UNIVERSITY F&A RATES –
FEDERAL REVIEWS & NEGOTIATION ISSUES
Gary Talesnik, Attain, LLP
Cindy Hope, The University of Alabama
Paul Nacon, Huron Consulting Group
Importance of F&A Rates
Why are F&A Rates Important?
• Significant Source of Revenue to Institution
• University with Direct Federally Sponsored Research Costs of
$100M (with Certain Exclusions) and 50% F&A Rate Receives
$50M Cost Reimbursement Annually
• F&A Reimbursement is a Major Influence on Institutional
Decisions to Invest in Research Facilities
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Overview of Proposal Review and Negotiation Process
Desk Review of Proposal
• Identify Additional Information Needed
• Identify Initial Areas of Focus
Request Additional Information
• May Make Several Information Requests, Before and After Site
Visit
Site Visit(s)
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Main Focus - Space Study
Will Identify Departments/PIs in Advance
Accuracy of Equipment Inventory
Other Aspects of Proposal
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Overview of Proposal Review and Negotiation Process
(Continued)
Establish Negotiation Date
Provide Opening HHS DCA Position
• Proposed Adjustments
• Usually One Week Before Negotiation Date
Negotiation Conference
• May be at DCA Office or at Institution
• Some Negotiations Done by Phone
Agreement on Rates, Period Covered, Rate Components
Send Rate Agreement for Institutional Signature
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Space Surveys
Determine the Functional Use of University Space
Critical Part of F&A Proposal
Drives the Allocation of All Facility Costs
• Building and Equipment Depreciation
• Interest Expense
• Facility Operations and Maintenance Expenses
Complicated Process
HHS Alternate Space Study Methodology
• Based on Conventions for Certain Types of Rooms
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Reviews of Space Surveys
Major Focus of Federal Review of Proposal
Main Part of On-site Review of Proposal
Adequacy of Instructions, Functional Definitions
• Clear, Complete and Unbiased
• Compliance with A-21 Functional Definitions – e.g., Definition
of Organized Research
• Consistent with Definitions of Base Costs – e.g., Handling of
Research Training
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Reviews of Space Surveys (Continued)
Negotiator Will Request Detailed Information for Specific
Departments/PIs. May Include:
• Research S&W vs. Research Space by Department
• Functional Allocation of Space for Each Room
• All Room Occupants and Accounts (Including Faculty, Staff,
Unfunded Occupants and Occupants Paid Stipends)
• Employees Funded by Non-Research Accounts and Rooms Used
• If PIs will be Interviewed, Space of Each PI Selected; All
Occupants of Each PIs Space (Including Faculty, Staff, Unfunded
Occupants and Occupants Paid Stipends); Salary Distribution of
PI and Staff
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Reviews of Space Surveys (Continued)
On-Site Space Review of Selected Depts/PIs
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Interview Departmental Administrators, PIs
Should be Accompanied by Cost Analysis Staff
Walk Through Rooms, Primarily Research Labs
Departments/PIs Should be Prepared in Advance
o Purpose of Review, Questions That Will Be Asked, etc.
• Avoid Interfering with Interviews
o HHS May Stop Process
• But Should Make Sure Questions/Responses are Clear,
Complete
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Space Surveys - Focus of Review and Negotiation
Issues
Space/Base Inconsistencies
Insufficient Recognition of Instructional or Other Non-Research
Activities in Research Space
• Unpaid Students and Students/Faculty/Staff Paid from General Fund
Accounts Working in Labs
• Visiting Scientists, Howard Hughes Medical Institute Investigators
• HHS Position:
Space Should be Allocated to Students Supported by Research
Training Stipends, Tuition Remission, Thesis Work;
100% Research Rooms
Vacant, Underutilized Space
Standard/Arbitrary Percentages for Functional Use of Rooms
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Space Surveys– Potential Adjustments
Proposed Adjustments if Federal Review Finds
Problems
FTE or S&W Allocation of Each PI’s Space; Extrapolation to All
Organized Research Space
OR
Determine Adjustments For Each Selected Departments;
Extrapolation to All Organized Research Space
OR
Limit Maximum Research Percentage of All Rooms
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Organized Research Base
ARRA (Stimulus Program) Funding
Cost sharing
Salaries Exceeding NIH Salary Cap
Classification of Sponsored Accounts
Research Training
Research Training Stipends
Research Funded Directly by Howard Hughes Medical Institute
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Building Depreciation
Building Depreciation Issues
• Useful Lives of Building Components
• Allocation of Depreciation on Renovations by
Floors/Rooms
• Treatment of Write-offs Related to Changes in Useful Lives
o Occurs Mainly When Buildings are Initially Componentized
o Not Allowed in One Year; Spread Over New Rate Cycle (Usually
Fours Years)
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Equipment Depreciation
• Equipment Inventories -- Inability to Locate Equipment
• Allocation of Equipment Depreciation – Room-by-Room vs.
Department or Building
• Equipment Funded by Non-Federal Grants/Contracts
• Changes in Equipment Capitalization
o Submit Impact Statement – Show Rate Adjustments Related to
Capitalization Change; Usually a “Wash” for First Rate Cycle After
Change
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Interest Expense
• Interest on Fully Depreciated Assets is Unallowable
• HHS Position: For Componentized Buildings, Allocate Interest to
Three General Building Components
o General Building Components – Building Shell, Building Service
Systems, Fixed Equipment
o Could Have Significant Impact on Interest Associated With ShortLived Building Components
• Interest on State General Obligation Bonds
o A-21 Requires Allocation of State-Paid Interest in SWCAP
• Interest-only Loans
• A-21 compliance requirements (e.g. lease-purchase analysis)
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Operation and Maintenance Expenses
• Expensing vs. Capitalization of Repair and Maintenance
Projects
• Handling of O&M Costs Paid by Academic Departments
• Classification of Costs as O&M vs. G&A
• Allocation of Campus Police, Security, Grounds-keeping
• Allocation of Environmental Health and Safety (Radiation
Safety, Hazardous Waste, etc.)
• Building Metering – Building Level Metering vs.
Floors/Rooms; Partial-year Metering
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Library Costs
• Inadequate Allocation to Non-University Library Users
• Student and Professional Employee FTE Statistics Used to
Allocate Library Costs
o How FTEs are Calculated
o Professional vs. Non-professional
• Multiple Libraries - Separate vs. Combined Allocation
• Special Library Studies – How User Surveys are Conducted
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Administrative Cost Pools
G&A, DA, SPA
• G&A: Shifting Costs from G&A to O&M
• DA: Direct Charge Equivalent (DCE) Calculations
o Classification of Employees in Categories to Calculate DCEs
 Faculty/Professional, Administrative, General Support, Technical
o Classification of Positions as “Administrative” vs. “General
Support”
 May Ask for Direct Charges to Sponsored Agreements
• SPA : Offices and Functions Included in SPA
o Must Be Separate Offices Established Primarily to Administer
Sponsored Projects
o Tech Transfer (Especially Marketing and Licensing Functions)
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Rate Projections
Issues Related to Rate Projections for New Facilities
and Major Renovations
• Acceptance of Projection for Future Rates
o HHS Position: Projection “Not a Given, Not a Right”
• Impact on Research Base and Existing Space
o Decompression
o New Research
o Replace Existing Space
o HHS Position: Annual Base Increase Should be Average for Last
Five Years, Unless Otherwise Justified
• Timing – Construction and Occupancy Dates
o HHS Position: Will Only Consider Projection if Construction
Has Started
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Rate Projections
Issues Related to Rate Projections for New Facilities
and Major Renovations (Continued)
• Planned Functional Use of Buildings
• Inclusion of O&M Costs in Projection
o HHS Manual Does Not Recognize O&M Costs for New Facilities
• Comparison of Previous Projections with Actual Experience
o Could be a Problem if Actual Base Year Rate is Substantially Lower
Than Previous Projection
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OMB, FDP Initiatives
OMB Grant Reform Initiative
• Consolidate OMB Grant Circulars (A-21, A-122, A-110, A-133,
Others)
• Numerous Changes
Federal Demonstration Partnership (FDP)
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Useful Reference Documents
OMB Circular A-21
• Federal Cost Principles for Educational Institutions
• Includes Basic Rules for Developing F&A Rates
HHS DCA Best Practices Manual for Reviewing C&U Long-Form
F&A Cost Rate Proposals
• Guidance to DCA Negotiators for Evaluating Proposals
• Provides DCA Position on Issues
• Not Official Federal Policy
COGR Analysis of Topics From HHS DCA Best Practices Manual
• Provides COGR Position on Significant Issues in Manual
• Some Differences of Opinion
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Contact Information
Gary Talesnik
Special Consultant
Attain, LLC
Office: (301) 738-0088
gtalesnik@msn.com
Paul Nacon
Senior Director, Huron Education
Huron Consulting Group
Cell: (312) 804-9293
pnacon@huronconsultinggroup.com
Cindy Hope
Assistant Vice President for Research
The University of Alabama
Office: (205) 348- 8119
chope@fa.ua.edu
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