Time for Change
We've all heard the saying "If it isn't broke, don't fix it." In 2014, the UIUC Budget Office was tasked with implementing a new campus "Comprehensive" Indirect Cost Recovery (ICR) distribution model. Although the old ICR distribution model under "Budget Reform" wasn't broke, it was extremely complex, lacked transparency, and made it difficult for business managers to track their ICR earnings over the long haul. The Budget Office kicked their plans into high gear. Their iACTion plan focused on analyzing, creating, and implementing the general provisions prescribed by the newly proposed model in the most efficient and transparent manner possible.
First, what is ICR?
Indirect Cost Recovery (ICR) funds are collected by the University from the facilities and administrative (F&A) rates charged to grant funds. These fees are charged to cover the University's overhead costs, such as salaries and wages, fringe benefits, materials and supplies, travel, and services, as well as tuition remission (TR). A portion of this revenue is allocated to the administrative offices that provide services like payroll and grant administration; a portion is also allocated back to campus departments. These unrestricted funds provide a key source of support for a unit's core research and administrative operations. ICR funding may also be used to support student scholarships/fellowships/awards, student services, maintenance and plant operations, or public service activities.
Transparency goal
The previous ICR distribution flow, developed in the late 90's under "Budget Reform," combined both F&A and TR earnings using a complex two-part distribution process; this model made it very difficult for units to really understand their ICR generation and it also created some unit inequities. Establishing an equitable distribution model while creating transparency was paramount to a successful implementation. In particular, the new model flows earnings directly to the units of the home Private Investigator (PI), regardless of the location of the research. In addition, tuition remission now flows back directly to the units who bear the cost of the tuition waivers.
The new ICR distribution method separates the F&A and TR revenue streams: In most cases, 45% of F&A revenue is distributed to the home college of the grant's lead PI and 75% of TR revenue flows back to the students' home unit of enrollment. Each college has the flexibility to develop its own internal distribution policy for both F&A and TR.
How is this goal being achieved?
The Budget Office chaired an appointed committee of key stakeholders, including many college budget directors, to determine the best approach to simplify the comprehensive ICR model and implement it through Banner. The Budget Office was responsible for converting nearly 6,000 existing grant funds to the new distribution methodology in a clear and concise process, while also developing transparency within the Banner system.
After the new ICR distribution method was implemented, new monthly comprehensive reports were created and distributed to the units. The Budget Office asked units for initial feedback in developing the reports, and have added new variations to the set of reports based on continuing feedback over time. The report development is ongoing and modifications will be made as customers deem necessary. The new approach has received only positive feedback thus far.
Customer impact
The new distribution model and reporting allows units to more easily determine how their ICR revenue is generated. Customers are able to more accurately predict ICR revenue, which is a key part of their annual budget planning process.
What's next?
One request that the UIUC Budget Office receives from customers is a desire for more specialized distribution codes that would give them the flexibility to distribute F&A across multiple colleges/departments and deal with split faculty appointments. The UIUC Budget Office plans to respond to this request as part of their new 2015 iACTion plan.
For more information on the ICR process or other budgeting services, please contact Suzanne Rinehart at srinehar@uillinois.edu or visit https://www.obfs.uillinois.edu/budgeting/urbana-champaign-campus/.
