We have received a rather strange request from one of our funders
regarding use of uncollected indirect costs as match to another of the
funder's projects.  Right now, the Controller and I are not comfortable with
meeting their request.  However, before we make a final decision, I would
like to know if anyone has had a similar situation and how it was handled.
Suggestions from OMB Circular experts would be particularly welcome.  Here
are the details of the situation:

 State Agency has received a federal grant from Federal Agency A to
fund Project A.  There is no matching requirement.  State Agency has, in
turn, subcontracted some of the federal funds to University.  However, State
Agency will not reimburse University for indirect costs.  University is not
required to provide match.

 Now State Agency has received a grant from Federal Agency B for
Project B, which requires a 60:40 (federal:non-federal) match.  State Agency
apparently is short of match and is trying to find it elsewhere in order to
draw down the maximum amount of federal funds available from Federal Agency
B.  (I have no idea how they got the federal grant without documenting the
proposed match or why they are coming up short now!)

 Project B consists of four components, only one of which has similar
activities to those which comprise Project A (GIS mapping of the local
coastline).  The technician doing the mapping for Project A will be asked to
provide some maps for Project B.  State Agency has asked if it can use the
indirect costs "contributed" by University on Project A as match for Project
B.  (Note that I have not yet been able to determine whether some of the
maps produced in Project A will also be used in Project B or whether new
maps specifically for Project B are being requested.)

 If new maps are being requested, then I believe my response should
be to request compensation from Federal Agency B via subcontract with State
Agency.  It would seem reasonable, then, to only allow the uncollected IDC
on the Project B subcontract, if any, to be counted as match on State
Agency's grant from Federal Agency B.

 If, however, some of the maps generated on Project A can also be
used on Project B, how much, if any, of the uncollected indirect costs from
Project A can be applied to Project B?  Is there some "rule" about how
closely the two projects must be related?  If so, where does it come from?
How does one classify the uncollected indirect costs on Project A--as
federal or non-federal (the issue being the prohibition of matching federal
with federal)?  If we agree to State Agency's request, who is responsible
for determining and documenting the relatedness of the projects?  What
instrument would we use to show our commitment of uncollected indirect costs
on Project A to Project B?  How do we document the situation and agreement
to the satisfaction of federal auditors?  If this practice were to be
disallowed, who would the auditors come after--State Agency or University,
or both?

 Please post responses to the list, as I suspect they will be
sufficiently varied to make a good discussion for all.  Thanks in advance
for the input.

Barbara H. Gray                           Telephone:  803-953-5673
Director of Sponsored Programs            FAX:        803-953-1434
University of Charleston, SC              e-mail:     xxxxxx@cofc.edu
Charleston, South Carolina  29424