GIM 22
Attachment A
A Primer on Facilities and Administrative Costs

18. How are F&A reimbursements allocated?

The RCR allocation is directly tied to the revenue source. This allocation is based on the F&A reimbursement that is received to help support the costs of research activity. In particular, units with an active research program benefit from a direct allocation equivalent to the Departmental Administration cost pool. The RCR allocation goes into 75-XXXX and in some schools and colleges into 79-XXXX accounts.

Prior to 1999 most of the DOF money allocated to academic units went into the LFA (74-XXXX) accounts. In addition, roughly 12% of the F&A reimbursement generated by the unit during the previous year was returned directly to the colleges, schools and departments. This was called the Research Support Allocation (Budgets 75-XXXX). This methodology was limited in its ability to adjust support for research infrastructure to changes in the level of the unit's research activity. In 1999 the University, in response to requests for a more understandable and responsive allocation method, established the RCR methodology.

The RCR methodology differs in detail from the old Research Support Allocation, which provided a flat percentage (about 12%) of the total F&A reimbursement. The RCR methodology allocates funds to schools and colleges based on the calculated Departmental Administration component of the F&A reimbursement generated by the grants in each school or college. The Departmental Administration component is a percentage computed from the most recent F&A Cost Study. The percentage varies by grant location (e.g. on-campus, off-campus, Applied Physics Lab, Regional Primate Center, etc) and by whether the grant is for research or instruction. The percentages for Departmental Administration (see Chart II) from the 1995 cost study are as follows:

It would seem that the percentages provide much greater funding to support off-campus grants than those located on campus. This is not the case. The F&A cost rate applicable to on-campus grants in 2000 was 52% while the off-campus rate was half that. Grants located on or off-campus with similar expenditures would generate similar funding for those grant's college and department administrative costs. For example, an on-campus grant with MTDC of $100,000 and an indirect cost rate of 52% would generate $15,600 (52% X 30.06%) in RCR. An off-campus grant with the same amount of MTDC and an indirect cost rate of 26% would generate $16,400 (26% X 63.08%). The slightly higher amounts for the off-campus grants can be attributed to a lower administrative efficiency of operating away from campus.

The RCR replaced the Research Support Allocation and the Local Fund Allocation in academic units. There is some remaining LFA funding for academic units, mainly temporary equipment allocations, and special purpose allocations made to a particular unit.

Chart XI shows the distribution of F&A expenditures between research related functions in academic and non-academic units. The expenditures in academic units are largely from the RCR allocation while the expenditures in non-academic units are all Local Fund Allocations (since they are not F&A cost reimbursement generators). Local Fund Allocations differ from RCR allocations in that they are not based strictly on the amount of F&A cost generated by the function they support. They are based on careful assessments of administrative and facilities operations needs for funds to support the academic functions. In concept the LFA provides funding for the research related costs of the libraries, central grant and contract administration, general administration, and the operation and maintenance of the physical plant. The LFA supplements funding for these functions from the State and from student tuition. In practice the LFA has had to bear an increasing share of the cost of these functions. That is mainly because of the effects of reduced budget allocations from the State and the fact that the State has targeted most of the new money it provides to the instructional function. Citizen initiatives, especially tax-cut initiatives and Initiative 601, have reduced the money the State can spend, and that necessarily reduces the amount available for higher education. The University has made up the funding shortfall from the State with DOF funds. So, it is not surprising that an increasing proportion of the research support functions in non-academic units is provided by F&A cost reimbursements.

F&A cost reimbursement is also used to support construction and renovation of research facilities. Funds for this purpose come from the Buildings and Improvements cost pool and the Interest cost pool discussed in Question 5. Funds generated by the Buildings and Improvements component of the F&A cost rate amounted to over $9 million in 2000. These funds were used for the renewal of older buildings and their major components such as roofs, plumbing, and electrical distribution systems. They were also used to reconfigure buildings to meet current research requirements such as enhanced ventilation requirements. Funds from the Building Interest component of the rate have been used for debt service on new buildings including the Harborview Research and Training Building, Health Sciences K-Wing, Ocean Sciences Building and Fishery Sciences Building.