understanding f&a costs facilities and administrative costs 1 revised april 2015
TRANSCRIPT
Understanding F&A Costs
Facilities and Administrative Costs
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Revised April 2015
Karen Breese [email protected]
F&A Rate Specialist, General Accounting
509-335-2056
Presenters:
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Welcome!
Preston Comstock [email protected]
Grant & Contract Manager, Office of Research
509-335-8539
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
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Direct Expenses:Salaries & WagesFringe benefitsServicesSuppliesTravelEquipmentSubcontractsInterestRentUtilities
Indirect Costs – Not specific to a sponsored project.
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Examples of Indirect Expenses:UtilitiesBuilding MaintenanceBuilding DepreciationCare of WSU groundsCustodial
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.
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For Research at WSU
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And For Other Sponsored
Activities
Organized Research
Separately budgeted “Project" accounts to record the activity for our sponsors:
Federal government, State governmentsCorporations, Foundations, Businesses
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Calculation of Research F&A Rate
Overdrafts
CommittedCost Sharing
All direct (MTDC) expenses related to organized research
Sponsored project costs
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F&A Cost Calculation
ModifiedTotal Direct
Costs
Total Costs
Exclusions
Adjustments
Financial Statement Operating Expenses
Capitalized ItemsFederal ExpendituresUnallowable Costs
Less: Credits or Plus: Allowable Interest
Calculating the Base for the F&A Rate
MTDC include Total Direct Costs minus: •Cost of equipment•Buildings•Patient care•Off-campus rents•Training Stipends•Student Tuition / Scholarships and•Sub-contracts over $25,000Includes cost sharing in Organized Research
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Modified Total Direct Cost (MTDC)
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Sponsored Project View – Example
Simple Sponsored Program Project Example
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One Project’s MTDC:
Total Direct Costs: $130,000 Salaries/benefits: $95,000
Supplies: $ 5,000
Scholarships: $10,000 Capital Equipment: $20,000
Modified Total Direct Costs = ?
Simple Sponsored Program Project continued
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Total Direct Costs: $130,000 Salaries/benefits: $95,000
Supplies: $ 5,000
Scholarships: $10,000 Capital Equipment: $20,000
Modified Total Direct Costs:= $130,000 - $10,000 - $20,000
= $100,000 MTDC
Rate
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51% Rate
Example F&A Rate
$51 $100
Simple Sponsored Program Project continued
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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.
What is the context – Why is there F&A?
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Within the University – Various Projects
Federal OMB A-21 Direct & Indirect (F&A) Costs
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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
Why are there F&A Rates?
To formalize Reimbursement of University overhead costs from sponsors of research, instruction and training.
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Context: Federal Cost Accounting
Reference: OMB Circular A-21
OMB Circular A-21
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• 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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• 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.
Example:A lab is used in several projects.
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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.
Direct Costs
Cost Sharing – University Costs towards the Project
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All contributions towards accomplishing a sponsored project, including Cash and In-kind.
Necessary, Allowable, Verifiable and Measurable Resources used.
Personnel Costs are generally the majority of Cash Costs (Cost Share) borne by the University.
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Many Locations-Many Activities
What are Examples of F&A Costs?
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•Janitorial Services
•Repairs and Renovation
•Buildings & Grounds Maintenance
•Physical Plant
•Environmental Safety
•Facility Planning
•Utilities
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•Research Compliance•Animal Care Review•Human Subjects Review•Office of Grant & Research Development•Sponsored Programs
• Purchasing•Payroll• Human Resources•Accounts Payable• General Accounting
What are F&A Costs?
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. 27
F&A Rates
FY15
On-Campus Research 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
ReasonableAllowableAllocable
Context: Federal Cost Accounting
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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How is the F&A Rate calculated?
Overall Timeline for F&A Rate process
Start of Fiscal Year
Space Usage Survey
End of Fiscal Year
Financial Report
F&A process:
Calculate& submit.
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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.
The indirect costs are dependent on space utilization and other data provided by dept personnel to allocate:
•Building Depreciation•Equipment Depreciation•Operations and Maintenance• Interest
5. Allocate indirect costs to direct cost pools.
6. Lastly, calculate Rates.32
4. The indirect costs are dependent on Dept personnel providing – space utilization, property inventory records and other data – to allocate:
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Identify & Group similar activities
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F&A Costs
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* Key Rate Components heavily dependent on Department Information:Research rate components On Campus Off Campus
Building use 5.6 points*Equipment use 2.7 points*Operations & Maintenance 15.0 points*Interest 0.3 points*Library 1.4 pointsGeneral Administration 8.5 points 8.5Department Administration 14.6 points* 14.6*
Sponsored Proj. Administration 2.9 points 2.9
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Total 51 points 26.0 Total from Key Dept data 38.2 points* 14.6
**Administrative component is capped at 26%.
F&A Rate Application Complexities
Barriers to charging the full F&A rateF&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 ResearchPreston Comstock
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.
F&A ReturnsExpense to Revenue
% Distribution
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 earnedDeans and departmental policies
• With academic affiliation50% branch campus50% Pullman campus• Without academic
affiliation100% to branch campus
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F&A Allocations
Pete Beeson 5-9683 Budget Office
F&A Splits Contact
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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.
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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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F&A Questions?
The F&A rate reimburses WSU.
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Ensure that there are no special accounting practices or treatments for sponsored projects –And – That all costs are consistently treated.
Heavily dependent on our accounting consistency.
Facilities
Building & Equipment
Utilities
Maintenance
Libraries
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What are F&A Costs?
Pooled Expenses
Presenters
Karen Breese [email protected] F&A Rate Specialist
509-335-2056
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Preston Comstock [email protected]
Grant & Contract Manager
Office of Research 509-335-8539
ReferencesUniform Guidance CrosswalkUniform Guidance OMB A-21
Office of Management & Budget Circular, Cost Principles for Educational Institutions,
Relocated to 2 CFR, Part 220 OMB A-110, Institutions of Higher Education, CFR, Part 215
OMB 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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