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INDIRECT COST RECOVERY ALLOCATION


Overview

Indirect cost recovery revenue (IDC) comes to the University through agreements with external sponsors in order to help defray overhead costs resulting from research activities. Under the current budget system, indirect cost dollars are collected and managed centrally by the Vice President for Finance and Administration (VPFA), and are used to provide general fund support for both research units and non-research units. With the exception of research centers and VPR&PS, the amount of Educational and General fund budget provided does not directly vary with the amount of indirect cost recovery a unit generates. Under RCM, IDC is allocated directly to the unit that generates the overhead costs in an effort to link IDC to research activity, provide better incentives for conducting research, and make units responsible for their portion of overhead costs.

Allocation Methodology
Indirect Cost Recovery revenue is allocated to RC units as follows:


RC units will receive 66.5% of the indirect cost recovery that the unit generates.

Or

For shared (e.g. inter-unit) grants, the 66.5% will be divided among units through negotiation at the time of the writing of the proposal. The following template has been provided as a default allocation to assist units in dividing the 66.5%:
Research Faculty

Formula Funded Faculty (duties split 50% between research and instruction)

Instructional Faculty

Allocation Details

66.5% to Units: Units conducting research generate overhead costs associated with the research activity. The same units are directly responsible for securing reimbursement for these costs. Therefore, it is logical that units conducting research receive the majority of the indirect cost recovery (66.5%).

Shared Grants Default Distribution Method: UNH is committed to promoting interdisciplinary research. This distribution of indirect cost revenue recognizes and rewards interdisciplinary collaboration, at the same time attempting to cover the administrative costs where they occur. Percentages attributed to the home units are in recognition of the standard costs of administration associated with faculty members; the larger percentage is directed toward the unit receiving the award, where the main costs will be incurred. Percentages (shown above) are guidelines and can be negotiated at the proposal stage by units for unique situations. In situations where the IDC return will not comply with the standard default mechanism (shown above), allocation of the 66.5% must be included on the Office of Sponsored Research "Request for Internal Approval of Grant or Contract Application to External Sponsor (the "yellow sheet"). Copies of the yellow sheet need to be forwarded to the Office of the Vice President for Research & Public Service (OVPR&PS) so adjustments can be made to the allocation of IDC. During the development of a new financial system, an automated distribution system will be developed.

13% to PI’s: In order to provide incentive for research and scholarly progress and seed funds for new projects, 13% of the indirect cost recovery should be directed to principal investigators.
The 13% return (approximate, as the percentage has varied) is an existing form of RCM. Started in 1984, this sharing of revenue by the central administration has clearly been a success. An argument can be made that this policy has encouraged the dramatic growth in externally supported research. The return represents an incentive that already succeeds at the individual level. It is a pure and direct form of incentive. PI’s see the reward for effort -- they receive funds when they produce, and they do not receive funds when they fail to produce. Faculty have stated that this small but significant and tangible reward is an added incentive to their research and scholarship mission.
At UNH, the return to PI’s is sometimes the only significant "seed" money available to explore new research concepts and to develop data for proposals in new areas (especially as resources at the dean/VP level have dwindled). As one PI stated, it is "how the next grant is gotten." Faculty also feel that "they are not stealing from their department’s or college’s meager resources" when they can use these funds instead.

18.5% to the Vice President for Research and Public Service: The Office of the Vice President for Research and Public Service will receive 18.5% of the indirect cost return. This distribution is intended to accomplish two things:

2% to the Library: The Library will receive 2% of total indirect cost recovery generated to recognize its contribution of valuable resources to researchers. The Federally approved indirect cost rate also includes approximately 2% for library services. It is appropriate to provide the library with a portion of the indirect cost recovery in an effort to recognize the library’s valuable role in research and scholarship and its associated costs.

Indirect Cost Distribution in the RCM System
Allocation Schedule
In the initial phase of RCM, the distribution of indirect cost will be similar to the current system. The previous calendar year’s indirect cost revenue will be used to calculate the next fiscal year’s budget. For example, calendar year 2002 actual revenue was used as the budget for the FY04 "indirect cost return."
Although alternative allocation methods could be developed that would calculate indirect cost distribution more immediately, it has been determined that the cost of changing the current distributing system of tracking and indirect cost recovery revenue to accommodate improvements envisioned within RCM is administratively prohibitive.
Calendar year IDC return vs. FY Budgeted return
Until the transition to a quarterly "real-time" IDC return, there will be a variance between what IDC has been budgeted to receive in a fiscal year and what is distributed to units based on the calendar year returns. This difference will be distributed to RC units based on their % of the calendar year IDC return. See attached FY01 IDC allocation.
FY Budget surplus or deficit
To the extent the revenue received in a fiscal year is greater than the distributed amount, a surplus will exist. The first commitment for this "surplus" revenue will be to generate a reserve to protect against a decrease in IDC in future years. Once this reserve reaches $500,000 any "surplus" in a given year will be distributed to RC units during the year end closing process based on their % of the calendar year IDC return.
New Research Centers
When significant indirect cost revenue is anticipated to be generated by a new research center, a current year budget could be established. This would require approval from both the VPR&PS and the VPFA. Since this process would be used only when a new organization is "guaranteed" to generate significant indirect cost revenue, this process should be rarely used (and not for individual PI’s). The amount of funding should be agreed to by the VPR&PS and the responsible Dean/Director. In these cases, funding would come from budgeted indirect cost recovery revenue by taking the amount off the top of the total budget and distributing the remainder to RC units based on % of calendar year return. This would only be a one to two-year funding solution for new centers. After the one or two year start up period, the research center's share of calendar year grant activity will provide the basis for funding to the RC unit.

13% to PI's
Each individual PI who has generated indirect cost recovery during the previous calendar year will have 13% of the related grant(s)' total indirect cost recovery allocated to them in the form of an internally designated account by the Vice President for Research and Public Service office. Please note: in keeping with past practice, PI return amounts of less than $25 will not be returned to the PI and will be held centrally due to the administrative cost of processing those transactions.
PI current year shares and remaining account balances of indirect cost recovery for faculty that have left the University will revert to the RC unit. Shares for PI's that involved multiple units (i.e. CEPS faculty with grants in EOS) will distributed to each unit via the prescribed percentages for shared grants as described in the first section of this document.