Management Guidelines for the Development of the Indirect Cost Rate Proposal

The University Corporation for Atmospheric Research (UCAR) is a consortium of 75 Member universities with doctoral programs in the atmospheric and related sciences, 23 Academic Affiliate institutions that offer BS and/or MS degrees in the atmospheric and related sciences, and 48 International Affiliates. With a budget of approximately $200M annually, UCAR manages the National Center for Atmospheric Research (NCAR) and the UCAR Community Programs/Education and Outreach/Other (UCP/EO/Other). UCAR is a not-for-profit and, therefore, must comply with the following OMB Circulars: A-110 (administrative requirements), A-122 (cost principles) and A-133 (single audit).

The UCAR mission is to support, enhance, and extend the capabilities of the university community, nationally and internationally; to understand the behavior of the atmosphere and related systems and the global environment; and to foster the transfer of knowledge and technology for the betterment of life on earth.

Leaders of the university atmospheric sciences community and the National Science Foundation (NSF) established the National Center for Atmospheric Research (NCAR) in the late 1950s under the management of a consortium of universities, the University Corporation for Atmospheric Research (UCAR). The center is organized by scientific and technological disciplines: atmospheric chemistry, climate and global dynamics, solar physics and solar-terrestrial interactions, mesoscale and microscale meteorology, and societal impacts. Two technology divisions provide computing resources and observational instruments for use by the entire atmospheric sciences community. In addition to the scientific and technological divisions, NCAR also has an advanced study program for postdoctoral visitors.

In the early 1980’s, the UCAR Board of Trustees decided that UCAR should expand its mission beyond that of operating NCAR. The Board authorized UCAR to undertake additional projects of interest to the university community Because of community interest and the desire of the sponsors and the Board of Trustees to create higher visibility and greater autonomy for the projects, they were located in UCAR. All of the programs had a common theme of education, training, and research community support. In 1992 the programs joined together to form the UCAR Community Programs/Education and Outreach/Other (UCP/EO/Other). At present, UCP/EO/Other consists of a number of programs funded by various federal agencies to provide support to the scientific community by creating, conducting, and coordinating projects that strengthen education, training, and research in the atmospheric, oceanic and earth sciences. Because some UCP/EO/Other programs support staff not residing on the Boulder campus, UCP/EO/Other has two indirect rates. An On-site rate is applied to program activities that are resident in Boulder, and an Off-site rate is applied to the salaries and benefits of staff whose office locations are not on the Boulder campus.

Reimbursement for indirect costs is accomplished via fixed rates with carryforward. The rate is "fixed" in that it is based on an estimate of costs for a future period of time covered by the rate. The rate includes a "carryforward," or variance, in that you must compute the amount required to reconcile the difference between the costs estimated for the time covered by the rate and the actual costs incurred for that period. The variance amount becomes an adjustment in the indirect cost rate submission two years after the initial calculation. The carryforward adjustment cannot be made for the fiscal year immediately following the year covered by the fixed rate because the fixed rate for the following year has already been established before the amount of the carryforward adjustment is known.

UCAR’s Indirect Cost Pools include:

• Employee Benefits (e.g., medical, FICA, TIAA/CREF, non-work time)
• Communications (e.g., telecom, networking/security)
• Facilities (e.g., maintenance, custodial, building debt service)
• UCAR G&A (e.g., President’s Office, F&A, Corporate Affairs, Library Services)
• NCAR Indirect (e.g., NCAR Director’s Office, Lab/Division administrative budgets, bid & proposal)
• UCP/EO/Other Indirect (e.g., UCP/EO/Other Director’s Office, division administrative budgets, bid & proposal)

*Includes casual employee salaries and student visitors.

The following chart is a graphic representation of the flowdown of UCAR’s indirect cost pools after the benefits cost allocation is made to expensed payroll. At the top of the indirect cost flowdown is the Communications Cost Pool, next level is the Facilities Cost Pool, next level is the UCAR G&A Cost Pool. The final level of the indirect cost flowdown is the Entity G&A Cost Pools, i.e., NCAR and UCP/EO/Other.

UCAR Employee Benefits Rates Development Process

1. Introduction

1. The employee benefits pool contains those indirect costs that are associated with benefits received by UCAR, NCAR, and UCP/EO/Other employees.
   

2. Two benefit rates are in effect. A full benefit rate is applied to expensed payroll of regular employees. A reduced benefit rate is applied to wages of casual employees and student visitors.
   

3. Types of Costs

1. Pool components allocated to total expensed payroll (reduced benefit base) include:

• Employer share of FICA
• Travel accident insurance
• Unemployment insurance
• Worker’s compensation insurance
• Wellness seminars and programs beneficial to the entire staff
• Employer cost of the bus pass program (Eco-pass)
• Variance carryforward

2. Pool components allocated to regular employee expensed payroll only (full benefit base) include:

• Employer share of medical and dental plan
• Group life insurance
• Employer share of retirement plan (TIAA/CREF)
• Educational assistance
• Long-term disability insurance
• Severance
• Non-work time dollars, including the following:

• Vacation/PTO used
• Vacation/PTO liability
• Holidays
• Sick leave, Salary Continuation Plan, Family Sick/Death Leave
• Worker's Compensation time
• Educational time
• Military duty
• Jury duty
• Facility shutdown and other non-work time dollars

4. Allocation Base used for employee benefits is expensed payroll. Expensed payroll excludes salaries paid for non-work time.

2. Process
1. Pool Costs

1. Information gathering

1. Prior year actual information is obtained from the accounting system and reviewed.
2. Information pertaining to estimated growth, inflation, or reductions in pool components, such as estimated salary increases or estimated increases in insurance costs, is obtained from both internal UCAR resources and external sources.

2. Information calculation and summarization

1. The information that has been gathered is reviewed by the UCAR Budget Office and based upon the available information, decisions for estimating the new fiscal year pool components are made. Estimates may be based on prior year actuals, a percentage of gross payroll, or may be calculated using other information and estimating techniques.
2. After completion, estimates are electronically summarized by category into an electronic format for summary level review and calculation.

3. Information review

1. The UCAR Budget Office, Human Resources representatives, the Director of Budget and Finance, and the Vice-president of Finance and Administrations provide initial reviews of benefits pool cost estimates and calculations.
2. The entity Budget & Planning Offices and the President's Council perform subsequent reviews.

2. Pool Base

1. Prior year actual information is obtained from the accounting system and reviewed.
2. Information pertaining to estimated growth or reductions in the base components is obtained from both internal UCAR resources and external sources.

2. Information calculation and summarization

1. The information that has been gathered is reviewed by the UCAR Budget Office and based upon the available information, a decision for estimating the new fiscal year base is made. Estimates for the new fiscal year base may be based on information obtained from the respective pool representatives, prior year actuals and other historic data, and may also be calculated using other information and estimating techniques.
2. Estimates are summarized into an electronic format for summary level review and calculation.
3. The benefits rates are calculated as follows:

3. Information review

1. The UCAR Budget Office, Human Resources representatives, the Director of Budget and Finance, and the Vice-president of Finance and Administrations provide initial reviews of benefits pool base estimates and calculations.
2. The entity Budget & Planning Offices perform subsequent reviews.

2. Summary Final Reviews

1. The UCAR President's Council reviews the estimated rates. President's Council input is included in the benefits rate calculation as appropriate.
2. At the discretion of UCAR, the benefits rate may be subject to other reviews as necessitated by circumstances arising from and unique to any given year's proposal.

1. Introduction

1. Composition of the pool
   1. The Communications Pool includes those indirect costs associated with data and voice communications services.
   2. Types of costs may include, but are not necessarily limited to, salaries and benefits, materials and supplies, purchased services, travel, and depreciation and interest. In addition, the pool includes the prior year variance carryforward.

2. Communications Rate Base. Communications indirect costs are allocated on the basis of headcount of Boulder-based staff.

2. Description of the rate development process
1. Cost Pool
1. Corporate guidelines and rate development schedules are provided to the Communications Budget Administrator as the first step in the rate development process. The guidelines may include, but are not necessarily limited to, salary increase and employee benefit rate assumptions.
2. The UCAR Budget Office organizes prior year actual expenditures and current year budgets for each function into spreadsheets for consideration in preparing budget year cost estimates.
3. Current staff levels and current actual salary information is included in the spreadsheets created by the UCAR Budget Office.  The Communications Budget Administrator reviews and updates salary information for each function to consider in the budget preparation process.
4. Multi-year depreciation and interest schedules are originated by the UCAR Budget Office and updated by the Communications Budget Administrator to assist in determining budget year cost estimates.
5. The Communications Cost Pool managers consider current ongoing costs and programmatic reductions and increases to determine the optimal budgets for the Communications functions required by the Corporation.
6. The proposed budgets are reviewed by the Communications Budget Administrator, the cognizant President’s Council member, UCAR Budget Office, entity Budget & Planning Offices, and the President’s Council in that order.
2. Base
1. The process for determining the headcount base proposal for the budget year begins with obtaining the current monthly update of the headcount allocation as well as the prior year headcount.
2. The UCAR Budget Office consults with administrative offices of the entities to which Communications costs are allocated to develop estimated changes to the current headcount allocation to reflect best estimates of the headcount allocation for the budget year.
3. The base used for allocation of Communications indirect costs is subject to the review of the UCAR Budget Office, the entity Budget & Planning Offices, the cognizant President’s Council member, and the President’s Council in that order.
3. When all cost pool and base estimates have been reviewed, preliminary rate calculations and allocation estimates are prepared by the UCAR Budget Office which subsequently completes the formal rate calculation.

		Sum of Communications Cost Pool
Communications Rate (Headcount)	=	-------------------------------------------------
		Total Headcount

 

1. Introduction
1. Composition of the pool
1. The Facilities Cost Pool includes those indirect costs defined as "Facilities" in OMB Circular A-122 except for those functions included in the Communications Indirect Cost Pool.
2. Types of costs may include, but are not necessarily limited to, salaries and benefits, materials and supplies, purchased services, travel, and depreciation and interest. In addition, the pool includes the allocation of the Communications Cost Pool and the prior year variance carryforward.
3. Facilities Rate Base. As prescribed by A-122, facilities indirect costs are allocated on the basis of usable square feet of space, excluding common areas, such as hallways, stairwells, and restrooms. Due to the disproportionate amount of space used compared to facilities benefits received, allocation of costs to the NCAR hanger are currently at 50% of the normal amount.

2. Description of the rate development process

1. Cost Pool
1. Corporate guidelines and rate development schedules are provided to the Facilities Budget Administrators as a first step in the rate development process. The guidelines may include, but are not necessarily limited to, salary increase and employee benefit rate assumptions.
2. The UCAR Budget Office organizes prior year actual expenditures and current year budgets for each function into spreadsheets for consideration in preparing budget year cost estimates.
3. Current staff levels and current actual salary information is included in the spreadsheets created by the UCAR Budget Office.  The Facilities Budget Administrators review and update salary information for each function to consider in the budget preparation process.
4. Multi-year depreciation and interest schedules are originated by the UCAR Budget Office and updated by the Facilities Budget Administrators to assist in determining budget year cost estimates.
5. The Facilities Budget Administrators and Facilities Cost Pool managers consider current ongoing costs and programmatic reductions and increases to determine the optimal budgets for the Facilities functions required by the Corporation.
6. The proposed budgets are reviewed by the Facilities Budget Administrators, the UCAR Budget Office, the cognizant President’s Council member, the entity Budget & Planning Offices, and the President’s Council in that order.
2. Base
   1. The process for determining the gross assignable square footage (GASF) base proposal for the budget year begins with the UCAR Budget Office obtaining the current monthly update of the square footage allocation.
   2. Staff from Facilities and the entities to which Facilities costs are allocated are consulted to develop estimates of changes to the current space occupied to reflect best estimates of the space allocation for the budget year.
   3. The base used for allocation of Facilities indirect costs is subject to the review of the UCAR Budget Office, the cognizant President’s Council member, the entity Budget & Planning Offices, and the President’s Council in that order.
3. When all cost pool and base estimates have been reviewed, rate calculations and allocations are prepared by the UCAR Budget Office.

		Sum of Facilities Cost Pool
Facilities Rate (GASF)	=	--------------------------------------
		Total GASF

 

1. Introduction

2. The G&A cost pool contains costs associated with general administration and general expense. Included are those expenses that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization. The pool contains its allocable share of fringe benefit costs, operations and maintenance expense, depreciation and use allowances and interest costs. The G&A cost pool includes, but is not limited to, the following general executive and administrative offices, expenses of a general nature, and allocations:

• UCAR President and Vice Presidents
• Support for the Board of Trustees and Member Representatives
• UCAR Communications
• UCAR Government Affairs and Development Activities
• Contracts & Sponsored Agreements
• Business Services
• Office of General Counsel
• Budget & Finance
• Information Technology
• Human Resources
• Health and Environmental Services
• Transportation Services
• Library Services
• Community & Public Services
• Web Master Services
• Employee Activity Committee (EAC)
• Allocation of Communications Cost (Headcount)
• Allocation of Facilities Cost (GASF)
• Variance Carryforward

3. The G&A base is allocated to benefiting functions on the basis of modified total direct costs (MTDC). MTDC includes salaries and wages, fringe benefits, materials and supplies, services, travel, and grants and subcontracts up to the first $25,000 of each subgrant or subcontract per year (regardless of the period covered by the subgrant or subcontract). The allocation base for the UCAR G&A cost pool consists of the direct program MTDC plus the entity indirect cost pools, excluding the UCAR G&A allocation. For programs that are not associated with a specific entity, UCAR G&A is applied at the program level based upon MTDC.

2. Description of the Rate Development Process

2. Pool Base

1. Introduction

1. Composition of the Pool

The NCAR Indirect Cost Pool consists of the NCAR Director’s Office, Lab/Division Indirect Costs including bid and proposal costs and general administration costs associated with the management and administration of the NCAR Laboratories and Divisions; and allocation of the Communications Cost Pool; the Facilities Cost Pool; and the UCAR G&A Cost Pool. Prior year variance carryforward is also included in the NCAR Indirect Cost Pool. The NCAR Director’s Office cost item consists of Director’s Office operations including the salaries and benefits of the NCAR Director and the Director’s Office administrative staff; the Associate Director’s salary and benefits and associated supplies and services, travel associated with the Associate Director’s functions; the Budget and Planning Office staff salaries and benefits and associated supplies and services, and travel.

Costs included in this pool may consist of salaries, associated fringe benefits, materials and supplies, purchased services, travel and depreciation and interest related to general administration and general expenses that cannot be readily identified with a particular final cost objective.

NCAR indirect costs are allocated on the basis of modified total direct costs (MTDC) to benefiting NCAR programs. MTDC consists of direct salaries and wages, fringe benefits, materials and supplies, purchased services, travel, and subcontracts up to the first $25,000 of each subgrant or subcontract per year. Excluded from the MTDC base are equipment, contract amounts above the first $25,000,and participant support costs. NCAR may, with prior approval from the NSF Program Officer, cosponsor the indirect costs of certain grants in which the sponsoring institution or agency does not allow the application of indirect costs. Although these grants are not included in the MTDC base, the associated MTDC costs from the cosponsored costs are included in the NSF program base.

2. Process

1. Pool Costs
1. Corporate guidelines and rate development schedules are provided by the UCAR Budget Office to NCAR as a first step in the rate development process. Guidance may consist of salary and non-labor inflation assumptions and other guidance that may be necessary. Director’s Office and Associate Director operation costs are obtained from the Director’s Office Administrator in consultation with the NCAR Director and Associate Director. The Director of Budget and Planning provides detail cost estimates for the Budget and Planning Office budget. Division indirect cost budgets are developed directly by the Budget and Planning Office staff.
2. Prior year actual expenditures and current year budgets for each function within the Director’s Office are organized into spreadsheets as a basis for preparing the budget for inclusion in the rate submission. Staffing schedules are also updated for the latest personnel changes including projected salary increases for the current year and the following year. Inflation factors for non-labor costs and the new benefit rate are also incorporated into the budget calculation. Known one-time or new ongoing costs are determined at this time usually in consultation with the NCAR Director and Associate Director.
3. Laboratory/Division Indirect Budgets are calculated by the Budget and Planning Office using a set formula based on divisional MTDC levels. The NCAR Directors' Committee approves this formula. Each Lab/Division indirect budget varies in relation to that division’s MTDC growth. As a division’s program grows (MTDC increases) the lab/division's indirect budget increases. When the lab/division’s program declines (MTDC decreases), the lab/division’s indirect budget is reduced.
4. The NCAR Associate Director provides guidance to the Budget and Planning Office and reviews the rate submission during each step in the rate development process.
   
   
2. Pool Base
1. Modified Total Direct Cost (MTDC) information is provided to the Budget and Planning Office by each NCAR lab/division.
2. The Budget and Planning Office develops summaries by lab/division of prior year actual MTDC activity. This information is provided to each Lab/Division Administrator for review. The lab/division administrator reviews the prior fiscal year MTDC actuals and makes adjustments based on anticipated program changes. Changes may be based on current spending activity and projected carryover estimates into the next year, proposals submitted for additional funds, anticipated new program activities, and anticipated completion of current projects. These updated estimates for the current year and the following year are provided to the Budget and Planning Office approximately four months prior to submission of the rate to the National Science Foundation.
3. Base estimates are reviewed by the Budget and Planning staff and are compared with additional base trend analyses developed by B&P. If time permits, NCAR lab/divisions are provided preliminary base numbers for review and comment prior to or in parallel with the NCAR Associate Director’s review of the base.
   
   
3. Preliminary Rate Calculation/Allocation Estimates

Once all base and cost pool estimates have been reviewed, a preliminary rate is calculated using estimates for the Communications, Facilities, and G&A allocations if current allocation estimates are not available. The NCAR Associate Director approves the preliminary rate estimate prior to submission to the UCAR Budget Office.

4. Forward Preliminary Rate Information to the UCAR Budget Office

The preliminary rate information for the NCAR Indirect Cost Rate is forwarded electronically to the UCAR Budget Office, where the formal rate calculation is completed.

		Sum of NCAR Cost Pool
NCAR G&A Rate (MTDC)	=	-----------------------------------
		Total MTDC

 

UCAR Community Programs/Education and Outreach/Other
(UCP/EO/Other)

1. Introduction

The indirect cost pool for UCP/EO/Other consists of program indirect costs that cannot be readily identified with a particular final cost objective, consistent with the definition in OMB Circular A-122. These include the UCP/EO/Other Director's office and bid and proposal costs; Communications and Facilities cost allocations; UCAR G & A cost allocations, and variance carryforward.

2. Base

The UCP/EO/Other indirect cost base is allocated as defined in OMB Circular A-122 to benefiting programs based on modified total direct costs (MTDC). MTDC includes direct salaries and wages, fringe benefits, materials and supplies, purchased services, travel, and subcontracts up to the first $25,000 of each subgrant or subcontract per year. Excluded are equipment, contract amounts above the first $25,000, and participant support costs.

2. Description of the Rate Development Process

The UCP/EO/Other Budget Office uses a combination of methods to estimate budgets. The first step is to obtain guidance, salary increase factors, draft benefit rates, and the rate development schedule from the UCAR Budget Office. This information is distributed to UCP/EO/Other program administrators.

• The draft benefit rates, prior year actual expenses, and current year budgets are incorporated into spreadsheets that are then used by the programs in estimating both their direct and indirect labor and non-labor costs. Direct labor for off-site staff is estimated separately from direct labor for on-site staff.

• Additional information on anticipated program needs from program managers, as well as other factors such as inflation and expenditure history, are used with the spreadsheet information for estimating both the cost pool and base. As the indirect cost rate calculation process begins, the UCP/EO/Other Manager of Budget and Administration meets with the UCP/EO/Other program administrators to provide guidance based on input received from the UCAR Budget Office.

1. Indirect Cost Pool

1. The spreadsheets used for indirect cost pool budget estimating provide both prior year actual expenses by expense category and current year budgets by expense category.
2. Using estimated salaries from the spreadsheets as a starting point, labor budgets for the new fiscal year are built from the bottom up and are based on anticipated program needs. Prior year non-labor expenditures are adjusted for the new fiscal year budgets based on anticipated program needs.
3. The UCP/EO/Other Manager of Budget and Administration reviews the indirect cost pool budgets for reasonableness by comparing prior year actual expenses and the current year budgets and by holding individual meetings with program administrators and program managers to discuss additional information.
4. The UCP/EO/Other Director’s office budget is developed in the same fashion, using current salaries as a starting point, increasing budgets based on anticipated needs, and comparing prior year actuals to current budgets for reasonableness.
5. Estimated indirect cost pool budgets are forwarded to the UCAR Budget Office when reviews have been completed.

2. Modified Total Direct Cost Base

1. The salary and benefit portion of the MTDC is obtained from the spreadsheets noted above. This provides one part of the MTDC base estimate.
2. UCP/EO/Other program administrators review the non-labor MTDC actuals from the prior fiscal year and make adjustments based on anticipated program changes. These changes might be based on proposals that have been submitted for additional funds, anticipated new program activities, increased travel or field project costs, or reasonable inflation adjustments. All adjustments require explanation and justification. The estimated direct labor and the non-labor estimates form the on-site MTDC base.
3. The estimated labor for off-site program staff is included in the off-site MTDC base. The off-site rate is applied to salary and benefits only.
4. The UCP/EO/Other Manager of Budget and Administration reviews program base estimates, comparing them to prior year actual expenditures. The manager interviews each program administrator to review estimates and confirm likelihood of program and/or funding changes. Base budget estimates are modified based on these discussions.
5. Base estimates are forwarded to the UCAR Budget Office when this review is completed.

3. Preliminary Rate Calculation:

1. When all base and cost pool estimates have been reviewed, preliminary rates are calculated using estimates for the Communications, Facilities, and G & A allocations if actual allocations are not yet available. UCP/EO/Other has two rates: an Off-site rate which is applied to employees not resident in Boulder, and an On-site rate, which is calculated by adding the Off-site rate to an incremental rate calculated for the Communications and Facilities allocation. The Off-site rate (also referred to as the "All-sites rate" since it applies to all sites) is calculated first, as follows:

		Sum of UCP/EO/Other Cost Pool less Facilities & Communications allocations
Off-site rate (All-sites rate)	=	-------------------------------------------------------
		Total MTDC

The incremental rate calculated for the Communications and Facilities allocation to UCP/EO/Other is then calculated as follows:

		Sum Facilities & Communications allocations
Communications and Facilities incremental rate	=	-------------------------------------------------------
		On-site MTDC

The Off-site rate and Communications and Facilities incremental rate are then added together to equal the UCP/EO/Other On-site rate:

Off-site rate + Communications and Facilities incremental rate = UCP On-site rate.

2. The UCP/EO/Other Manager of Budget and Administration reviews base and indirect cost pool figures and the draft rates with the UCP/EO/Other Director (cognizant President’s Council member).
3. The preliminary rate estimate is distributed to the UCP/EO/Other program managers for their review. The UCP/EO/Other program managers then meet with the UCP/EO/Other Director and UCP/EO/Other Manager of Budget and Administration for final reviews.
4. Adjustments are made based on discussions at this meeting and the resulting numbers are forwarded electronically to the UCAR Budget Office, where the formal rate calculations are completed.

1. Summary Final Reviews
1. The entity Budget Offices review all components of the proposed indirect cost rates.
2. The President's Council reviews all components of the proposed indirect cost rates prior to approval.
3. Other reviews are performed as necessitated by circumstances arising from and unique to any given year's proposal.

2. Submission to NSF
1. The proposed indirect cost rate package is submitted to NSF by March 31st .
2. Resubmission may become necessary due to circumstances arising from and unique to any given year's proposal.