Ruth,
My eyebrows raise at anything greater than 10%, and particularly so if
you see a repeating pattern with the same PI and if you see this with
public funds.  Even if large residuduals are legal, I'd give it the
"newspaper" test.  I'm not sure the public would appreciate their tax
dollars paying significantly more than actual costs for a project,
especially when the work is being done by a non-profit and overhead
costs have already been covered.  Also, before allowing the PI to keep a
portion of the residual, make sure all the project costs have been
charged to the sponsored project and not to some other account, like the
department.  Some things you might want to think about for your policy:
1. Stating a preference for cost-reimbursement type agreements rather
than fixed price (This is less risk for the institution and alleviates
saavy PIs attempting to create discretionary funds by either inflating
prices or charging real costs somewhere else.  Cost reimbursement is
also easier to administer, since you don't have to chase after PIs to
determine if deliverables have been accomplished so that you can invoice
for them).  Make sure PIs know that it is SRO negotiates the type of
agreement
with the sponsor, not them.
2.  Putting a time limit on spending out the residuals--maybe 3-6 months
so that the ability to amass a large sum in the PI account over time is
reduced.  This reduces the tendency of repetition of bad practices.
3.  Some mention of repetitive situations where more than 10%
remains...how will you deal with the pattern behavior?  Should there be
additional review at the departmental level of project activity and
expenditures charged?  Should a PI be prohibited from doing fixed price
work?
4.  If you gave a discretionary partial IDC waiver (say you charged 10%
instead of your normal 40% because the sponsor, a local agency, had
limited funds available for the project), what should the institution's
share of the residual be?  Should it be 10% of the residual, 40% of the
residual, or the difference between what the institution would have
collected at the 40% level minus what it actually collected at the 10%
level (which is your real cost of doing the work)?
Some of this may sound a little draconian, and the vast majority of
faculty play fairly, and so it is nice to share the occasional residual
with them.  But one PI who is allowed to repeatedly have large
residuals, especially on government funded projects, can put your
institution at higher risk and having policies and procedures that
address that potential is a good idea.  I learned this from experience
at a place where I had one person who really took advantage but who, of
course, was untouchable for a number of reasons...and I held my breath
that it would not come back to haunt us.
Barbara

Ruth B Smith wrote:

>Dear Colleagues,
>
>From time to time residual funds remain after performance of a fixed price
>contract is completed and payment in full is received.  I would be
>interested in how you manage two aspects, in particular, of residual funds.
>
>First, what percentage of the original amount raises a red flag?  For
>example, we would be somewhat concerned if $30,000 of a $100,000 project
>remained, very concerned about 50% or more but not at all concerned about
>10% or less.
>
>Second, how may the residual funds be used and by whom?  May a faculty
>member pay his or her own off-duty quarter salary using residual or other
>discretionary funds?  We transfer residual funds, less F&A, to an account
>for the PI’s use for research-related purposes.  These discretionary funds
>may not be used faculty salaries but may be used for expenses such as
>student support, travel for meetings with funding agencies, small equipment
>and supplies.  The funds remain in the PI’s discretionary account until
>spent.
>
>Thank you for any information you are willing to provide.
>
>Cordially,
>
>Ruth
>
>
>
>
>
>Ruth Smith, Executive Director
>Old Dominion University Research Foundation
>P.O. Box 6369; Norfolk, VA 23508
>Ph 757.683.4293, ext. 600
>Fax 757.683.5290
>Mobile Ph 757-469-5675
>
>
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--
Barbara H. Gray
Director of Sponsored Research
Desert Research Institute
2215 Raggio Parkway
Reno, Nevada  89512-1095
Telephone:	775-673-7381
Fax:		775-673-7459
E-mail:	xxxxxx@dri.edu
www.dri.edu

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