UCR Policies and Procedures

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Campus Policy Number: 300-26
Distribution and Allocation of Facilities and Administrative Cost Recovery Funds (F&A)
Policy Owner: Resource Planning and Budget
Effective Date: 07/01/09
This allocation policy is effective fiscal year 2009-10 and replaces the policy which was originally implemented in 1995. The Facilities and Administrative Cost rate (previously known as the indirect cost or overhead rate) is derived from a complex set of reimbursement formulas designed to enable research institutions to recover some of the “indirect” expenses incurred by them to support research. Facilities and administrative cost (F&A) allocations in the current fiscal year are based on F&A expenditures charged to contracts and grants in the prior fiscal year.
Facilities and Administrative Costs (F&A) are charged to all contracts and grants per allowable policy. These F&A expenditures are reported to the Office of the President on an annual basis. A portion of the F&A earned by each UC campus is then returned to that campus in the form of pre-Off-the-Top Garamendi, Off-the-Top, Opportunity, General Fund Federal F&A, Clinical Trial F&A, and Educational Funds, as applicable. 
This policy addresses how the total amount of research-related F&A returned to the campus from the Office of the President is accounted for and distributed at the campus level.
Guiding Principles
The guiding principles of this policy are:
  1. To recognize the contributions of all units who are successful in obtaining extramural funds for which F&A is charged.
  2. To incentivize further success by making additional resources available to these units.
  3. To provide a designated level of support for units providing centralized support to the research enterprise.
  4. To provide a return to the Chancellor of the F&A revenue for further investment in the campus.
F&A Allocation
This allocation policy addresses the distribution of Off-the-Top and Opportunity Funds (derived from federal F&A) and Education Funds (derived from private and local government F&A). The policy does not cover F&A expenditures charged to state contracts and grants which are considered by the state as an income source in the University’s operating budget and ultimately become part of the UC General Fund.
The following items are funded from Opportunity Funds before other F&A allocations are made:

UCOP mandated programs
    Pre-Tenure Award Program                            Opportunity Fund
    Undergraduate Scholars Program                    Opportunity Fund
    Pre-Graduate Mentorship Program                  Opportunity Fund
    E. Cota-Robles Fellowship Program                 Opportunity Fund
The following items are funded from a combination of Opportunity and Education Funds before other F&A allocations are made:
General Liability/Employment Practices (GLEP)
    Insurance expense                  Opportunity and Education Fund
Network-related costs
    Communications Worker Fee     Opportunity and Education Fund
After the amounts required to fund the items above are subtracted, the balance of funds are allocated on an annual basis as follows:
·        10% to the Chancellor
·        20% to Central Research Support Functions
·        70% to the Organizations (Schools, Colleges, Library, Administrative Orgs, etc.) generating F&A on the basis it was generated in the prior fiscal year.

In the implementation of this policy, the funding amount provided from the 20% F&A allocation to Central Research Support Functions may be less than the amount required to fully support these needs. The shortfall in funding will be provided from other campus funds to ensure that those units that had been receiving funds from the prior campus F&A allocation methodology do not receive a decreased level of funding beyond any decisions made by the Chancellor or EVC.
The 70% F&A allocation amount will be calculated for each Organization as two separate allocations, one based on their share of the generation of federal F&A and the other based on their share of private and local government F&A generation.
Policy Implementation and Review Responsibility
The Office of Resource Planning and Budget is charged with the responsibility of implementing this policy, for calculating the amount of funds to be allocated to each Organization, and for the input of budgetary entries in the campus budget system at the unit level. 
After budgetary allocations are made to the Organizations, it is the responsibility of each Organization head (Deans, Vice Chancellors, etc.) to implement allocation decisions made under this policy within their organizations and for collaboration on allocations with other unit heads for campus wide or joint initiatives. All allocations and expenditures must comply with applicable campus and University policies for the use of funds.
On an annual basis each Organization head will provide a report to Resource Planning and Budget outlining the use of F&A funds in the prior year.  Data from the report will assist Resource Planning and Budget with meeting annual reporting requirements to Office of the President. In addition, the annual report from the Organization heads will ensure that the distribution of F&A funds at the unit level and below is made as transparent as possible.
The former F&A allocation methodology was developed in tandem with the Faculty Recruitment Package Policy, also known as Initial Complements, which established the amount and the manner in which Chancellorial funding was to be provided to the Schools and Colleges for faculty recruitment packages. The new F&A allocation policy now provides a considerably larger share of F&A funds to the Deans and replaces the funding formerly provided by Chancellorial funds for Initial Complements. Therefore, concurrent with the July 1, 2009 implementation date of the F&A Allocation Policy, the “Policy on Chancellorial Support for Faculty Recruitment Packages” is revoked.
All questions and correspondence pertaining to this policy are to be directed to the Office of Resource Planning and Budget (RP&B).
Facilities and Administrative Cost Recovery (F&A) – Fund Sources and Descriptions
Garamendi funds: Also referred to as “pre-Off-the-Top” funds, these funds are from the federal F&A associated with research conducted in or because of a research facility. With prior state approval a campus can use up to 100% of the incremental gross annual F&A cost recovery to pay for the acquisition, construction, renovation, equipping, and maintenance of certain research facilities, related infrastructure, and financing of these projects.
Off-the-Top Fund – After any Garamendi deductions, 19.9 % of the remaining funds are taken “off the top” of the federal F&A cost reimbursement for expenses related to the administration of federal contract and grant activity, and for costs disallowed by the federal government. Off-the-Top funds may not be used for capital expenditures.
University Opportunity Fund – After Garamendi and the Off-the-Top Funds are deducted, 45 % of the remaining balance is designated as University Opportunity Funds. The Opportunity Funds are directed to the campuses on the basis of how much F&A cost recovery each campus generates. Other than specific UCOP-mandated programs, Chancellors have discretion as to the allocation of these funds on each campus.
With the exception of Garamendi funds, the Office of the President retains approximately 6% of federal F&A funds and returns 94% of Off-the-Top and Opportunity Funds to the campuses on the basis it is generated.
University General Fund Income – The UC General Fund is used to support the University’s base or “core” budget needs. Among the sources comprising UC General Funds are nonresident tuition, student application fees, F&A cost recovery on state agency agreements, portions of net patent income, and a portion of the DOE Lab management fee. In addition to the F&A cost recovery on state agency agreements, the F&A cost recovery on federal contracts and grants is part of UC General Funds. The federal F&A portion that is transferred to UC General Funds is 55% of the amount remaining after deductions for Garamendi and Off-the-Top are subtracted. The other 45% is described above as the University Opportunity Fund.
Over the years, the funding in the UC General Fund originating from federal F&A has been treated under two arrangements – pre- and post-FY 2001 as follows:
General Fund Offset - Prior to FY 2000-2001, the 55% federal F&A share was commonly referred to as a “General Fund Offset” and these funds were mixed together with ALL General Funds for ALL campuses and classified as one fund number, 19900 General Funds. The “State’s 55%” share of overhead was considered a source of income in the University’s operating budget and no effort was made to distinguish these F&A-derived funds from “regular” General Funds. So, neither the F&A cost recovery component of the General Fund coming from federal research nor the amount from each campus was tracked separately. 
The merged generic UC/State General Funds were allocated to campuses by the Office of the President on the basis of each campus’s need for General Fund support for such things as faculty and staff merit increases, benefit increases, COLAs, etc. The allocations of 19900 General Funds had no relationship to the amount contributed from federal F&A by individual campuses. Thus, some campuses with robust federal research programs and low General Fund support needs heavily subsidized campuses with greater needs for General Fund support that made lesser contributions to the “General Fund Offset” pool.
General Fund Federal F&A – In FY 2000-2001, a unique fund number, 19933, was created to track the federal F&A cost recovery component of the General Fund. FY 1999-2000 was designated as the base year for all campuses and the amount of increase (or decrease) in federal F&A over the base year was identified by fund number 19933. From that point on 94% of the incremental or decremental 19933 (after an adjustment for inflation) was returned to the originating campus. Some campuses were disadvantaged when the change in 19933 allocation methodology occurred because their growth in federal research was not anticipated to keep pace with projected needs for General Fund cost adjustments. Other campuses with large federal research programs and less reliance on General Fund support were able to generate substantial amounts of 19933 to pledge to debt service on major capital projects.
The Task Force charged with revising the campus F&A allocation policy discussed the inclusion of General Fund Federal F&A (19933) as an allocation source. The Task Force could not recommend the inclusion of General Fund Federal F&A funds at this time, however, due to the campus wide impact this change would have on faculty and staff salary adjustments supported by General Funds. The Task Force recommends that the issue be revisited at a future date.
Clinical Trial F&A – 100% of the facilities and administrative cost recovery funds from clinical trial agreements are returned to the generating campus. Clinical trials are usually sponsored by private industry sources and are most commonly awarded to campuses with medical, pharmacy, veterinary, nursing, or dental schools and/or clinical facilities.
Education Fund – The Educational Fund is generated from the F&A from private contracts & grants and local government contracts & grants. The amount allocated to the campus is based on a formula calculating the annual increment or decrement minus an inflation adjustment. The majority of private F&A generated by each campus is returned to the campus. The Office of the President retains a central pool of Education Funds for systemwide allocations.
State Contracts and Grants F&A – The F&A cost recovery charged on state agency agreements is applied as a General Fund offset to the University’s operating budget as a source of income and becomes one of the components of the UC General Fund.
Annual Reporting
On an annual basis the Office of Resource Planning and Budget will provide a comprehensive report of the prior fiscal year F&A expenditures by Organization, amounts received from Office of the President from each F&A funding source, and detail for campus F&A allocations. The report will include the following F&A funding sources:
        Garamendi Funds (if applicable)
        Opportunity Fund
        19933 General Fund Federal F&A
        Educational Fund
        Clinical Trial F&A (if applicable)