ÐÔÓûÉç

The following questions are from the Nov. 19, 2018 memo listed below.

Q: Why are ÐÔÓûÉç’s F&A rates being reassessed?

A: Nationally, university rates are updated on average every four years. The UA rates were last approved in 2013 for FY14. The rates were approved for three years, but upon UA’s request, were extended for an additional two years through the end of FY18. The UA rates are due for reassessment.  

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Q: What are the new rates?

A: The new rates have not yet been finalized. UA Statewide completed analysis of ÐÔÓûÉç’s FY17 actual costs to calculate updated rates for submission to ONR in June 2018. The new ÐÔÓûÉç rates were calculated as:

• Organized research: 63.9%
• Organized research, DOD contracts: 74.0%
• Sponsored instruction/training: 50.0%
• Other sponsored activity: 38.2%
• Poker Flat: 28.1%
• Sikuliaq: 32.1%

However, these new rates have not yet been approved by ONR, and UA is operating under ONR-approved provisional rates in the meantime. The provisional rates currently in effect are the lesser of the 2013 rates or the calculated new rates. ONR uses Defense Contract Audit Agency to audit all of the university calculations prior to considering the proposed new rates; the audit is detailed and still in process. After ONR receives DCAA’s audit findings, it will negotiate final rates with UA statewide. It is expected that the new rates will be approved for a four year period, FYs 19-22.

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Q:  Why are some of the proposed new rates increasing?

A: The F&A cost rates calculated for ÐÔÓûÉç organized research have increased substantially from FY14. Two of the biggest factors contributing to this increase are: (1) facility costs increased substantially due to new costs for the new Engineering Learning and Innovation Facility (ELIF) and Combined Heat and Power Plant buildings; and (2) grant and contract activity, the denominator in the F&A rate calculation ratio, has declined slightly. Both of these factors relate to declining state support for the university. ÐÔÓûÉç is not the only public university experiencing declining state support; it is a trend that is playing out nationally. University F&A rates are a subject of concern in Congress, but reflect actual costs that states are decreasingly able to subsidize.

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Q: Will the new rate agreement apply to both federal and nonfederal projects?

A: Yes, once finalized, the new rates will apply to all extramurally sponsored projects. It is generally ÐÔÓûÉç’s policy to include full F&A costs on all extramurally funded projects unless a sponsored agency limits or forbids the reimbursement of F&A based on federal/state/local law, administrative regulations, or within a published sponsor policy. However, ÐÔÓûÉç will continue to have a process in place to consider requests for waivers from application of full F&A rates on projects.

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Q: Does ÐÔÓûÉç plan to amend the current ICR distribution formula?

A: A change in ÐÔÓûÉç’s approved F&A rates does not mean a change in internal distribution of indirect cost recovery receipts. Although federal regulation specifies how F&A rates are calculated, once revenues are received, universities have discretion as to how to allocate internally. Although much of the calculated rate increase is due to new facility costs, some is also because there are fixed costs in the units that cannot easily be reduced even as the base of active researchers has declined some. There have not been any discussions at ÐÔÓûÉç to date regarding modifying how ICR is distributed.

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The following questions came from the Nov. 20, 2018 Chancellor's Forum on budget planning.

Q: If the UA system increases F and A ~30 percent to a rate of 64 percent, how will that affect overall proposal competitiveness and will such an increase lead to faculty shifting expensive items to other University budgets with lower F and A rates on collaborative proposals? And more PI's seeking the 25 percent off campus rate for field work?

A: The facilities and administrative rate is being negotiated between the UA statewide office and the Office of Naval Research and is not yet finalized. ÐÔÓûÉç has a goal of expanding our research capacity and we understand the concern of our researchers that our F&A rates might make that more challenging. We will be exploring options for both covering our costs and maintaining the capabilities of our research enterprise.

— Larry Hinzman, vice chancellor for research

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Q: Do you think ÐÔÓûÉç is more competitive with the proposed increase to F&A rates? Current ÐÔÓûÉç rates are similar, if not slightly higher than other comparable academic institutions that also engage in Arctic research. Given that Arctic research is generally more costly to begin with, is this the best mechanism for recouping institutional costs associated with specific departments as per the justification?

A: The facilities and administrative rate is actually the only mechanism to recoup the cost of conducting the business of research from funding agencies. If we waive F&A costs, we are accepting that expense within ÐÔÓûÉç. Given state funding reductions to the university over the last several years, ÐÔÓûÉç has less ability to absorb unfunded costs. We know ÐÔÓûÉç is number one in Arctic research because of the work our researchers do, and we do recognize the potential burden of increased F&A rates to our research community and will try to be strategic about mitigating the impacts.

— Larry Hinzman, vice chancellor for research