of the Faculty Senate
Committee on Administration
April 24, 2002
Committee was asked to (1) analyze and follow up on last year's
survey of the school deans on the administrative relationship
between the schools and the central administration, (2) report
and make recommendations regarding the Provost's ongoing study
of the cost of research at the University, (3) review the University
policy on Postdoctoral Fellows, and (4) review a revised policy
on misconduct in research when proposed.
majority of the work of the Committee related to the Provost's
ongoing study on the cost of doing research at Penn. A presentation
of the preliminary results of the study was made to the Committee.
The Committee understands that this type of analysis is currently
unique among the Ivy Plus group.
describing some of the preliminary results of this valuable study,
it is useful to provide some perspective about indirect research
charges and costs at the University. Indirect charges differ considerably
across research grants. Grants such as NIH and NSF grants have
an official overhead rate of 58.5%, which is negotiated by the
University for all Penn schools. This rate has decreased in recent
years. Other grants such as Pew or Sloan Foundation grants pay
only a much smaller overhead rate while some foundations pay no
overhead at all. Thus, overhead cost recovery differs substantially
across types of grants. There is tremendous variation in the distribution
of types of grants as well as the dollar value of the grants across
exists a tension between administrators that need to recover indirect
costs and researchers who view higher overhead recovery as decreasing
the direct cost portion of their grant or reducing the competitiveness
of their grant application. This tension is not as apparent in
the case of NIH grants where researchers do not perceive the indirect
"tax" rate as affecting the competitiveness or the direct
cost of their grants.
the University's "Responsibility Center Management"
(RCM) approach, the schools (resource centers and auxiliaries)
receive the bulk of the revenues received by the University. For
example, 81% of the indirect costs that are generated by research
grants in a school are returned to that school. Indirect cost
recovery accounts for approximately 18% of the University's revenues
and 8% is the percentage of the academic budget, excluding the
primary objective of the study on the cost of doing research at
Penn was to determine the indirect cost of support per expended
dollar on direct research. This analysis is input into another
important question: Is Penn recovering its indirect costs in its
fiscal year 1999 data, indirect cost expenditures are calculated
in four categories: central, school, department, and facility.
The facility cost is the biggest driver of indirect costs accounting
for about half of indirect costs. The facilities cost is calculated
as the $ cost/square foot times the square feet assigned to research
and is quite sensitive to how schools assign space to the research
category. Treatment of facilities funded by donors is treated
the same as those funded by the University. However, in recent
years only the School of Engineering and the Wharton School have
had buildings largely paid for with donor gifts.
activities across schools are quite different. Specific school-by-school
breakdowns of indirect costs were not provided. However, schools
with less than $5 million in research grants per year were estimated
to have total incurred (as opposed to charged) indirect costs
of about 33% compared to 61% for schools that had over $10 million
of research per year.
detailed analysis produced a shortfall in recovered versus actual
indirect costs of about $37 million for FY99 on a recovered base
of $103.6 million. Under RCM, the shortfall falls mainly on the
Committee understands that the study will be used as a management
tool. An important aspect of this study is that it allows the
University and the schools to make a more accurate calculation
about the extent to which their indirect costs of research are
covered. The study also puts pressure on the schools (and departments)
to provide more accurate inputs into the cost calculation process,
refine the calculation to account for special needs for various
types of research, and better manage their research expenses.
Faculty attention and input into this process is important and
the Committee encourages the faculty in each school to ensure
that their interests and input are fully represented at the school
it was mentioned that different grants have different allowable
(or feasible) overhead rates. While any incremental contribution
to overhead costs helps a school, faculty should be aware that
the higher indirect cost recovery grants are making a greater
contribution to the school's common overhead pool. It is therefore
possible that on the margin such differences could generate some
pressure on the faculty to apply for grants with greater allowable
overhead rates. Also, greater recovery of expenditures characterized
as overhead (indirect costs) on federal grants may sometimes be
possible as "direct" costs on non-federal grants, so
the faculty should expect some encouragement towards adopting
"best practices" with respect to grant writing. Absent
direct incentives to adopt such practices, however, faculty grantees
are unlikely to prefer such reallocation of costs.
study will allow the University and the schools to get a better
idea of what overhead rate is appropriate to recover research
costs on a school by school basis. The preliminary analysis of
the Provost's study did indicate considerable variation in this
regard across (research) sizes of schools. If the gap between
actual and recovered costs is mostly attributable to one or two
schools and particularly if these schools have a disproportionate
percentage of the University's total research income, it is possible
that some pressure may develop over time for a two-tiered rate
system for some federal grants to replace the current single-rate
system. Such a two-tiered system would have, of course, positive
effects on the higher rate school(s), but probably also a corresponding
negative effect on rates for the other category of schools.
about the sources of costs also provides a basis for beginning
an exploration of how incurred costs vary across types of research
(e.g. wet labs versus pure office projects) and what types of
research projects incur incremental research costs or are likely
to have no effect on research costs on the margin. Schools may
use cost recovery information to develop policies that have higher
expectations for indirect cost recovery for established investigators
and those with large or expensive laboratories. The Committee
also recognizes that many faculty at the University incur very
low indirect research costs and in some cases recover more indirect
costs than their research incurs.
presentation to the Committee came late in the academic year.
Important missions of the Committee in this area are to develop
a greater understanding of research costs at Penn, educate the
faculty about these costs, and provide useful input into the process.
Greater appreciation of these issues may increase the willingness
of faculty to help shoulder and take additional responsibility
for the general indirect cost burden of the University or their
school. Greater faculty cooperation on research overhead recovery
will likely depend on educating the faculty about the links between
recovered overhead monies and how those monies are used to support
immediate research costs.
Committee understands that many faculty have questions about the
approach toward calculating indirect costs and efforts to control
them and these questions need to be addressed. Finally, the Committee
notes that decisions about appropriate cost recovery should take
into account that research done in one school benefits other schools
by strengthening the overall research environment at Penn.
reviewing the survey of school deans conducted last year, the
Committee decided that the information provided did not provide
a strong basis for independent follow-up action. Many of the relevant
issues flagged by the survey related to issues raised by the "Cost
of Doing Research at Penn" study and therefore, the Committee
decided to focus its efforts in that area.
Committee reviewed a modification of the existing policy on postdoctoral
fellows, which was proposed by the Provost's Council on Research.
The PCR adopted changes suggested by the Committee. Subsequently,
the Committee recommended that SEC approve the revised policy.
revised policy on misconduct in research was referred to the Committee
on the Faculty.
for Next Year's Committee
on the Committee's examination of the cost of research at Penn,
the Committee recommends the following areas be pursued next year:
(1) indirect costs, allocated costs, and subvention and their
relationship to the overall budget, (2) differences in the policies
of various schools with respect to the type of grants that are
encouraged, how the monies received to support the indirect cost
of research at each school are used, and how startup research
projects or changes in strategic direction are dealt with, (3)
how the special needs and demands of the School of Medicine affect
its cost recovery, (4) how the schools determine teaching versus
research space, and (5) how facilities and administrative costs
are determined and managed.
A. Yao, Business and Public Policy, Chair
S. Walter Englander, Biochemistry & Biophysics
Peter McCleary, Architecture
Charles W. Mooney, Law
David P. Pope, Materials Science
Chair, David B. Hackney, Neuroradiology
Senate Chair-elect, Mitchell Marcus, Computer & Information