It’s All About Space – Maximizing the “ F ” in your F&A Rate

1. It’s All About Space – Maximizing the “F” in your F&A Rate

2. Presenters: • Steve Cofield: • Manager of Cost Analysis, Oregon Health Sciences University • Deston Halverson: • Director, Huron Consulting Group • Josh Rosenberg: • Director of Cost Studies, Emory University

3. AGENDA: • Role of space in the F&A proposal • University processes for managing space • Options for space surveys • Maximizing the “F” • Be Aware! • Closing

4. The Role of Space in the F&A Proposal • The pools in F that are driven by space • Building Depreciation • Equipment Depreciation • Interest • Operations & Maintenance (O&M) • In other words, around 90% or more of your F!

5. The Role of Space in the F&A Proposal • The other pools: • Library (the “other” F pool) • Driven by FTEs, typically a very small F pool • Administration pools • Driven by MTDC/MTC • 26% cap prevents growth. The bottom line: Space is where the growth is!

6. The University Process • Timelines (proposal v. space) • Your proposal is due Dec. 31, 2014. • The following timeline is recommended (Add dates): • Educate community (Date) • Meet with departments • Survey • Review of survey by department

7. The University Process • Who at the university is involved? • Facilities Management/Campus Services • Cost Studies • Post-Award Office • Individuals in schools/depts. who complete the survey

8. The University Process • Education • Executive Administration: • What they are saying: We have brand new “research” buildings. • What they are thinking: 100% of the building is research, that will really help our F&A rate. • What YOU are thinking: I bet the real percentage coded to research is less than 50%! • Those who fill out the survey • The importance of accuracy • Who occupies what rooms and how are they funded • Watch out for over AND undercoding. • Overcoding: The room is 100% research! • Undercoding: Don’t make it a S&W model.

9. Space Survey Options • Full space survey (all departments, all room types) • Provides very useful data to executive management • Helpful for external reports/surveys • Very thorough but….. • Extremely time consuming and labor intensive

10. Space Survey Options • Partial space survey (research intensive departments, specific room types) • Less time intensive • Allows you to focus on research space only • Incomplete

11. Space Survey Options • Salaries and wages model • Feds may ask for this as a baseline. • Undercodes labs and other research space which is typically costlier (and helps us more in the proposal)

12. Maximizing the “F” • Newer buildings • They cost more to build –> more costs in the pool • Take awhile to occupy fully. • The more pure research in there, the better

13. Maximizing the “F” • Bigger labs • The bigger the square footage, the costlier the room is to run….and the bigger the contribution to the pools.

14. Maximizing the “F” • Faculty placement • Put your more heavily funded faculty in the larger labs. Better justification for higher research percentage.

15. Maximizing the “F” • Debt Financing • Issue bonds to cover some of the construction costs. • Goes into the Interest pool. Let indirect cost recovery pay for your debt financing costs.

16. Maximizing the “F” • Tying equipment to a room. • Scientific equipment, annual depreciation expense: $10,000. • By Room: Equipment in a lab coded 90% to research…..$9,000 depreciation in the pool. • By Building: Building is coded 40% to research….$4,000 depreciation in the pool. • By Department: Dept. is (S&W) 20% research….$2,000 depreciation in the pool. • Bottom line: KNOW WHERE YOUR EQUIPMENT IS (ESPECIALLY YOUR SCIENTIFIC, EXPENSIVE EQUIPMENT)!

17. Maximizing the “F” • Componentization • Components of a building have a shorter useful life than standard straight line. • Lower useful life = more depreciation expense each year = bigger Building Depreciation pool.

18. Maximizing the “F” • Coding of service center space • Look at functional coding of user accounts charged. • Allocate based on functional revenues, which means picking up research square footage.

19. Be aware of: • Space to Base Ratios • Examples: • University average: $150/1 ($150 in on-campus S&W per 1 research square foot) • Economics Dept: $374/1 • Physics Dept: $58/1 • Govt: Drop Physics to University Average, Keep Economics the same!!!

20. Be aware of: • Variances between relative research space and relative research dollars • Chemistry Research Space (relative): 54% • Chemistry Research Dollars (relative): 39% • Variance: 15% (borderline)

21. Be aware of: • The time lag between proposal and site visit (how this can hurt you) • Lab was occupied when you did the survey, now vacant!

22. Be aware of: • Chatty Kathy, PhD, Live at the Site Visit: “I am getting TONS of new funding in” • Why are Feds happy? More dollars in the base (Lower F&A Rate), no space adjustment.

23. Be aware of: • Red Flags for Feds • The fundamental divide: • University: We want a lower denominator (sponsored dollars) and higher numerator (indirect costs driven largely by space). • Feds: Your space is too high; we want a higher denominator and lower numerator. • Departments with space to base ratios favorable to the university • “100% rooms” • Family photos in labs…so there ARE students in here! • The lights are on, nobody is home (vacant labs). • Non-lab room types with high research coding.

24. In closing: • Space drives 4 of the 5 F pools • Growth in your F&A rate comes from the F side, and F is driven largely by space • Maximizing F means finding strategies to grow those pools and paying close attention to how you code your space

25. Questions?

26. Contact information: • Steve Cofield • 503-494-1287 • cofields@ohsu.edu • Deston Halverson • 312-912-5406 • dhalverson@huronconsultinggroup.com • Josh Rosenberg • 404-727-1677 • Josh.rosenberg@emory.edu