Office of Sponsored Programs

F&A Data on Research WBS Elements

This document describes 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. 

1. Proposal Phase

With proposal preparation DLCs complete most research budgets utilizing current federal negotiated research F&A rates.  However, occasionally sponsor policies dictate a rate and/or base, which will result in indirect cost recovery below that which 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.

On the MIT Proposal Summary Form, the DLC enters the appropriate F&A rate and base, reflecting sponsor limitations. OSP should verify that the base is clearly described, including unusual exclusions, and consistent with OSP understanding of sponsor requirements. 

The total anticipated underrecovery of F&A for each year of the award is noted by the DLC on the form along with the source(s) of funds identified to cover the underrecovery. The source may be one or more specific accounts identified by the PI, DLC, or school.  If the DLC is assuming responsibility for funding an underrecovery, but has not yet identified the source, the DLC underrecovery cost center should be shown as the “source.” With the approval of the appropriate Dean or Vice President for Research, the source may also be the VPR’s underrecovery budget (cost object number 1733000)—in such cases the proposal summary form should indicate from which office approval was received and be signed by a representative of that office.

Anticipated underrecoveries associated with NIH Training Grants are funded by the Institute and do not need to be analyzed at the proposal stage.

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 projectWBS elements.  The rates for federal awards and subawards are determined in accordance with the provisions of OMB Circular A-21 (effective May 1996).  See OSP policy entitled, Implementation of ‘Fixed Rate’ Requirement of A-21.  Federal policy requires fixing rates for the life of the award at 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 federal negotiated rate.  However, both federal and non-federal sponsors occasionally specify a rate and/or base, which differs from those which would normally be applied under federal and/or Institute policies.

2.2 Entering Indirect cost Specifications in COEUS

OSP Contract Administrators are responsible for entering F&A specifications on COEUS data input sheets.  (See the attached input form for COEUS Indirect Cost Screen).  All comments related to indirect cost should be included in the COEUS Indirect Cost Comment field for the WBS element (or parent WBS element, if applicable to the hierarchy as a whole).  OSP Data Center administrators are responsible for entering data shown on the input sheets into the COEUS system.  OSP Contract Administrators are responsible for verifying the accuracy of F&A specifications in COEUS as shown on NoAs produced at WBS creation and change.

2.2.1 For WBS Excluded from F&A Calculation:

COEUS provides for default entry of SAP costing sheets for WBS which are excluded from indirect cost calculation based on COEUS Account Type.  (These defaults will be overridden by entry of indirect cost specifications on the COEUS Indirect Cost Screen.  Therefore, except for Indirect Comments, the COEUS 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)

COEUS provides for default entry of SAP costing sheets for research WBS which do not require fixed F&A rates.  Most non-foundation non-federal awards fall in this category.  These defaults will be overridden by entry of indirect cost specification on the COEUS Indirect Cost Screen.  Therefore, except for Indirect Comments, the COEUS 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.

(COEUS 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 COEUS Indirect Cost Screen with the rate of 999.99%.  This will apply standard MIT billing rates.  THIS MECHANISM SHOULD NOT BE REQUIRED FOR AND USED ON RESEARCH WBS.)

2.2.3           For Research WBS with Federal A-21 “Fixed Rate” Requirements.

Fixed rates, reflecting all rates in effect at the time of award of the competing segment must be entered.  Rates in effect at the time of award include Provisional Rates.  (When Fixed Rates are negotiated for those periods, the OSP Data Center will convert all Provisional Rates in COEUS/SAP to negotiated Fixed Rates.)  All current fixed and provisional 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 just 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 multi-year 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 10/1/99 through 9/30/2001 should be entered as:

(Through December, 1999, competing segment data was recorded by the OSP Data Center in the Indirect Cost Comment section.  With the release of COEUS 3.5, the competing segment is recorded with rate specifications, as shown on the input form.  Many federal awards subject to the A-21 fixed rate policy were received prior to change of COEUS to capture competing segment data.)

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 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 CAO 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 month, not day.) 

New reporting tools are being developed for CAO to identify when corrections are necessary, however, until they are completed, OSP Contract Administrators will communicate via e-mail to ur-issues@mit.edu, requesting corrections.  Such communication will direct CAO to the rates and periods recently entered in COEUS—CAO 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 Center will assess the need for and generate requests for any new SAP indirect cost keys, which are required to accommodate these rates.)  A SAP costing sheet should be selected which describes the base.  The indirect cost specifications may need to be entered for the first fiscal year of the award only (see below), unless multi-year 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:

If the base is very unusual and a SAP costing sheet has not been produced to accurately capture its components, a costing sheet should be selected which 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.  CAO 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 CAO review and act on COEUS instructions.  (All such situations should be brought to the attention of Pat Greer—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 request, via the COEUS Indirect Cost Comment field, that CAO to make indirect cost charges by manual entry.  Sponsor approved rates should be entered.  However, in very rare situations, sponsors approve small fixed indirect cost charges (not tied to direct cost expenditure), which must be accommodated in this manner.  These situations should be fully described in the Indirect Comments section and brought the attention of Pat Greer.

OSP Contract Administrators must communicate to ur-issues@mit.edu requesting charges.  Allowable indirect cost expenses should be charged by CAO to the account with offset to the DLC’s U/R cost center as soon as the award account is established.  

When sponsor’s terms require indirect cost to be calculated as a percent of TDC or percent of the total award, 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 total award should be converted to a TDC base (for example, 10% of the total award equals 11.11% TDC) and explained in COEUS Indirect Cost comments.

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

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 COEUS Indirect Cost screen for the Project’s level one WBS element.

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.  Project’s level one WBS element should be shown under the “Destination” column.  If the underrecovery is to be funded by the VPR budget, cost object 1733000, should be entered. 

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.   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 during 12/1/99, allowing F&A at 15% MTDC, and resulting in  budgeted 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; should be entered as:

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 CAO 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 creation or revision of a WBS element, COEUS 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 Data Group will process a transaction to reset the specifications at the rates entered for the new year.  In addition, the Data Group will reset the rates for changes, which occur during a fiscal year, as necessary, when new competing segments begin.

2.5    Communicating Corrections to CAO

Whenever, OSP Administrators identify errors in COEUS/SAP F&A data, they should immediately proceed to initiate a correction in master data.  New reporting tools are being developed for CAO to identify when corrections to existing indirect costs are necessary.  Until they are completed, OSP Contract Administrations should review the WBS to see if there were direct cost charges made during the period F&A data was set incorrectly.   If so, the OSP Contract Administrators will send e-mail to ur-issues@mit.edu, requesting the correction.  Such communication will direct CAO to the rates and periods recently entered in COEUS—CAO will calculate and process the necessary F&A adjustment.

3. Closeout Phase

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