Indirect Costs CALS RESEARCH DIVISION April 24, 2008 Website: // Meredith Luschen, [email protected],

Indirect CostsCALS RESEARCH DIVISION

April 24, 2008

Website: http://www.cals.wisc.edu/research/

Meredith Luschen, [email protected], 261-1500

Becky Bound, [email protected], 265-8443

Sandy Fowler, [email protected], 262-3947

Outline Preaward

What are indirect costs? How do you calculate indirect costs? Examples

Postaward How is it calculated Post Award? Common Questions and Frequent Pitfalls

What are Indirect Costs? Sometimes called Facilities and Administrative

(F&A) Costs or Overhead Facilities and Administrative (F & A) costs are

"those [costs] that are 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." OMB Circular A-21 Section E.1

Negotiated by the University with the Federal Government

F&A Cost Components Facilities Costs:

Building Depreciation (or Use Allowance) Equipment Depreciation (or Use Allowance) Operations and Maintenance (utilities,

maintenance, custodial costs, non-capital improvements)

Interest Expense (paid to external parties) Library (books, library facilities and library

administration)

F&A Cost Components*Administrative Costs: Departmental Administration

Dean’s Office, Dept Heads, Dept Administrative staff and administrative work of faculty (including bid and proposal preparation)

General Administration & General Expense President of Chancellor, Institution-wide Financial Management and

Business Services, Personnel Management, Safety & Risk Mgmt, etc. Sponsored Projects Administration

Grant and Contract Administration, Cost Analysis, Patent Expenses Student Services

Registrar, Bursar, Student Medical Typically supports and is allocated to Instruction

*Administrative components limited to 26% of MTDC

Calculation of F&A Rate

Facilities Costs + Admin Costs  ————————————  = F & A Rate Organized Research Base

Organized Research Base includes: Sponsored project costs University-funded competitive awards Overdrafts Committed cost sharing

Indirect Costs Rate Types Research Extension/Public Service Instruction Clinical Trials Off Campus Governmental Agencies within the state of

Wisconsin

Types of Indirect Cost Base Modified Total Direct Costs Total Direct Costs Salaries and Wages Other specified in the RFP

Modified Total Direct Costs Definition: Sum of direct costs, less…

Capital Equipment (items > $5,000) Tuition Remission Subcontract amounts in excess of $25,000 (the

first $25k of each subcontract remains part of the direct cost base and is subject to indirects)

Rental/Lease Patient Care

SEE EXAMPLE

Total Direct Costs Definition: Sum of direct costs, less…

Nothing

SEE EXAMPLE

Salaries and Wages Definition: Sum of all Salaries and wages

PI salary Other personnel salary Fringe benefits

Can only be used with the Simplified Method

Other as specified by agency Total Project costs

eg:17.5% of direct costs plus matching costs Total awarded amount

eg: 10% of total awarded amount (DATCP GLCI)

Total federal funds awarded eg: 20% of total federal funds awarded. Another

method of calculating the maximum allowable is 25% of TDC (USDA NRI)

NSF REU – 25% of stipend only

SEE EXAMPLE

Post AwardHow is it calculated Post Award?

What F&A Base rate is being used on your award? How does F&A relate to your purchases? What direct costs are left to spend on an award? What happens to the remaining F&A balance?

Common Questions and /Frequent Pitfalls

What F&A Base rate is being used on your award?

How does F&A relate to your purchases? Previous example had a Base F&A Code (Rate): MTDC (45.5%)

All modified total direct costs will generate 45.5% F&A Example, a $100 supply charge will produce $45.50 in F&A. Salary and fringe benefits are included in the MTDC base and

therefore do generate F&A F&A posts at end of month

How is it known what expenditure will generate F&A? Based on account code. See handout A charge that is defined as part of the MTDC base will produce

indirect costs when expended. Specific charges may or may not fall under the MTDC base, based on

the type of charge it is defined as. Pay attention to what a charge is coded as to see if it will or will not

produce F&A Example: Support Cost budgeted, coded as travel Example: Mileage budgeted, changed to vehicle rental

What direct costs are left to spend on an award?

WISDM project view now breaks F&A (overhead in WISDM) into a separate section.

There are 4 view levels Summary level 2 shows direct costs as one line item Summary level 3 is the same as level 2 (for now) Summary level 4 is the default view which shows full budget detail Summary level 5 is the view that has all the account codes

In Summary level 4 – look at the SUBTOTAL DIRECT AVAILABLE BALANCE under the Balance column – this is the direct cost balance

Don’t forget the various encumbrances on your account This number is subject to change based on the coding of

future expenditures

What happens to the remaining F&A balance?

Read your agreement What does the agency allow? Will they allow you to use remaining F&A

balance towards direct purchases? This is why forecasting is important. Allows time to

request budget variation.

Can the remaining F&A be carried forward to the successor award?

Common Questions and Frequent Pitfalls Account codes not correctly coded during the purchase

process. eg: support cost (5000 series) coded as travel. Not spending budget on items as proposed (not always an

error, but different spending can create a surplus F&A balance)

Assuming all capital expenditures will not be assessed F&A. Remember there are other rate bases that do assess F&A to capital expenditures

No planning or forecasting Spending down the award without considering F&A costs.

This overdrafts the award. Transfers submitted to clear overdraft without F&A

calculated. Spending unused F&A as a direct cost without agency

approval (if needed).

Questions?