent on research ‐
 50 cents of cost is incurred by the University.
• Why don’t we charge the sponsor 50 cents directly?
F&A is difficult to estimate project-by-project.
The F&A agreement establishes that the
federal government or sponsor will pay
its fair share of total costs.
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F&A Rates
On-Campus Research
FY15
51.0
On-Campus Instruction
55.0
Off-Campus Research
26.0
Off-Campus Instruction
26.0
On-Campus Other
38.0
Off-Campus Other
26.0
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Cost Accounting Standards
Consistency
Reasonable
Allowable
Allocable
Context: Federal Cost Accounting
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How is the F&A Rate calculated?
Institutions that wish to be reimbursed for
Facilities and Administrative costs •Two methods of calculating an F&A rate:
 Long Form- Required for institutions
expending more than $10 million on
Federal grants and contracts annually.
 Short Form- Simpler allocation methodologies used by institutions that have <$10 mil research expenditures.
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Overall Timeline for F&A Rate process
Space
Usage
Survey
End of
Fiscal
Year
Financial
Report
F&A
process:
Calculate
& submit.
Start of
Fiscal
Year
Slide 31
F&A Rate Calculation
1. Start: Operating expenses in financial statement.
2. Adjust to exclude unallowable costs.
3. Map to A‐21 cost pools/groups and bases.
4. The
indirect
costs
dependent
Dept
The
indirect
costs
areare
dependent
onon
space
personnel
space
utilization,
utilizationproviding
and other– data
provided
by dept
property
inventory
records and other data – to
personnel
to allocate:
allocate:
• Building Depreciation
• Equipment Depreciation
• Operations and Maintenance
• Interest
5. Allocate indirect costs to direct cost pools.
6. Lastly, calculate Rates.
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Identify & Group similar activities
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F&A Costs
* Key Rate Components heavily dependent
on Department Information:
Research rate components
Building use
Equipment use
Operations & Maintenance
Interest
Library
General Administration
Department Administration
On Campus
Off Campus
Sponsored Proj. Administration
5.6 points*
2.7 points*
15.0 points*
0.3 points*
1.4 points
8.5 points
14.6 points*
2.9 points
Total
Total from Key Dept data
51 points
38.2 points*
8.5
14.6*
2.9
__________________
26.0
14.6
**Administrative component is capped at 26%.
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F&A Rate Application Complexities
Barriers to charging the full F&A rate
F&A Waivers:
 Institution

grants privileged exceptions.
Institution wants to foment a relationship with a new sponsor.
• Sponsor limitations:
– Ex. USDA 10%
– Ex. Training Grant 8%
– Ex. Foundations (common with humanities programs)
 TDC
Base
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Office of Research
Preston Comstock
F&A Returns
Expense to Revenue
% Distribution
Architectural design view of the PACCAR Inc. (www.paccar.com) Environmental
Technology facility, formerly proposed as the Clean Technology Lab Building
with estimated completion of October 2015.
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Is F&A Important to Me?
•Where does my paycheck come from?
•What is the source of funds for the utilities in my
building?
•How are support staff paid?
•How are costs for shared purposes tied to the
benefiting functions?
•How is research infrastructure paid for?
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Allocation of Revenue
F&A Revenue Generated
23% to F&A Revenue
Generating Units
7% Libraries
38% Campus
Support
32%
University
Support
Dean - 8% total F&A earned
Department – 15% total F&A earned
Deans and departmental policies
• With academic affiliation
50% branch campus
50% Pullman campus
• Without academic affiliation
100% to branch campus
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F&A Allocations
F&A Splits Contact
Pete Beeson
Budget Office
5-9683
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Why is the F&A
rate important?
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Facilities and Administrative Costs
• Incurred for common or joint purposes;
• Identifiable at a high level;
• Benefiting the total institution.
Understanding F&A Costs Apr2012
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F&A Rate in Action 
•Projects for external sponsors have direct costs and indirect costs; the latter being recovered through an F&A percentage.
• F&A recoveries support the University.
•QUARTERLY F&A recoveries distributions.
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The F&A rate reimburses WSU.
Heavily dependent on our accounting consistency.
Ensure that there are no special
accounting practices or treatments for
sponsored projects –
And –
That all costs are consistently treated.
F&A Questions?
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What are F&A Costs?
Facilities
Administrative
Building &
Equipment
Dept
Utilities
College
Maintenance
Campus
Libraries
University
Pooled Expenses
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Presenters
Preston Comstock
[email protected]
Grant & Contract Manager
Office of Research
509-335-8539
Karen Breese
[email protected]
F&A Rate Specialist
509-335-2056
47
References
 Uniform
Guidance Crosswalk
 Uniform Guidance
 OMB
A-21
Institutions,
 OMB
 OMB
Office of Management & Budget Circular, Cost Principles for Educational
Relocated to 2 CFR, Part 220
A-110, Institutions of Higher Education, CFR, Part 215
A-133, Audits of States, Local Governments and Non-Profit
Organizations
DHHS Division of Cost Allocation College and University Long-Form Guide
 DHHS Division of Cost Allocation Frequently Asked Questions

• State of Washington and WSU:




Bylaws of the Board of Regents of Washington State University & Executive Policy Manual
WSU’s Business Policies and Procedures Manual
State Administrative and Accounting Manual (SAAM) – State of Washington
Division of Cost Allocation [DCA] – Washington Statewide Cost Allocation Plan [SWCAP]
 Cost


Accounting Standards Disclosure Statement [DS-2]
Current negotiated federal F&A rate agreement(s) between WSU and the Department of Health &
Human Services, through WSU’s cognizant negotiation agency: the Division of Cost Allocation
Postsecondary Education Facilities Inventory and Classification Manual, for Room Use codes.
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