Proactive Preparations
for the F&A Proposal*
*how to keep your job in a tough economy
Faculty
• John B. States
Vice President, Financial Accounting and Reporting
University of Texas Medical Branch at Galveston
john.states@utmb.edu
• Paula J. Milano
Executive Director of Space and Capital Resources
University of California Berkeley
pmilano@berkeley.edu
• Jennifer Wei
Director, Cost Studies and Effort Reporting
Northwestern University
jennifer-wei@northwestern.edu
• Michael M. Smith
Managing Director
Huron Consulting Group
mmsmith@huronconsultinggroup.com
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The Dreaded Question
Just before you left for New Orleans, the CFO and the
Provost caught you in the hall. They were on their way
to an important meeting with the President, you
weren’t invited. In passing, the Provost asked when the
F&A rate expired. You explain that the rate expires
6/30/2014 and that you are now in in your base year.
The CFO asks “what will the new rate be?”
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You Answer:
a. It is almost two years before negotiation, how the
*&$%# should I know!
b. With all of the changes going on, we won’t know
until we complete the proposal preparation in
December, 2013.
c. What do you want it to be?
d. Let me do some modeling and then I can give you a
list of the issues
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What are the Factors at Play?
• Pushing the rate down
– Decreased state support
– Budget cutting efforts
– Decreased spending on pool costs
– Pressure to maintain instruction
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What are the Factors at Play?
• Pushing the rate up
– Recent new buildings
– Compliance costs
– F.6.b / DCE – decrease in funded departmental support
– Decreasing base
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What are the issues?
• In tough economic times, administration wants rates to
go up
• In tough economic times, administration cuts
administrative and physical plant costs
• 1995 to 2005 saw significant increases in funded
research
– But, now funding is flat
• Increase in research funding spawned an increase in
research facilities
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What are the Issues?
• The economy collapsed in 2008 and hasn’t improved
much since then
• Things are messed up
• No one wants to spend money
• Your staff has been cut
• They want you to get a much higher rate
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What Pressures Do We Face?
• Financial Administration
– We need more money – get the rate up
– We need to cut your budget
• Faculty
– Increased rates make us less competitive and we will lose grants
and have to cut staff
• Cognizant Agency
– Preconceived notion of where rates should be
– Rates should not move very much
– ARRA should decrease rates
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What About The Numbers?
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Space Survey
Depreciation
O&M Costs
Library
Administration
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What Can We Do About the Numbers?
• Wait until the books close
– Bad Choice
• Plan Now
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Remember the 6 P Rule!
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Proper
Prior
Planning
Prevents
Poor
Performance
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Planning
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No Surprises Approach
• Prior Year Practice Rate
• Partial Year Rate with Preliminary Space Data
• Final Rate
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Prior Year Practice Rate
• Use year before base year
• Simplify rate
– No special studies
– S&W, FTE or historic data for space
– Estimate difficult data
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Questions to be answered
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•
•
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How close are we?
What are the critical factors?
How should we do space
Do we need special studies?
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What to expect
• If we do x, y & z, we get ?
• If we don’t do it, we get ?
• In order to get the rate you want, we have to do:
– Space study
– Depreciation justification
– Utility study
– Library study
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Results of prior year rate
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Ball park estimate
Work plan
Options
Justifications
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If you don’t know
where you’re going,
you might not get
there
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Partial Year Rate
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Use 6, 8 or 9 month data
Begin rate 6 months before you have final data
Confirm ball park estimate
Work out details before the year ends
Do strategic review when there is time for
corrections
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Partial Year Rate
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Secret Weapon – it buys you time
Do everything you can with the partial year
Build, review and scrub pools and bases
Build and perfect DA
Building and Equipment Depreciation may not be
available
• Test and confirm space and base
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Understand What Has Changed
• Has research base gone up faster or slower than other
bases?
• Why? What are the dynamics?
• Have Administration costs gone up faster or slower
than research base?
• Have you added new buildings?
• Do you have a new cost?
• Interest on debt financed buildings?
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Do Not Wait!
• “If it twere done when twere done, then twere
well”
- Lady Macbeth, Macbeth Act 1, Scene 7
• “Just do it” – Nike
• “Git ‘er done” – Larry the Cable Guy
• Do everything you can before the end of the year
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What Needs to be Done?
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Depreciation
Space Survey
Base and Pool Review
State interest
Special Studies
– Library
– Utilities
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DEPRECIATION
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Depreciation
• Building Depreciation
– Componentized?
– Non-Componentized?
– Updated Yearly?
• Fixed Equipment
– Separate from the building cost?
• Moveable Equipment
– Identify equipment by room?
– Allocate depreciation to the room?
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Space Survey – Why Is It Important?
• Crucial for F&A rate calculation as Facility Rate
is uncapped in A-21
• Cost allocation for Facilities:
– Building depreciation
– Equipment depreciation
– Interest/debt financing
– Operations and Maintenance
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Organized Research Cost Allocation
Allowable
Facilities
Costs
Allowable
Administrative
Costs
MTC & Other
Allocations
to Research
Space Allocations
to Research
Uncapped
F&A Costs
Organized Research
MTDC
F&A
Capped at 26% in A-21
= F&A Rate
Space Survey
Where do I start?.....well
• How much space overall do you have?
• Ask yourself the following:
– How much in new building construction?
– Any of it research related?
– Deferred Maintenance in research areas?
– Are departments familiar with Space Survey?
– What training is needed?
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Space Survey
Perform some preliminary analyses
• Perform a S&W calculation for all space
– This should be your baseline
• Using alternative space methodology
– Set dollar thresholds to analyze
– Feel free to change your dollar threshold
• Calculate the cost of space by department
– Does it make sense?
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Space Survey
• How much will I need to survey?
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Space survey involves research departments/centers
What’s manageable?
Do you have enough staff for training & execution?
Do you have enough time for training & execution?
• If feasible, conduct space survey during practice year to enhance
department knowledge and save time for the base year
• Are consultants an option?
• Save time w/ Alternate Space Methodology
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Base and Pool
– Allocation of Pool Costs to Major Functions
Indirect Cost Allocation Basis
Pool
Facilities
Square Feet
Admin
Modified Total
Cost of each
major function
Allocation Basis Detail
•
Allocation Statistic is equal to Sq. Ft used for each
Major Function divided by Total Assignable Sq. Ft
Major Function
Allocation
General Administration
University-wide MTC
Department
Administration
Sponsored Projects
Administration
Student Services
School/ Department MTC
Sponsored project MTC
Allocated 100% to
Instruction
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Base and Pool Review
• Facilities Pools
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Building
Equipment
Interest
O&M
Library
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Base and Pool Review
• Administrative Pools
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–
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General Administration
Department Administration
Sponsored Project Administration
Student Services Administration
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Base and Pool Review
• Bases
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Instruction
Organized Research
Other Sponsored Activity
Other Institutional Activity
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Academic Department Inputs
How can departments help if utilizing Space
Survey?
• Complete these activities timely & appropriately
– Space survey
• Including effort reporting or payroll confirmation
– Equipment inventory
• Start training early (Practice Year?)
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Academic Department Inputs
• Ensure that costs are charged to
appropriate sources
• Effort Reporting
• Is Cost Sharing Properly Reported?
• Have salaries been distributed consistent with
effort?
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General Thoughts
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Base Scrub for proper coding
Cost Sharing
Crosswalks
Contact people within your organization
Model! (Know your software)
Salaries & Wages Modeling
Space to Base ($/Sq. Ft.)
Allocation Methodologies
Manage expectations internally
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Discussion
and
Questions
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