May 19, 2011


CHAIR ROBERT POWELL
Davis Division Academic Senate


COUNCIL OF DEANS


Re: Proposal to Provide Supplemental Funding to Mitigate Impacts from Composite Fringe Benefit Rate Calculations on Existing Sponsored Awards


Dear Colleagues,

I am writing in response to recent discussions about supporting campus principal investigators (PIs) as we make the transition to composite fringe benefit rate calculations on existing sponsored projects.  Specifically, the campus proposes a program to provide supplemental funding to mitigate or offset these impacts for PI’s negatively affected by this change.  The proposed approach is similar to the program created by the campus in 2004-05 to offset the impact of nonresident tuition remission for GSRs.

This proposal is made in good faith with the understanding that the change to composite fringe benefit rates represents a significant long term improvement in accounting practice which will, in the long run, simplify the budget development process for PI’s.  However, we acknowledge that changing the way that benefit costs are calculated may be a serious issue for existing grants that were negotiated and signed by both the faculty and the sponsor before composite rates were developed.  We understand that the nature of the change to direct costs could not have been anticipated by PI’s when their existing project budgets were developed and approved.  A description of the proposed process is provided below.


Principles
The process for providing supplemental funding for composite fringe benefit rate impacts would be informed by the following principles:

  • The amount of funding to be made available would not be predetermined, however, supplemental funding would be provided to all qualifying sponsored programs on a non-competitive basis.
  • All requests for supplemental funding would be reviewed and approved by a committee to be charged with implementing this proposal. (See “Committee” below.)
  • Requests for supplemental funding would be required to meet a minimum threshold amount of 5% of the project budget or $5000, because minor fluctuations between cost estimates at the proposal stage and the actual direct charges are normal occurrences which should be absorbed by the project.
  • Funding would be provided only to offset increased costs related to the way that rates are calculated under composite fringe benefit rates.  Cost increases that result from increases to health care benefit costs and the reinstatement of contributions to the UC Retirement Program would need to be absorbed by the project.  Accounting & Financial Services will develop a formula and methodology to calculate and extract these costs from supplemental funding requests.
  • Supplemental funding would be provided only for awards approved prior to the implementation of composite fringe benefit rates beginning July 1, 2011.


Committee
I will ask Vice Chancellors Meyer and Lewin to charge a committee to evaluate and approve all requests for supplemental funding.  Committee membership would include representatives from the Academic Senate, the Office of Research, Budget & Institutional Analysis, and Accounting & Financial Services. The committee would convene in June 2011 and evaluate funding requests for the next 12 to 18 months or until the transition is complete.


Process
PI’s or their designees would submit budget documents from the approved award proposal along with an analysis of increased costs that are attributable to the change in fringe benefit rate calculation (i.e., actual vs. composite).  For projects where the performance period spans multiple years, supplemental funding requests would show annual costs.  The supplemental funding request would also include a brief narrative explaining the impacts of the increased costs to the program.The committee would evaluate each funding request, seek additional information from the PI as necessary, and approve or deny the request.  An explanation of any denial would be provided to the PI and an opportunity to appeal the decision would be provided.

Once a request for supplemental funding were approved, Accounting & Financial Services would be responsible for recording an expense transfer entry from the project to a central campus account for the amount of the approved supplemental funding. These entries would be made before the end of each project budget period.

The specifics of this proposal may be subject to change by the committee appointed to implement this program.  However, we hope that this approach addresses all concerns on the part of PI’s affected by the change to composite fringe benefit rates.  We will begin implementation of this supplemental funding program immediately.  Thanks in advance for your assistance.

Sincerely,

Ralph J. Hexter
Provost and Executive Vice Chancellor

c:  Vice Chancellor, Lewin,
     Interim Executive Associate Vice Chancellor, Nosek,
    Vice Chancellor, Meyer,
    Associate Vice Chancellor Allred
    Associate Vice Chancellor Ratliff