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 vicepresident 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 Backes, Andrea Bryson, John Church, Tim Edleson, Jeff Tom Klein Title Director of Finance Professor Professor Professor Director of Finance and Planning Associate Vice President Interim Head Associate Vice President Department Humphrey Institute Humphrey Institute Environmental Health Sciences Social Work MN Extension Service Office of the VP for Research Animal Science Sponsored Projects Administration Email Phone bayso001@umn.edu 5-6852 bryso001@umn.edu churc001@umn.edu jedleson@umn.edu klein046@umn.edu 5-5888 6-1494 4-8795 4-2238
Lawrenz, Frances James Linn Ed Wink
lawrenz@umn.edu
5-2046
linnx002@umn.edu ewink@umn.edu
4-1205 4-1648
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Appendix B
Fiscal Year 2007 Comparison of Direct and Indirect Costs Research % Recovery IDC 5,315.98 575,768.10 1,768,702.78 29,247.84 0.00 0.00 7,348,147.01 127,951.53 0.00 4,070,774.53 2,206,327.07 4,607,114.32 9,321.71 2,818,976.43 85,215.08 2,138,091.93 0.00 0.00 0.00 0.00 250,752.01 0.00 8,742.57 0.00 19,643,555.23 171,978.73 0.00 35,410,248.71 1% 39% 25% 22% 0% 37% 19% 35% 28% 39% 15% 12% 18% 28% 0% 0% 0% 21% 20% 30% 43% 0% 33% Public Service % Recovery IDC 17,212.63 4,982.32 333,236.01 51,464.72 0.00 0.00 1,394,395.88 74,861.31 0.00 29,650.53 1,988,516.67 45,009.76 126,881.69 434,136.40 60,576.35 36,380.74 0.00 5,757.50 1,296,215.60 0.00 128,405.88 0.00 0.00 0.00 525,088.30 51,869.97 6,247.93 2,110,783.53 4% 3% 15% 15% 0% 0% 18% 13% 0% 2% 15% 6% 19% 9% 37% 27% 5% 21% 5% 0% 0% 0% 20% 5% 0% 21% 697,735.56 (5,215.67) 1,069,073.15 0.00 0.00 4,372.03 877,156.76 167,049.73 0.00 0.00 0.00 1,921,462.23 54,495.22 0.00 8,273,266.63 24,379.78 (1,015.42) 70,423.65 (8.07) 0 0.00 0.00 0.00 0.00 0.00 0.00 85,503.99 0.00 0.00 496,899.41 Instruction % Recovery IDC 3,016.49 67,571.17 43,128.39 0.00 0.00 2,725.28 24,100.49 0.00 0.00 19,458.67 264,287.73 40,067.97 6% 7% 5% 0% 0% 23% 6% 2% 8% 2% 0% 3% 19% 7% 0% 0% 0% 4% 0% 6% Total % Recovery IDC 25,545.10 648,321.59 2,145,067.18 80,712.56 0.00 2,725.28 8,766,643.38 202,812.84 0.00 4,119,883.73 4,459,131.47 4,692,192.05 136,203.40 3,277,492.61 144,776.01 2,244,896.32 (8.07) 5,757.50 1,296,215.60 0.00 379,157.89 0.00 8,742.57 0.00 20,254,147.52 223,848.70 6,247.93 38,017,931.65 3% 24% 21% 17% 0% 2% 31% 16% 0% 30% 18% 33% 18% 11% 23% 25% 3% 21% 0% 10% 0% 16% 0% 29% 16% 0% 30%
Area Grp CXXX DMED DXXX MXXX RXXX TAES TAHS TALA TAUX TCBS TCED TCLA TCLF TCOA TCSM TDEN TEQD TEVP TEXT TGRD THHH THRS THSC TINF TIOT TLAW TLIB TMED
TDC 491,734.52 1,461,087.94 7,113,672.30 131,318.19 21,196.03 0.00 20,111,262.17 678,110.19 0.00 11,562,049.35 7,775,926.70 11,854,030.90 62,144.29 23,652,884.16 475,053.27 7,753,131.89 0.00 83,880.27 383.14 15,768.19 1,175,182.56 0.00 44,588.04 0.00 65,437,685.91 404,153.75 (1,093.21) 106,912,944.28
TDC 416,097.55 197,489.22 2,257,662.07 337,667.83 332,887.48 132,513.67 7,872,832.77 575,464.15 101,400.00 1,243,459.20 13,214,902.40 811,839.43 677,058.63 4,580,869.09 161,952.97 135,319.38 0.00 118,538.09 6,255,237.37 0.00 2,407,578.67 153,450.70 10,401.34 806,428.30 2,681,057.62 978,119.46 2,238,680.92 10,178,854.61
TDC 49,909.09 1,009,382.92 813,943.26 0.00 0.00 11,621.71 422,428.80 0.00 0.00 853,749.00 3,442,119.44 1,667,354.75
TDC 957,741.16 2,667,960.08 10,185,277.63 468,986.02 354,083.51 144,135.38 28,406,523.74 1,253,574.34 101,400.00 13,659,257.55 24,432,948.54 14,333,225.08 739,202.92 28,931,488.81 631,790.57 8,957,524.42 0.00 202,418.36 6,259,992.54 892,924.95 3,749,810.96 153,450.70 54,989.38 806,428.30 70,040,205.76 1,436,768.43 2,237,587.71 125,365,065.52
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TNUR TOIP TPHR TPUB TRES TSAF TSYA TUCL TVET Totals:
2,035,917.21 20,281.33 5,103,980.65 52,724,291.03 2,550,664.32 0.00 1,758,590.12 0.00 6,438,460.82 337,849,280.31
679,938.32 9,836.35 1,807,994.34 10,695,723.68 1,116,475.88 0.00 334,031.20 0.00 1,469,500.56 97,389,731.89
33% 48% 35% 20% 44% 19% 23% 29%
42,762.16 65,289.50 171,532.52 7,102,213.93 10,698.20 113,812.12 2,809,428.22 368,113.06 1,144,458.28 70,706,070.91
3,782.26 2,318.10 49,299.80 959,435.31 0.00 0.00 144,666.03 159.71 87,783.10 9,969,118.03
9% 4% 29% 14% 0% 0% 5% 0% 8% 14%
2,243,737.47 298,068.70 157,307.99 5,207,073.83 0.00 0.00 473,138.52 57,182.36 604,143.74 30,370,557.22
139,667.16 23,845.00 11,680.27 348,284.72 0.00 0.00 28,234.08 0.00 60,110.02 1,752,360.78
6% 8% 7% 7% 6% 0% 10% 6%
4,322,416.84 383,639.53 5,432,821.16 65,033,578.79 2,561,362.52 113,812.12 5,041,156.86 425,295.42 8,187,062.84 438,925,908.44
823,387.74 35,999.45 1,868,974.41 12,003,443.71 1,116,475.88 0.00 506,931.31 159.71 1,617,393.68 109,111,210.70
19% 9% 34% 18% 44% 0% 10% 0% 20% 25%
% of Total:
77%
89%
16%
9%
7%
2%
100%
100%
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