August 22, 2007
Memorandum
To: Tim Mulcahy
From: Indirect Cost Recovery and Public Service Research Committee
(see list of members in Appendix A)
RE: Report on Support for Public Service Research
Introduction
You have charged the committee on Indirect Cost Recovery and Public Service Research
with developing a series of recommendations which would help address the budgetary
challenges that certain “public service” research-intensive colleges and other units (from
here on referred to as colleges) must confront with implementation of the budget model.
The committee followed your specific charge to:
Develop a definition of “public service” research that can be used to identify specific
types of research for which the recommendations would apply
Identify mechanisms for supporting public service research
Recommend criteria to guide identification of those colleges and circumstances that
would qualify for access to the proposed mechanisms, including relevance to the
University‟s public service mission; and
Recommend an implementation plan
To conduct its work the committee held bi-weekly meetings throughout the summer,
exchanged email communication in between meetings, obtained data on indirect costs
and public service activities, and perused many documents related to the issues. The
committee drafted an initial document and revised it several times.
The following principles guided the committee:
Keep the criteria for addressing the problem straightforward and easy to apply with
data available from existing systems
Uphold the unique needs of individual units
Provide opportunities for negotiation in special circumstances.
The Problem
The University has a land grant mission to the State of Minnesota which includes a
commitment to providing public service to the State and to the global community.
University colleges embrace this public service mission and have included statements
similar to these in their goals as well.
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The University‟s public service mission is to:
Extend, apply, and exchange knowledge between the University and society by
applying scholarly expertise to community problems, by helping organizations
and individuals respond to their changing environments, and by making the
knowledge and resources created and preserved at the University accessible to
the citizens of the State, the nation and the world.
http://www1.umn.edu/twincities/01_abt_gen_hist.php
Here is the problem: Public service activities are chronically under-funded when
compared to the total costs of the public service work. The new budget model has made it
possible to more closely examine the costs of public service. Knowledge of these costs
prompts all colleges to look closely at the costs versus benefits of engaging in these
activities. The problem arises because some public service activities critical to the overall
functioning and effectiveness of at least some colleges and the University may not take
place because of the costs to the colleges.
Sponsored public service activities generally have low indirect cost recovery. Sponsored
Projects Administration (SPA) calculates the FY 2007 recovery rate for public service
activities is 14% (in comparison to research activities at 29% and instruction at 6%),
while the Federally negotiated full recovery rate for public-service sponsored projects is
31.0%. The majority of colleges have a below-average rate of public service project
indirect cost recovery (i.e., less than 14%).
On the non-sponsored side, multiple funding sources (e.g., gifts, endowment earnings,
external sales) are used to pay for public service activities, but the committee believes
these activities also rarely fully recover costs. (Note: we are aware of no hard data to
support this claim, but believe it to be true.) Although there are several examples of this
type of activity, one would be when the total gift to support a speaker must be expended
to pay the honorarium and the remaining costs must be borne by the college. This part of
the problem is particularly acute for colleges that have a very high percentage of public
service activities.
We believe that in the case of some colleges it is appropriate for the University to
consider budgetary subsidies and other mechanisms to support public service activities in
recognition of the colleges‟ contributions to the University‟s land grant public service
mission. This would be in addition to the facilities and resources the University provides
as part of the general infrastructure.
In the following sections the committee addresses its four charges.
Definition of Public Service Activities
The committee decided that it should broaden its focus beyond public service research to
include public service activities because the former is confined to sponsored public
service activities. We believe that the economic challenges that gave rise to the formation
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of the committee, encompass this wider set of activities not just those that have
traditionally attracted sponsored funding.
The committee believes that an appropriate definition of public service activities is any
activities undertaken to fulfill the University‟s Web posted mission of public service
provided above. The committee also recognizes that this definition is quite broad and
that only a subset of these activities could be supportable.
Mechanisms for Supporting Public Service Research
Many mechanisms for supporting public service research were considered. Some are
already being implemented based on the recommendations of the Facilities and
Administrative Cost Committee. These include:
more use of direct charging to funders of items generally thought of as indirect costs
negotiations with State and other agencies by the OVPR to provide higher indirect
cost rates
education of deans and PIs about how important it is to recover indirect costs and
ways to do so.
These mechanisms, however, are insufficient to address the problems in colleges heavily
engaged in public service activities. Therefore, the committee recommends that the
University central administration consider providing a subsidy to these colleges. The
subsidy could take the form of:
a lower return rate to central in support of central services (i.e., a reduction in cost
pool charges to the college)
or direct provision of additional O&M funds to the affected colleges.
The latter suggestion has the advantage of maintaining the integrity of the existing
budget model calculations.
Subsidy would not be automatic. The college would have to provide evidence that the
projects it was supporting were, indeed, public service activities linked to the
University‟s land grant mission. Depending on the nature of the portfolio of projects, the
college could be eligible for additional funds.
The committee anticipates that generally any subsidies for public service activities would
be negotiated as part of the compact process. In addition, however, the committee also
recognizes the possibility that some very large externally funded opportunities may arise
that are out of alignment with the timing and discussions of the compact process.
“Large” in this case would be defined in terms of the college‟s overall budget, e.g., a
project that amounted to 25-30% or more of the budget. In these rare instances
negotiation would take place on an ad hoc basis between the dean, provost and vice-
president of research.
Criteria for identifying relevant colleges and circumstances
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The committee believes that effectively addressing this problem involves articulating
criteria to guide identification of those circumstances that would qualify for access to the
proposed subsidy
Criterion 1: The committee believes that both a college‟s overall effective ICR
rate and the percent of total expenditures represented by public service
expenditures might be the best indicators of need. The committee therefore
recommends consideration for a subsidy if both of the following conditions are
met:
an overall effective ICR rate is 18% or less
expenditures on public service are 18% or more of the college‟s total
expenditures
These two indicators combined indicate “extreme need” and would open the
possibility of negotiating a subsidy.
The effective ICR rate is determined by dividing the total indirect costs recovered
by the total direct costs. This number only relates to sponsored projects. An
examination of the effective indirect cost recovery rates for 2006 (with no Wave 1
colleges) showed 17 units at 18% or below. (This includes Morris, Rochester, the
library and other special units. See Appendix B.)
The percent expended on public service activities includes all costs defined with a
public service function code divided by all funds expenditures. An examination of
this percent calculated on a five year average for 2007 showed only four units at
or above 18% (see accompanying Excel file). These four also have ICR recovery
rates of below 18%. The portfolio of projects in the college would be used to
determine the appropriate amount of the subsidy.
Criterion 2: The portfolio of activities (or an individual, very large project)
would have to meet the definition of public service activities proposed above.
The committee suggests that the following characteristics be considered in
determining the specific public service nature of the portfolio:
the need for the activity
the number of people that are affected by the activity
the diversity of the people that are affected
where in the timeline of impact an activity is taking place (e.g., developing
a curriculum for the MN Department of Education).
the amount of direct University involvement (e.g., whether the activity a
type of „pass through‟)
the accessibility of the knowledge/material produced to citizens and the
community
the type of funder.
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It is also important to consider the fit with the university‟s methods of work. This
would include consideration of the breadth of involvement (one faculty member
vs a number of faculty in multiple departments); whether the work can employ
and provide opportunities for graduate students; and how much of the funds are
invested in university activities.
Implementation Plan
The committee suggests that its recommendations be embedded immediately into the
compact process. The recommendations of the committee should be communicated to the
leadership of the colleges and added to the required information for the compact process.
Colleges would present their effective indirect cost rates and percentage of public service
expenditures and show how their portfolio of public service activities does or does not
meet the definition and criteria above. The amount of any potential subsidies would be
discussed and determined for the coming two years as part of the compact process. In rare
instances of public service activity, when extremely large amounts of expenditures are
involved, and the opportunities arise outside of the compact cycle, ad hoc meetings
would be held to determine if any subsidy would be provided.
The committee further suggests that educational and/or incentive programs complement
these recommendations. The programs would be college and department-centered and
provide information about why it is in everyone‟s best interest to obtain the highest
indirect costs allowable and what the trade-offs are in terms of accepting funds for public
service activities when much of the cost will have to be carried by the college. Vigorous
support of these types of programs would help to reduce the financial shortfalls for public
service activities. Educational opportunities should be provided to Deans, Department
Heads, PIs, financial staff.
These programs could also involve direct incentives for success in increasing public
service activity ICR, such as returning some of the ICR to PIs or to departments to
support graduate students to conduct research, to support seed research, etc. Indirect
incentives, such as the college having more funds to support new initiatives, would be
effective only if coupled with more educational efforts. Departments would have a key
role to play in both education and incentives programs as they are a very important link
between the higher-level administrative elements (policy, budgeting, central
administration and the colleges) and the individual faculty.
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Appendix A: List of committee members
Indirect Cost Recovery and Public Service Research Committee Members
Name Title Department Email Phone
Backes, Andrea Director of Humphrey bayso001@umn.edu 5-6852
Finance Institute
Bryson, John Professor Humphrey bryso001@umn.edu 5-5888
Institute
Church, Tim Professor Environmental churc001@umn.edu 6-1494
Health Sciences
Edleson, Jeff Professor Social Work jedleson@umn.edu 4-8795
Tom Klein Director of MN Extension klein046@umn.edu 4-2238
Finance and Service
Planning
Lawrenz, Associate Office of the lawrenz@umn.edu 5-2046
Frances Vice VP for
President Research
James Linn Interim Head Animal Science linnx002@umn.edu 4-1205
Ed Wink Associate Sponsored ewink@umn.edu 4-1648
Vice Projects
President Administration
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Appendix B
Fiscal Year
2007
Comparison of Direct and Indirect Costs
Research % Public Service % Instruction % Total %
Recovery Recovery Recovery Recovery
Area Grp TDC IDC TDC IDC TDC IDC TDC IDC
CXXX 491,734.52 5,315.98 1% 416,097.55 17,212.63 4% 49,909.09 3,016.49 6% 957,741.16 25,545.10 3%
DMED 1,461,087.94 575,768.10 39% 197,489.22 4,982.32 3% 1,009,382.92 67,571.17 7% 2,667,960.08 648,321.59 24%
DXXX 7,113,672.30 1,768,702.78 25% 2,257,662.07 333,236.01 15% 813,943.26 43,128.39 5% 10,185,277.63 2,145,067.18 21%
MXXX 131,318.19 29,247.84 22% 337,667.83 51,464.72 15% 0.00 0.00 0% 468,986.02 80,712.56 17%
RXXX 21,196.03 0.00 0% 332,887.48 0.00 0% 0.00 0.00 0% 354,083.51 0.00 0%
TAES 0.00 0.00 - 132,513.67 0.00 0% 11,621.71 2,725.28 23% 144,135.38 2,725.28 2%
TAHS 20,111,262.17 7,348,147.01 37% 7,872,832.77 1,394,395.88 18% 422,428.80 24,100.49 6% 28,406,523.74 8,766,643.38 31%
TALA 678,110.19 127,951.53 19% 575,464.15 74,861.31 13% 0.00 0.00 - 1,253,574.34 202,812.84 16%
TAUX 0.00 0.00 - 101,400.00 0.00 0% 0.00 0.00 - 101,400.00 0.00 0%
TCBS 11,562,049.35 4,070,774.53 35% 1,243,459.20 29,650.53 2% 853,749.00 19,458.67 2% 13,659,257.55 4,119,883.73 30%
TCED 7,775,926.70 2,206,327.07 28% 13,214,902.40 1,988,516.67 15% 3,442,119.44 264,287.73 8% 24,432,948.54 4,459,131.47 18%
TCLA 11,854,030.90 4,607,114.32 39% 811,839.43 45,009.76 6% 1,667,354.75 40,067.97 2% 14,333,225.08 4,692,192.05 33%
TCLF 62,144.29 9,321.71 15% 677,058.63 126,881.69 19% 0% 739,202.92 136,203.40 18%
TCOA 23,652,884.16 2,818,976.43 12% 4,580,869.09 434,136.40 9% 697,735.56 24,379.78 3% 28,931,488.81 3,277,492.61 11%
TCSM 475,053.27 85,215.08 18% 161,952.97 60,576.35 37% (5,215.67) (1,015.42) 19% 631,790.57 144,776.01 23%
TDEN 7,753,131.89 2,138,091.93 28% 135,319.38 36,380.74 27% 1,069,073.15 70,423.65 7% 8,957,524.42 2,244,896.32 25%
TEQD 0.00 0.00 - 0.00 0.00 - 0.00 (8.07) - 0.00 (8.07) -
TEVP 83,880.27 0.00 0% 118,538.09 5,757.50 5% 0.00 0 - 202,418.36 5,757.50 3%
TEXT 383.14 0.00 0% 6,255,237.37 1,296,215.60 21% 4,372.03 0.00 0% 6,259,992.54 1,296,215.60 21%
TGRD 15,768.19 0.00 0% 0.00 0.00 - 877,156.76 0.00 0% 892,924.95 0.00 0%
THHH 1,175,182.56 250,752.01 21% 2,407,578.67 128,405.88 5% 167,049.73 0.00 0% 3,749,810.96 379,157.89 10%
THRS 0.00 0.00 - 153,450.70 0.00 0% 0.00 0.00 - 153,450.70 0.00 0%
THSC 44,588.04 8,742.57 20% 10,401.34 0.00 0% 0.00 0.00 - 54,989.38 8,742.57 16%
TINF 0.00 0.00 - 806,428.30 0.00 0% 0.00 0.00 - 806,428.30 0.00 0%
TIOT 65,437,685.91 19,643,555.23 30% 2,681,057.62 525,088.30 20% 1,921,462.23 85,503.99 4% 70,040,205.76 20,254,147.52 29%
TLAW 404,153.75 171,978.73 43% 978,119.46 51,869.97 5% 54,495.22 0.00 0% 1,436,768.43 223,848.70 16%
TLIB (1,093.21) 0.00 0% 2,238,680.92 6,247.93 0% 0.00 0.00 - 2,237,587.71 6,247.93 0%
TMED 106,912,944.28 35,410,248.71 33% 10,178,854.61 2,110,783.53 21% 8,273,266.63 496,899.41 6% 125,365,065.52 38,017,931.65 30%
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TNUR 2,035,917.21 679,938.32 33% 42,762.16 3,782.26 9% 2,243,737.47 139,667.16 6% 4,322,416.84 823,387.74 19%
TOIP 20,281.33 9,836.35 48% 65,289.50 2,318.10 4% 298,068.70 23,845.00 8% 383,639.53 35,999.45 9%
TPHR 5,103,980.65 1,807,994.34 35% 171,532.52 49,299.80 29% 157,307.99 11,680.27 7% 5,432,821.16 1,868,974.41 34%
TPUB 52,724,291.03 10,695,723.68 20% 7,102,213.93 959,435.31 14% 5,207,073.83 348,284.72 7% 65,033,578.79 12,003,443.71 18%
TRES 2,550,664.32 1,116,475.88 44% 10,698.20 0.00 0% 0.00 0.00 - 2,561,362.52 1,116,475.88 44%
TSAF 0.00 0.00 - 113,812.12 0.00 0% 0.00 0.00 - 113,812.12 0.00 0%
TSYA 1,758,590.12 334,031.20 19% 2,809,428.22 144,666.03 5% 473,138.52 28,234.08 6% 5,041,156.86 506,931.31 10%
TUCL 0.00 0.00 - 368,113.06 159.71 0% 57,182.36 0.00 0% 425,295.42 159.71 0%
TVET 6,438,460.82 1,469,500.56 23% 1,144,458.28 87,783.10 8% 604,143.74 60,110.02 10% 8,187,062.84 1,617,393.68 20%
Totals: 337,849,280.31 97,389,731.89 29% 70,706,070.91 9,969,118.03 14% 30,370,557.22 1,752,360.78 6% 438,925,908.44 109,111,210.70 25%
% of
77% 89% 16% 9% 7% 2% 100% 100%
Total:
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