New guidelines for indirect cost recovery will be explained

New guidelines for the assignment of the indirect costs of research will be the focus of three open meetings the week of Nov. 2 that all members of the University community are encouraged to attend.

The guidelines were prepared by the Joint Administrative/Faculty Task Force on Indirect Costs and are designed to help the University comply with new regulations from the federal Office of Management and Budget (OMB). They were mailed in mid-September to all deans, directors, department heads and principal investigators, approximately 4,000 persons.

Audits conducted by the Department of Health and Human Services (HHS) a year or so ago at a number of universities found improper assignment of costs in a number of areas.

“The new guidelines are designed to help faculty and staff determine the appropriate allocation of costs to various types of accounts,” explains Alan W. Steiss, director of the Division of Research Development and Administration. “We want to identify legitimate costs and make certain that they are properly distributed.”

Fifteen “very sensitive” types of expenses are covered in the guidelines: advertising, alcoholic beverages, alumni activities, commencement, entertainment, fund raising, hosting, lobbying, meals and travel, memberships, meetings and conferences, public relations, recruiting, selling and marketing, and student activity costs.

The meetings are designed to reinforce the importance of compliance with the new OMB regulations, and to help faculty and staff determine what is allowable and what is not allowable. “It’s critical to the University’s well-being from a financial standpoint to get everyone on board,” Steiss says.

The success of the application of the new guidelines has a direct bearing on how much in indirect costs the University can recover, Steiss says. “It will affect subsequent reviews by HHS auditors. Our hope is that they will see we have addressed the problems, that we can strengthen our case for a higher rate.”

HHS auditors have been on campus for the past month and the University is seeking relief from the current indirect cost recovery rate of 47.2 percent, down from 56 percent. “Every percentage point is $1 million, so we stand to gain a great deal or lose a great deal,” Steiss explains.

He also notes that the guidelines apply across-the-board to all accounts, not just those related to sponsored research. “Everyone is affected by the new criteria.”

The November meetings are designed to give a general overview of the situation and the underlying principles that govern the guidelines. There will be time for questions of a general nature. Individual follow-up sessions will be arranged with school and college units, because they each handle costs in different ways.

Steiss says the primary audience is project and department administrators who handle accounting activities, but faculty should also attend as they make many decisions on the allocation of funds.

In a cover letter accompanying the guidelines, University administrators noted that the guidelines “impose a significant new burden on an already strained administrative system. Nevertheless, a good faith effort to comply with new federal requirements is essential to the continuation of our successful partnership with our federal research sponsors. The faculty/administrative team that developed the guidelines has created a set of clear rules and procedures which, we trust, can and will be absorbed successfully into the administrative culture of the University.”

The meetings are sponsored by the offices of the Vice President for Research and the Vice President and Chief Financial Officer. Speakers will be Steiss and Thaddeus F. Nowak, assistant manager of cost reimbursement, Office of the Controller.

Sessions, all at 9:30 a.m., will be held in Rackham Auditorium Nov. 3, the Towsley Center Auditorium Nov. 4 and Chrysler Center Auditorium Nov. 5.


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