F&A Data on Research WBS Elements

This document describes the OSP administrative practices related to handling F&A information on research project WBS elements. It particularly focuses on situations where underrecoveries of indirect cost occur. Underrecovery may occur in any research WBS element where indirect cost specifications are established at less than the current federal negotiated rate.

Three Phases:

1. Proposal Phase

With proposal preparation, DLCs complete most research budgets utilizing current federally negotiated research F&A rates. However, sponsor policies occasionally dictate a rate and/or base that will result in indirect cost recovery below the level that would be produced using federal research rates. When this occurs, the DLC also prepares an estimate of the underrecovery of F&A for each year of the project period. This estimate is for internal purposes only and is not submitted to the sponsor with the proposal.

In the Kuali Coeus (KC) budget, the DLC enters the appropriate F&A rate and base, which reflects sponsor limitations. OSP should verify that the base is clearly described in the budget comments, including unusual exclusions, and is consistent with OSP’s understanding of sponsor requirements.

The total anticipated underrecovery of F&A is broken out for each fiscal year of the proposed award period, and is noted by the DLC on the KC Underrecovery Distribution screen. The DLC should identify the source(s) of funds committed to cover the underrecovery for each fiscal year. The source may be one or more specific accounts identified by the PI, DLC, or school. In the Budget Comments, the DLC should provide a description of the sponsor's indirect cost limitations, and any specific language per agreement with the Vice President for Research (VPR), which should be included in KC Underrecovery Comments, if an award is made.

If the DLC is assuming responsibility for funding an underrecovery, but has not yet identified the source, the DLC should enter the responsibility code 0000004 as the “source.” With the approval of the appropriate Dean or VPR, the source may also be the VPR’s underrecovery budget (cost object number 1733xxx will be provided by the School or VPR). In such cases, the KC Budget Comments should indicate from which office approval was received and the proposal should be approved by a representative of that office, or a separate letter approving the underrecovery expense may be uploaded as in institutional document.

Anticipated underrecoveries associated with NIH Training Grants are funded by the Institute and do not need to be analyzed at the proposal stage. For KC, the DLC may enter the Institute responsibility code 0000001 as the “source” and note in the Budget Comments that NIH Training Grants do not require the DLC to fund underrecoveries.

2. Award Phase

2.1 Determining the Appropriate Rate and Base for New Awards

Upon receipt of a new award, OSP Contract Administrators are responsible for determining, based on the terms of the award, the appropriate F&A rate(s) to be used on project WBS elements. The rates for federal awards and subawards are determined in accordance with the provisions of OMB Circular A-21 (effective May 1996) and OMB's Uniform Guidance. (See the OSP policy entitled, Implementation of “Fixed-Rate” Requirement of A-21.) Federal policy requires fixing rates for the life of the award at the rates in effect (including provisional rates negotiated to date) at the time of award. Most non-federal awards are established at “MIT billing rates,” which may change by fiscal year along with the current federally negotiated rate. However, both federal and non-federal sponsors occasionally specify a rate and/or base, which differs from those that would normally be applied under federal and/or Institute policies.

2.2 Entering Indirect cost Specifications in Kuali Coeus (KC)

OSP Contract Administrators are responsible for entering F&A specifications on KC data input sheets. All comments related to indirect costs should be included in the KC Indirect Cost Comment field for the WBS element (or parent WBS element, if applicable to the hierarchy as a whole). The OSP Data Team is responsible for entering data shown on the input sheets into the KC system. OSP Contract Administrators are responsible for verifying the accuracy of F&A specifications in KC as shown on the Notice of Award (NoA) produced at WBS creation and change.

2.2.1 For WBS Excluded from F&A Calculation:

KC provides for default entry of SAP costing sheets for WBS which are excluded from indirect cost calculation based on KC Account Type. These defaults will be overridden by entry of indirect cost specifications on the KC Indirect Cost Screen. Therefore, except for Indirect Comments, the KC Indirect Cost Screen should be left blank. The following defaults are provided:

Account Type “Fabricated Equipment” defaults to EXCLU.

Account Type “Core Administration” defaults to RESEB.

2.2.2 For Research WBS Without Fixed F&A Rates (Billing Rates)

KC provides for default entry of SAP costing sheets for research WBS that do not require fixed F&A rates. Most non-foundation and non-federal awards fall in this category. These defaults will be overridden by entry of indirect cost specification on the KC Indirect Cost Screen. Therefore, except for Indirect Comments, the KC Indirect Cost Screen should be left blank. The following defaults are provided:

Account Type “Off-campus” defaults to RESMF.

Profit Centers P401750 and P401710 default to RESMFF.

All Other WBS elements numbered greater than or equal to 5000000 default to RESMN.

(KC provides a mechanism for changing the SAP costing sheet to create an unusual base without fixing the F&A rate. In these situations, the SAP costing sheet for the unusual base must be entered via the KC Indirect Cost Screen with the rate of 999.99%. This will apply standard MIT billing rates. This mechanism should generally not be required for research WBS. It is generally used to establish billing rates with non-research costing sheets which are not entered by KC default. This mechanism may be used on research and non-research WBS when correcting an incorrect fixed rate to standard MIT billing rates, though generally this is accomplished by completely deleting all non-comment specifications on the KC Indirect Cost Screen.)

2.2.3 For Research WBS with Federal “Fixed Rate” Requirements.

Fixed rates, reflecting all rates in effect at the time of award of the competing segment must be entered. All current fixed and pre-determined rates at the time of award must be entered, even though the periods to which the rate apply may extend beyond the expiration of the competing segment. (No-cost extensions of the competing segment may be approved, which may allow the application of different rates approved for periods beyond the original competing segment expiration date.)

The OSP Contract Administrator enters the different rates, which are in effect for the competing segment, entering the on- and off-campus rates negotiated with the government and their period of applicability. The appropriate combination of on-campus and off-campus rates must be entered creating a two-line pair for each period. (The on-campus/off-campus pair must always be present— OSP should not enter only on-campus or off-campus rates, even if only on-campus or off-campus cost is anticipated.)

The first pair entered for the competing segment will show the effective date of the competing segment. The appropriate SAP costing sheet, describing the indirect cost base, should be shown for each period. Usually, this costing sheet will be RESMN; however, RESMF will be used for off-campus accounts, and RESMFF will be used for profit centers P401750 and P401710.

The end date of the final pair entered should be left blank. (Please note that, if the end date of the final fiscal year is not left blank, indirect cost will continue to calculate at the rate shown in the final pair until a rate for a subsequent fiscal year is entered. Leaving the end date for the final entry blank is intended to eliminate confusion related to the status of the rate on or after that date.)

When competing segments do not show changes to rates in each fiscal year of the segment, only the changes need to be entered, but the changes should show multiyear periods of applicability. (If fiscal years without change in rates have been entered, rates will still feed properly to SAP, but it is not necessary or desirable to enter extra lines for periods where rates do not change.)

For example: an on-campus WBS element for an award for the competing segment 10/1/2011 through 9/30/2013 should be entered as:

Eff Date

End Date

IDC Rate

Costing Sheet

Fiscal Year

On/Off Campus

10/1/11

6/30/13

60.5

RESMN

2012

On

10/1/11

6/30/13

5.0

RESMN

2012

Off

7/1/13

 

56.0

RESMN

2014

On

7/1/13

 

4.5

RESMN

2014

Off

Frequently, new competing segments will be added to existing WBS, creating the need to augment F&A specifications previously shown on the account. Clearly, these rates should be entered prior to or as soon as possible after the effective date of the new competing segment. When a WBS element passes its expiration date prior to the receipt of a renewal for a new competing segment (the WBS is terminated), the rates should be augmented when the account period is extended after award of the new segment.

When the WBS element is extended in pending status, ideally the new rates should be entered at the time of the pending extension. If the change in rates cannot be anticipated in this way so that application of the change of rates is off by more than one month, it will be necessary to have VPF process retroactive indirect cost corrections to the first month of the new competing segment. (Currently, SAP indirect costs are calculated and applied at the end of each month—the rate on the account at that time will be applied to all costs incurred during the month. Therefore, changes can only be applied with the precision of a month, not a day.)

OSP Contract Administrators will communicate via e-mail to ur-issues@mit.edu, requesting corrections. Such communication will direct VPF to the rates and periods recently entered in KC— VPF will calculate and process the necessary F&A adjustment.

2.2.4 For Research WBS with Other Fixed Rate Requirements

Both non-federal and federal sponsors may impose unusual fixed indirect cost rates and bases on some awards. On- and off-campus indirect cost rates should always be set at the sponsor-approved rate. (The OSP Data Team will assess the need for and generate requests for any new SAP indirect cost adjustment keys, which are required to accommodate these rates.) An SAP costing sheet should be selected that describes the base. The indirect cost specifications may need to be entered for the first fiscal year of the award only (see below), unless multiyear underrecovery data must be included (see 2.3)—the fixed rate established for the first fiscal year will be extended through all remaining fiscal years within the award period.

For example: An off-campus WBS element for a three-year award effective during FY2000 and allowing F&A at 10% MTDC should be entered as:

Eff Date

End Date

IDC Rate

Costing Sheet

Fiscal Year

On/Off Campus

7/1/01

 

10.0

RESMF

2000

On

7/1/01

 

10.0

RESMF

2000

Off

If the base is very unusual and an SAP costing sheet has not been produced to accurately capture its components, a costing sheet should be selected that approximates the base as closely as possible. An explanation of the sponsor-approved base should be included in Indirect Cost Comments, listing all specified exclusions. VPF will process monthly manual adjustments to the WBS element to accommodate the unusual base.

OSP Contract Administrators must communicate to ur-issues@mit.edu, requesting that VPF review and act on KC instructions. (All such situations should be brought to the attention of Shawna Vogel—any repetitive requirement will be evaluated for possible development of a new SAP costing sheet.)

When the sponsor’s terms allow no indirect cost expense (and the WBS is not for a core administration or an approved equipment fabrication), on- and off-campus indirect cost should be set with a rate equal to 0.00% and costing sheet RESMN or RESMF, in accordance with MIT policy regarding on-campus and off-campus status.

OSP should avoid setting indirect cost specifications to calculate no indirect cost and requesting, via the KC Indirect Cost Comment field, that VPF make indirect cost charges by manual entry. Sponsor-approved rates should be entered. However, in rare situations, sponsors may approve small fixed-amount indirect cost charges (not tied to direct cost expenditures), which must be accommodated in this manner. These situations should be fully described in the Indirect Cost Comments section. OSP Contract Administrators must communicate to ur-issues@mit.edu requesting charges. Allowable indirect cost expenses should be charged by VPF to the account with offset to the DLC’s UR cost center as soon as the award account is established.

When the sponsor’s terms require indirect cost to be calculated as a percent of TDC, or a percent of the total direct costs, the RESTDC costing sheet should be applied. RESTDC calculates F&A on a TDC base as an adjustment to an on-campus MTDC calculation at current billing rates. Sponsor indirect cost rates stated on the basis of the total award amount should be converted to a TDC base (for example, 10% of the total award equals 11.11% TDC) and explained in KC Indirect Cost comments.

Two new costing sheets, RESTLE and RESTLC, have also been created to resolve an issue regarding WBS elements with an assigned Lab Allocations key. With the existing costing sheets, RESTDE and RESTDC, overhead is applied on top of the Lab Allocation charges. VPF’s Sponsored Accounting team then had to remove the overhead charges via a JV entry. Use of RESTLE and RESTLC will eliminate the need for such manual adjustments.

RESTLC should be used instead of RESTDC for on-campus research cost objects that have a Lab Allocation Key assigned to them and F&A calculated on a TDC base.

RESTLE should be used in place of RESTDE for on-campus research cost objects that have a Lab Allocation Key assigned to them and F&A calculated on a TDC base, less equipment.

Underrecoveries associated with NIH Training Grants are funded by the Institute. Anticipated underrecovery does not need to be entered in a KC plan. The costing sheet RESTG should be entered in KC.

2.3 Entering Data Regarding Budgeted Underrecoveries of F&A

Based on information presented at the time of proposal preparation and review (unless updated at the time of award by the DLC), OSP Contract Administrators will enter data related to budgeted underrecoveries of indirect cost on the KC Indirect Cost screen for the project’s level-one WBS element and appropriate child WBS elements. This data in KC does not generate a transaction in SAP. The lead DLC should document approval of any previously unapproved sources of underrecovery funding. All “source” accounts that were listed with the DLC responsibility code of 0000004 at the proposal stage must be updated with actual account information at the time of award.

If the underrecovery of indirect cost is to be funded from accounts designated by the PI, DLC, or school, the accounts should be shown under the “Source” column. If the underrecovery is to be funded by the VPR budget, an underrecovery funding cost object 1733xxx as designated by the school or VPR should be entered. Generally, the project’s level-one WBS element should be shown under the “Destination” column. However, if more than one PI or DLC is receiving funding in child WBS and sharing in responsibility for providing sources of underrecovery funding, the respective child WBS elements should be shown in the “Destination” column.

Data should be entered by MIT fiscal year in either the on- or off-campus line. The annual budgeted underrecovery should be entered in the MIT fiscal year during which the project period effective/anniversary date occurs. (If the plan designates more than two funding sources per fiscal year, enter extra lines as needed for each year.)

The budgeted underrecovery for the duration of the anticipated award must be entered at the time of award, even though the full award may not be obligated at that time. Any specific language provided by the DLC per agreement with the VPR should be included in the KC Underrecovery Comments. This data records the original underrecovery plan and will be used in management reporting. The amounts will not be added to the authorized total and will not be funded in the WBS element.

For example: an on-campus WBS element for a three-year award effective 12/1/2011, allowing F&A at 15% MTDC, and resulting in budget underrecovery in Year 1 of $7,000, Year 2 of $8,000 and Year 3 of $9,000, to be shared equally by a DLC discretionary internal order and the VPR budget, should be entered as:

Eff. Date

End Date

Rate

Costing Sheet

Fiscal Year

On/Off Campus

Underrecovery
Amount ($)

Source
Account

Destination
Account

12/1/11

6/30/12

15.0

RESMN

2012

On

$3,500

2xxxxxx

6xxxxxx

12/1/11

6/30/12

15.0

RESMN

2012

Off

$3,500

1733xxx

6xxxxxx

7/1/12

6/30/13

15.0

RESMN

2013

On

$4,000

2xxxxxx

6xxxxxx

7/1/12

6/30/13

15.0

RESMN

2013

Off

$4,000

1733xxx

6xxxxxx

7/1/13

 

15.0

RESMN

2014

On

$4,500

2xxxxxx

6xxxxxx

7/1/13

 

15.0

RESMN

2014

Off

$4,500

1733xxx

6xxxxxx

Underrecoveries of indirect cost are not usually reported to the sponsor. If it is necessary to report the underrecovery to the sponsor as a form of cost sharing, the underrecovery amounts and source(s) should be shown by fiscal year on the Cost-Sharing Screen with a comment on the IDC Screen referring the user to cost-sharing. Cost-Sharing Comments should include instructions to VPF to make charges to Recoverable Indirect Expense in amounts to equal the underrecovery.

2.4 Feeding F&A and Underrecovery Funding Specifications to SAP

Upon the creation or revision of a WBS element, KC feeds specified or defaulted indirect cost keys and costing sheets to SAP. Only specifications for the current/most recent fiscal year will feed. At the beginning of each fiscal year, the OSP Data Team will process a transaction to reset the specifications at the rates entered for the new year. In addition, the OSP Data Team will reset the rates for changes that occur during a fiscal year, as necessary, when new competing segments begin. (In these cases, the new rates will be reflected in the WBS in SAP at the end of the month in which the new rate data is entered in KC.)

2.5 Communicating Corrections to VPF

Whenever OSP Administrators identify errors in KC/SAP F&A data, they should immediately proceed to initiate a correction in the master data. OSP Contract Administrators should review the WBS to see if there were direct cost charges made during the period in which F&A data was set incorrectly. If so, the OSP Contract Administrators will send an e-mail to ur-issues@mit.edu requesting the correction. Such communication will direct& VPF to the rates and periods recently entered in KC— and VPF will calculate and process the necessary F&A adjustment.

3. Closeout Phase

The final audit of the indirect cost will be based on the indirect cost specifications in KC (and on legacy system –001 forms for WBS which pre-date SAP implementation). Any questions VPF accountants have that are related to this information will be directed to the appropriate OSP Contract Administrator.