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March 1, 2006

MEMORANDUM

We are pleased to announce the implementation of our University Research Center (URC) Incentive Program, with an effective date of January 10,2006. The URC Program description and chart detailing DRIF distribution for this program are enclosed for your review and distribution. Please note there has been one substantive change since this program was presented and discussed at the COD meeting. The DRIF incentive funds will be solely provided by the Provost, the VPR and the relevant Dean(s).

In the process of developing this incentive program, past practices with respect to granting F&A waivers were examined by a working group including senior staff in the Divisions of Research and Academic Affairs and several deans. They reviewed both types of waivers currently in use: (1) allowing for the reduction in our DHHS-approved F&A rate which results in the campus collecting less indirect cost than we are authorized to collect, and (2) allowing a direct return of a portion of the indirect cost collected on a project to support that project, currently called "internal waiver," which is actually a direct return of what would otherwise be distributed as DRIF to a particular project off the top of the DRIF pool.

This working group recommended that the VPR should maintain the discretion to grant reductions in the F&A rate, based on stated priorities, to maximize funded research at UM. The group agreed unanimously that the current process of "internal waivers" costs the entire campus and results in a disincentive to other faculty researchers. Currently these internal waivers amount to more than $3M taken off the top of the DRIF pool. This results in a decrease of the expected DRIF return to everyone to whom DRIF is distributed and explains why departments are currently receiving approximately 14.8% rather than 16% of their indirect cost expenditures. This is a significant loss, generally without any explanation or ability for advanced planning, and causes great strife at the department level.

Based on the advice of this working group, we are implementing the following actions:

Eliminate future "internal waivers," the direct return of indirect cost off the top of the DRIF pool.

Do not renew any current "internal waivers" when their terms expire.

Negotiate an end date with those deans who have "internal waivers" granted with no end date.

Recognize "internal waivers" as cost share for research projects and fund them as cost share out of current DRIF. Decisions on cost share would then follow VPR stated priorities and guidelines and would be funded by the appropriate parties (i.e., Department, Dean, VPR, Provost).

For the new University Research Center proposed incentives, the 10% allocation for the Center's use would be funded automatically (on those specific programs), split 33% each among the Provost, the VPR and the Dean(s), as shown in the figure attached to the enclosed UCR Incentive Program.

With the implementation of these actions, the DRIF distribution at the department level will be predictable, rise to the expected level, and provide appropriate incentives for requesting and collecting full indirect cost. In the case of the $2M/yr "University Research Center" initiative, we will recognize the 10% (of F&A) allocation as a true incentive to remain in the URC, in addition to the normal expected DRIF distribution which will flow through the URC to the contributing departments. Those providing the incentive will appropriately be those most committed to and involved with the centers (Provost, VPR, Deans), and there will be no loss to other departments and faculty on the campus.

A printable version of this memo is available - (pdf)