Here's what the accountants may be thinking.

When you create the F&A rate (this is VERY simplistic, but the point is
real), you divide (research) expenses on one dimension between direct and
indirect, and on a second dimension between externally paid and internally
paid.  So, if you absorb F&A costs to meet cost sharing requirements rather
than collecting them, the result is, theoretically, a reduction in the rate
you can claim.

However, in reality, the effect is vanishingly small -- but because it is
there, it is one more argument for not reducing or waiving F&A
reimbursements unless there is a very good reason to do so.  Cost sharing,
in my opinion, is a good reason, because you are going to cover those costs
anyway, and not recovering them is easier (and harder to pinpoint in the
system!) than ponying up direct costs of some sort.

Are your outside auditors well versed in F&A rate proposal
creation?  Recently this listserve heard from someone whose auditors did
not comprehend that federal grants are "assistance", and thought
uncollected F&A was a "loss", in the sense of not being paid the full costs
of something being done for someone, rather than simply a reduction in the
amount assistance to get done something they would have done anyway if they
had the funds.

Chuuck

At 01:47 PM 4/23/2004, you wrote:
>Dear Chuck, thanks, this is how I see the issue; however, my Accounting
>staff has gotten a preliminary read the other way from our outside
>auditors.  If the final answer my Accounting office accepts goes the
>"wrong way" (saying the foregone indirect as a cost share reduces the
>subsequent indirect cost proposal, lowering the rate), I will be in need
>of references to OMB circulars or some such to win the day. Please stay tuned.
>Thanks, Dan Snyder
>
>Mr. Dan Snyder
>Administrative Director
>Patrick Center for Environmental Research
>Academy of Natural Sciences
>1900 Ben Franklin Parkway
>Philadelphia, PA  19103-1195
>
>Phone: (215) 299-1065
>FAX: (215) 299-1079
>xxxxxx@acnatsci.org
>http://www.acnatsci.org/research/pcer/
>
> >>> xxxxxx@VCU.EDU 04/23/04 01:38PM >>>
>Someone got it right:  "since no actual indirect costs are involved in the
>cost share, only foregone revenue, the cost share has no effect on the
>subsequent indirect cost proposal."
>
>Indirect costs are real costs.  You pay them.  And they apply to all like
>(research, education, other) projects, no matter what external agency funds
>the projects.  Whether or not you get reimbursed for them makes no
>difference in how you count them in your proposal for setting a
>reimbursement rate.
>
>NEVER let anyone confuse the indirect costs you spend, and the
>reimbursement you may (or may not) get to cover these already paid costs.
>
>Chuck
>
>
>At 09:00 AM 4/23/2004, you wrote:
> >Does foregoing indirect costs to provide cost sharing have any effect on
> >our subsequent indirect cost proposal? For example: We are preparing a
> >proposal to a state agency that requires cost sharing. They are willing to
> >accept foregone indirect costs as a form of cost sharing.  So, we will
> >only charge an indirect cost rate of 10% MTDC, which is well below the
> >rate negotiated with our cognizant federal agency.
> >
> >So far, so good. However, the question has arisen here internally as to
> >whether this form of cost sharing has any effect on the next indirect cost
> >proposal we prepare for our cognizant federal agency. One view is that
> >since we promised these foregone indirect costs as cost sharing to the
> >state agency, we must deduct the amount of indirect cost recovery foregone
> >from our stated indirect costs in the next proposal to the cognizant
> >federal agency.  The other view is that since no actual indirect costs are
> >involved in the cost share, only foregone revenue, the cost share has no
> >effect on the subsequent indirect cost proposal.
> >
> >We are in the process of tracking down information to enlighten our
> >internal debate, and would appreciate input from you experts who inhabit
> >this list!  Thanks for any help.
> >
> >Mr. Dan Snyder
> >Administrative Director
> >Patrick Center for Environmental Research
> >Academy of Natural Sciences
> >1900 Ben Franklin Parkway
> >Philadelphia, PA  19103-1195
> >
> >Phone: (215) 299-1065
> >FAX: (215) 299-1079
> >
> >
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>Herbert B. Chermside, CRA
>Special Asst. to VP-Research
>Virginia Commonwealth University
>PO BOX 980568
>Richmond, VA  23298-0568
>Voice:  804-827-6036
>Fax     804-828-2051
>e-mail xxxxxx@vcu.edu
>
>
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Herbert B. Chermside, CRA
Special Asst. to VP-Research
Virginia Commonwealth University
PO BOX 980568
Richmond, VA  23298-0568
Voice:  804-827-6036
Fax     804-828-2051
e-mail xxxxxx@vcu.edu

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