The University of Texas at Arlington Office of Research and Office of Accounting

1. The University of Texas at Arlington Office of Research and Office of Accounting and Business Services Brown Bag Training Session Two: Indirect Costs

2. Definition of Indirect Costs • “…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.” • These are REAL COSTS • More correct terminology is Facilities and Administration (F&A) Costs

3. Components of F&A Costs • Facilities • Buildings depreciation or use allowance • Equipment depreciation or use allowance • Operations and maintenance • Library

4. Components of F&A Costs (cont’d) • Administration • General administration • Departmental administration • Sponsored projects administration • Student services • Capped at 26% (per OMB A-21)

5. Determination of F&A Rate • Ratio of : F&A Expenses MTDC BASE • F&A expenses = actual F&A costs • MTDC base = all sponsored program expenses (funds from sponsor + University cost share) less specific items excluded

6. Determination of F&A Rate (cont’d) • Rate agreement negotiated with cognizant audit agency (DHHS) • We always get less than our actual rate

7. How is F&A Rate Applied • Percent of Modified Total Direct Cost (MTDC) • Direct Costs • Identified specifically with a particular sponsored project, instructional activity or other institutional activity, or • Can be directly assigned to such activities relatively easily and accurately

8. How is F&A Rate Applied (cont’d) • MTDC = All Direct Costs except • Equipment • Subcontract amounts in excess of $25,000 • Tuition remission • Rental costs • Scholarships/fellowships • Participant support costs

9. How is F&A Rate Applied (cont’d) • Percentage of MTDC (defined in previous slide) • Percentage of MTDC (defined in program guidelines or contract terms and conditions) • Reduced rate applied to Total Direct Cost • Off-Campus rate of 26% can only be used if the sponsored activity takes place in a facility for which rent is paid as a direct costs • If the program guidelines do not specify a rate, we use 48%

10. What are the Regulations • Office of Management and Budget (OMB) – Executive Office of the President • OMB Circulars • OMB A-21 Cost Principles for Educational Institutions • OMB A-110 Uniform Administrative Requirements for Grant and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profits • http://www.whitehouse.gov/omb/circulars/index.html

11. OMB Circulars • Determine if costs is allowable • Eligible for reimbursement • Permitted by terms of sponsor • Examples of unallowable costs are personal items, alcohol, entertainment, promotional items

12. OMB Circulars (cont’d) • Determine if costs is allocable • Assigned to one or more cost objective on some reasonable basis • Cost objective may be sponsored agreement or F&A activity

13. Quiz • Can the following be charged directly to a sponsored agreement and, if so, under what circumstances? • Telephone service and long distance calls • Telephone equipment and line charges normally treated as F&A and CANNOT be charged directly to the sponsored agreement • Long distance charges should be direct charges if allocable to the sponsored project • Centers supported in whole by Federal Funds

14. Quiz (cont’d) • Office Supplies • Normally treated as F&A and CANNOT be charged directly to the sponsored agreement • Exceptions: Some items (such as computer disks) may be used specifically for the project and may be allowed as direct costs

15. Quiz (cont’d) • Copy Charges • Ordinarily CANNOT be charged directly to the sponsored program • Exceptions • Specific items (such as survey instruments, dissemination costs) are allowed by funding agency • These items are explicitly indicated in the proposal budget

16. Quiz (cont’d) • Memberships and Subscriptions • Personal memberships and subscriptions are not allowed since they are considered personal costs • Institutional memberships and subscriptions for professional organizations or publications are allowable

17. Quiz (cont’d) • Administrative Salaries • “The salaries of administrative and clerical staff should normally be treated as F&A costs. Direct charging of these costs may be appropriate where a major project or activity explicitly budgets for administrative or clerical services and individuals involved can be specifically identified with the project or activity. "Major project" is defined as a project that requires an extensive amount of administrative or clerical support, which is significantly greater than the routine level of such services provided by academic departments.” (A-21 Sect F.6.b.2)

18. Quiz (cont’d) • Examples of “Major Projects” • Large centers that may include managing teams of investigators • Projects which involve extensive database management • Projects that require making travel and meeting arrangements for large numbers of participants, such as conferences and seminars • Projects whose principal focus is the preparation and production of manuals and large reports, books and monographs (excluding routine progress and technical reports)

19. Brown Bag Training Session Three • December 19th, 2002