August 25, 2015
Sponsored research overhead funds review from V.P. for Research Karen Burg
Dear Faculty and Staff,
We're already almost two months into a new fiscal year and, as promised, I want to take time to communicate how sponsored research overhead funds were spent on the K-State research enterprise in fiscal year 2015. This budget is based on historical decisions made in the last several decades, and a comprehensive review has not occurred recently.
First, let's take a moment to review the source of those funds, known as sponsored research overhead (SRO) or indirect costs (IDC). Sponsored research overhead costs are expenses necessary for the research operation of the university that cannot be easily assigned to a specific grant — things like electricity, heat, light, accounting services, human resources, or administrative costs such as procurement, asset management, regulatory compliance and department research administration support. Whenever a faculty member brings grant dollars into K-State, a negotiated percentage of the budget is collected for overhead costs and allocated into four pots, as determined by K-State's SRO distribution policy: central administration, dean/department, host research directors such as the vice president for research, or VPR; Agricultural Experiment Station, or AES; and Engineering Experiment Station, or EES) and K-State libraries (see below).
Dean/department and library categories are self-explanatory, but you may wonder where funds designated for central distribution and research director categories are spent. VPR/AES/EES funds comprised $744,586, or 4.37 percent of fiscal year 2015 SRO collections. The VPR share of that amount was about $290,000. These funds were primarily used to support items that benefit the whole campus; for example, they covered university subscriptions to services such as Cayuse, an electronic proposal development and submission system, and PIVOT, an online searchable funding database; several institutional memberships (e.g., BioKansas, Council of Governmental Relations, National Ecological Observatory, and the National Academy of Inventors); and wages for student workers in PreAward Services.
Now let's take a look at how funds marked for central distribution were spent in fiscal year 2015 (see below).
The Biosecurity Research Institute, or BRI, clearly takes a large portion of the pie. One piece goes to debt service (the payment of principal and interest over time), and the rest goes to operations. Understanding the difference between these two pieces is important. When Pat Roberts Hall was built, K-State used debt through the state to construct the building, and that money plus interest must be repaid. In fiscal year 2015, we deposited $867,779 of new SRO to the debt service account, which fell short of the roughly $2.3 million payment we made to the state. This strategy makes it difficult to achieve flexibility in how we spend SRO funds. We've been able to make the annual payment toward this debt service from a reserve of funds created by the Office of the Vice President for Research, but that reserve is shrinking rapidly, which means the percentage of funds that go to BRI debt service could grow in the future to as much as 27.26 percent of the total. Full funding of the BRI debt service will need to be addressed within the next two years, because the debt service continues through 2032. This slice of the pie isn't going away anytime soon.
The other portion of BRI expenditure represents a share of the cost of operating the facility, including salaries, equipment, supplies, and so on. At 23.22 percent of the central distribution, this is a substantial budget item, but BRI is crucial to K-State as we work to protect global food systems and meet our 2025 goals. It would be easy to complain about this seemingly large slice of pie; however, the investment affords amazing opportunities. Simply put, the BRI helps solidify Kansas State University as an authority on threats to our global food systems as well as human and animal health. The research, trainings and conferences that the BRI has hosted this summer are great illustrations, and the entire university benefits from the growth in opportunities and recognition that it brings as well as the more than $70 million in high-containment-related research. K-State undergraduate and graduate students are also able to take courses in biosafety and biocontainment research at the BRI through partnerships with academic departments. That kind of experience sets our students apart and prepares them to meet global challenges. Investment in the BRI will continue to pay dividends that benefit the entire campus.
Other budget areas that may need explanation include PreAwards Services, the Office of the Vice President for Research, the Institute for Commercialization, the College of Arts & Sciences, and the Office of the Vice President for Administration and Finance.
- Thirty-two percent of the PreAwards Services budget of $434,377 is returned to faculty through Faculty Development Awards and University Small Research Grants (known as FDA/USRG awards), 52 percent goes to staff salary and benefits, and the remainder goes to operating costs.
- The Office of the Vice President for Research budget is heavily weighted toward human resources: 80 percent of this budget supports salaries for full-time staff and student workers. The remaining 20 percent includes operation for the remaining units within the Office of the Vice President for Research and university initiatives supported by the VPR.
- The Kansas State University Institute for Commercialization, or KSU-IC, helps our research entrepreneurs assess commercially viable opportunities for their research, develop and facilitate technology-driven industry partnerships, and license K-State-developed intellectual property on behalf of the Kansas State University Research Foundation. KSU-IC also starts new businesses when appropriate as it works to commercialize the university's intellectual property. In the past 10 years, KSU-IC has generated approximately $15.9 million in direct revenue back to K-State via licensing efforts while also helping to facilitate an additional $4.4 million in sponsored research funding over that same time frame; this unit clearly generates good return on investment.
- The funds sent to the College of Arts & Sciences represent specific commitments to provide a share of funds ($14,071) for the Fish & Wildlife Coop Unit, animal care services from a lab assistant in the Ackert Hall Lab ($19,069), and the Natural Resources and Environmental Sciences program in geography ($9,000).
- The Office of the Vice President of Administration and Finance, or VPAF, received 11.39 percent of central distribution, or $960,973. This money is distributed to the Division of Financial Services, Public Safety, K-State Police Department, and Facilities. Slightly more than forty percent of the VPAF distribution (41.62 percent, or $400,000) is budgeted for Environmental Health and Safety, specifically debt service for and monitoring of the chemical waste landfill. The allocation to facilities for maintenance and repairs historically has been and continues to be less than $20,000.
When I look at these budget breakdowns, I see a couple of overarching themes. One is that we invest heavily in our human capital: slice after slice of the pie is weighted toward salaries and benefits. Another is that we are generally doing a good job of investing in entities that provide a return to K-State. We are moving our research enterprise forward in a cost-effective manner.
That doesn't mean we don't have challenges to face. The distribution of indirect costs and the corresponding distribution of expense is a difficult calculation. We currently have a roughly 60-40 split between central research administration and colleges and departments. Other institutions do this in a variety of ways, and exploring other splits may yield positive changes. Responsibilities and expectations will likely change if we adopt a new system, but some of those changes could be necessary and beneficial.
Review of our SRO distribution will be undertaken by a task force of campus leaders and will involve the campus community at large. We want to work together as a university to ensure that we have policies in place that support our research enterprise and our 2025 goals.
For example, I know lab renovation is one issue that is on many minds. The available funds for renovations are always more limited than we'd like, and our ability to respond centrally to these needs is constrained by our distribution policy. The same observation may be made regarding maintenance of multi-user equipment. Current distribution to facilities of less than $20,000 is simply not adequate to meet the needs we have on campus, and this is one point that must be considered by a task force. If we expect to maintain equipment and infrastructure centrally, our SRO return policies must be revised accordingly.
Budget realities are never easy to confront. Digesting this letter is a great first step, so thank you for your time and attention.
Regards,
Karen J.L. Burg