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Re: Question related to charge of an operations fee plus regularoverhead for a non-federal award Gregory K. Schmidt 10 Apr 2000 09:01 EST


I didn't know anyone still used S&W as their base.

There are several issues you address here.  Your first is whether you should
even accept the award.  What is to gain if you win the award, but bankrupt
the unit as a result?

Your other issues concern tinkering with the base by either direct charging
those items, or creating a use charge in addition to the F&A recovery.  By
charging indirect costs as direct, you change the basis upon which your F&A
rate is determined.  This will have adverse effects on your current, as well
as future rates.  You may also be required to repay the fed and other
sponsors some F&A costs previously recovered now that the basis has changed.

Would you run afoul of A21?  Not necessarily.  CAS?  Instantly.  CAS crosses
all aspects of the institution.  With CAS, the charges you make to the Fed
must be consistent with those of other users.  You cannot treat anyone
differently.  (Yes, I'm aware CAS is in A-21.  I think her point concerns
the other sections of A21 since she separated A21 and CAS in her question).

Creating a use charge is a viable option into which F&A for the unit is
included.  However, to maintain consistent cost treatment, you would have to
use the resulting rate for all users of the services you provide.  This
would move the agreement with the state from a cost reimbursement to a unit
cost contract.  It would also eliminate the rate problem you cited, and your
dependence upon full F&A recoveries for funding operations.  The downside is
you need to recover all your costs through the use charge.

If it were my decision, I'd develop a cost center if it's appropriate.  I
think I'd probably forgo signing this agreement in the interim, based upon
the info provided.

Good luck!

Rochelle Athey wrote:

> Colleagues:
> My university is struggling with questions related to a negotiation on
> indirect costs with a state governmental agency.  The agency only wants
> to pay 20% S&W, which is quite a bit less than our current rate of 50%
> S&W.  The problem is that if we agree to the reduced rate, the center
> that obtained the award will end up losing operating funds derived from
> idc recovery.  At this university, idc recovery is not distributed to
> departments/units unless the award(s) from which it is derived are
> recovering the full idc rate.  In this case, the dollar amounts are
> significant; the center might lose upwards of $25K.  Since this is a
> center, not a regular academic department, they need all the operations
> money they can get; without the idc allocation, they might go under.
> The administration is not predisposed to make any deals on the
> allocation of idc -- the formula is the formula and no one gets a
> special deal.
> Hence, the center has asked if they can budget either 1) typically
> indirect costs as direct costs or 2) develop an operations fee in
> addition to the idc rate proposed by the agency.  The reasoning is that
> the state agency isn't covering the full cost of the research due to the
> reduced idc rate -- so why can't we charge these costs directly?  The
> center also thinks the agency might pay for these costs if they are
> documented in the line item budget and charged as direct costs;
> apparently the agency has a semantics problem with the term "indirect
> costs" but no problem with costs such as janitorial services appearing
> in a line item budget.  Finally, the center contemplates utilizing two
> buildings that are not part of the current idc rate proposal to perform
> the project.  The university isn't charging building use allowance on
> these two structures and isn't paying for operations and maintenance on
> them.
> My questions are as follows:
> Should we permit the the charging of typically indirect costs as direct
> costs or the proposed operations fee since this is a non-federal
> project?  Would our accounting system run afoul of A-21 and CAS if we
> permitted either of these options since "all costs incurred for the same
> purpose, in like circumstances, are either direct costs only or indirect
> costs only with respect to final cost objectives."  Or does this really
> only apply to federal projects?
> Do you think we should develop a separate idc rate agreement for the
> department based on their use of the two buildings not included in the
> idc agreement?
> Any other thoughts, suggestions, ideas?  Thank you for any guidance you
> can provide.
> Rochelle Athey
> Director, Sponsored Programs
> California Polytechnic State University Foundation
> 805-756-1123/805-756-5588 (fax)

Gregory K. Schmidt
Assistant Controller
Florida A&M University
201 FHAC
Tallahassee, FL  32307

850.561.2956 voice
850.561.2461 fax

"The reasonable man adapts himself to the world;
the unreasonable one persists in trying to adapt the
world to himself.  Therefore, all progress depends
on the unreasonable man."

 George Bernard Shaw

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