ࡱ> Z\Y }bjbj,(,( 4,NBNBiffLL8$ 4(>>>>VVV84:4:4:4:4:4:4,I79f4V4"VVVf4LL>>{4V^L8>>84V84-.8;b,j-$4404-;;(..|/VVVf4f4VVV4;VVVVVVVVV| :    SENATE BUDGET AND TAXATION COMMITTEE TUESDAY, FEBRUARY 18, 2014 Testimony of Erica Kropp and Denise Clark Good afternoon Chairman Kasemeyer, Vice Chairman McFadden and members of the Committee. My name is Erica Kropp. I am Vice President for Administration and Finance for the University of Maryland Center for Environmental Science (UMCES). Joining me is Denise Clark, Associate Vice President for Research at the University of Maryland, College Park. We are here today testifying on behalf of our institutions and the ĢƵ. We are very appreciative of this opportunity to testify and explain our opposition to a Department of Legislative Services recommendation within the analyses of DBMs budget. DLS is recommending that the annual budget bill include language that would limit or cap the indirect cost recovery to 15% on any interagency agreement a State agency may have with any USM institution. If approved, this would have a negative financial impact upon a number of the USM institutions. Facilities and Administrative Charges, commonly referred to as indirect costs or overhead, are the least understood budget component of our sponsored programs. But in fact, they play an important role in our efforts to support and achieve the research and other services we provide to our sponsors. In the simplest of terms, overhead is justified as allowable costs for projects that cannot be easily identified with any one particular project. Often used illustrations of costs associated with overhead are electricity, water, physical plant, general equipment/building depreciation, libraries and administrative support costs. The administrative support costs, which include salaries and benefits, in whole or in part, are for university costs associated with local, state and federal laws, rules and regulations applicable to the processes and internal controls for sound management. These requirements for accepting funding call for consistency in application of these internal processes and rules. USM believes many of the overhead rates are incorrectly calculated in the spreadsheet used as the basis for this recommendation. Rates can be confusing as some refer to the rates in proposal budgets while others refer to rates of recovery based on total expenditures. It is worth noting that when a rate of 50% overhead is included in a budget of $100,000 that translates to, at most, a 33% rate of recovery. Example: $66,666 Direct Costs $33,333 50% Overhead Rate applied to all Direct Costs $100,000 Total Award Overhead rates at USM institutions are calculated according to federal requirements, negotiated with the cognizant federal agency, and audited. Under these rules and requirements, overhead rates are calculated on the expectation that the costs incurred as a result of sponsored program activity will be recovered from all sponsored programs from all sources. Approved overhead rates vary significantly by institution within the USM. This reflects the differences in facilities required for sponsored programs and administrative infrastructure, particularly between research and comprehensive institutions. Where sponsored programs provide for less than the federally-agreed-upon indirect cost rate, the institution is required or compelled to fund a portion of the administrative and facilities costs associated with the program from other institutional sources. For example, UMCES annually receives approximately a third of its extramural funding through State contracts and grants. An additional reduction in overhead would significantly and negatively impact the institution and put a greater burden on other sources of funds. Most state grants to USM institutions include negotiated overhead rates that are far below the federal rate. The relatively few times an institution receives the full overhead rate is when the project is funded with a federal flow-through funds. Many State grants to USM relate to federal flow-through grants that require specific expertise and/or facilities and equipment (e.g., researchers, physicians, wet labs, etc.). In many instances, the State was able to secure these grants by identifying the USM institutions as sub awardees with the capacity to do the specified project. If the overhead rate is capped below the official federal rate, USM institutions could be discouraged from participation. This would mean the State would be less competitive for federal grants resulting in an economic impact to Maryland, i.e. loss of State and University jobs and federal dollars in the State economy. Alternatively, if the State had to rely on the private sector, with much higher overhead rates, to accomplish the tasks through contracts this could result in a negative fiscal impact to the State. We agree with the Secretary of Department of Budget and Management that it is both arbitrary and premature to establish a cap without a better understanding of the higher-than-average overhead rates. The institutions look forward to working with DBM to provide the necessary data to complete an accurate analysis. Again, we appreciate this opportunity to testify before this committee. Erica Kropp Vice President for Administration and Finance University of Maryland Center for Environmental Science  HYPERLINK "mailto:ekropp@umces.edu" ekropp@umces.edu Denise Clark Associate vice President for Research University of Maryland, College Park djclark@umcp.edu      '.569;ACPlmn 1 2 e f    wld\d\l\lTlTl\l\lTh(7bOJQJh]nOJQJhmVOJQJh]nh]nOJQJh]nh]n5OJQJ^JhCJOJQJ^JaJh]nCJOJQJ^JaJh@CJOJQJ^JaJ hw?hs-CJOJQJ^JaJhmVCJOJQJ^JaJ/h]nh`+5B*OJQJmHnHphsHu1jhghs-56:OJQJUmHnHu 'BCn/ 0 8 9 l 2( Px 4 #\'*.25@9gd]ngd]ngd]nm$$]`a$gd]n$a$gd]n $Z]Za$gd]n%&mw'- ()._`&'(-ཱུh]nhOJQJhOJQJh]nOJQJh]nh(7bOJQJh(7bOJQJ^Jh]nh]n>*OJQJ^Jh]nh]nOJQJ^Jh(7bOJQJh]nh]nOJQJ=lmijwxopPQ] 1VhikgdWOK 2( Px 4 #\'*.25@9gd]ngd]n+PQhijlmoprsuwx̻oVNJNJNJNJFJhqhsjhsU0h]nh]n0J>*B*CJOJQJ^JaJph/jh]nh]nCJOJQJU^JaJ h]nh]nCJOJQJ^JaJ)jh]nh]nCJOJQJU^JaJh]nCJOJQJ^JaJ h='hCJOJQJ^JaJh]nh]nOJQJh]nhmVOJQJhmVOJQJhqh +OJQJhqhmVOJQJklnoqrtuvwxz{|}gdWOK$a$gds-gd]nxy{|} h='hCJOJQJ^JaJhshqjhqU21h:pWOK/ =!8"8#$% DyK ekropp@umces.eduyK 0mailto:ekropp@umces.edu'Dd 45J  C &Afrsealb&e4Tʣ\D˃G]& nU&e4Tʣ\D˃GPNG  IHDRO%PLTE!!!!!!)))!)))11!1)111999!9)9)9)91999BBJRRRBJBG B)B1J)J1R1B)B)!H-J1R1R11R9R9B9J9R9J9!R9!B91RB!BB1BBBJJ9JJJ`Z9c9Z9cBcBZB!ZJ)ZJ1RJ9RRJZRJRRRZRRZZRZZZziF|O !cR)gV=ccRccc]x[/gRJkss{{k9k9s9kJoB{BFJJRRRkkksss{s{{{{!!))!{{1!1)9)9191B5J9NBRJZN{kcRg^so{s{{Ƅ΄{֌ތޔƜR!ΥZ֥Z֭ZޭZޭc޵ccckk޽kkks{΄ք֌֔֜ޜޥޭƽƵ絽ƽ.tRNSS%bKGDH cmPPJCmp0712Hs!IDATx^}y_XITqvLI3BNJkKF-.6IJ>B=@4@M #ǩo8qJ,o -qz}w~_9?>tyݲٹ³h]8$;`3BmR6.m4,&հ-w}֯'±x+*A>2?SdMO62(˛ʳڱD++շj0<!QޠH$G/9pŕy08ua4{m`i2(J˿h+1S]CmFK2^٠G5c媁zU}UJu|a:G_FОek5Rl5Ɖ/ԡDMP$bT,E.֫ۅb}9!t-5ɒ몹Pc1tDuZInZ4$ЁS7sF#Ŭ6R2&堶zdɦ,bP P?YM=&t5U# QhMN|1Q SgX}5+Y@n=aO# Hsl(H[ʥEuGA9"Qc|AO%ׅp\F5g`#4ntH@y:Δ 浈g\jL[}RK(刬nG2Uc[~^)USzo~48A4 "+Ӳ7RG@6*lv5YKM0~Z?Rz.BgVWQxD AUC v %8g m|:h\al*߀*3]EB'_Rs=!dvBm:B X6*/AQCga"߶4S1 ĬWI9'"}&KA+KmE64 dTc u6j Y,/ssaZ8vRz7:?oJ6cTu2s|;0rCsfgczvC 87K]qҭXo A=~f<]^<6?+觧gfN}O2cMaNĠ*Pj lȍB(Z s M;}pRLs R#!U:q7j9.Hβ ,kl\#҈)쁅4TS; ӡ[wiB9̊Geےó;AKsypb6ŌX5o u F!TB.aeٞ" ttTt{4v N?K>s@v5Q:{9j: 1ctBґOX1dc\@%֍{ uc#ڱ{yd{U3Bٗ3!Wj:U=Ib%]aO0;vpBfBZ.]hIo([br./H3BGMǪ:^aƮEԣTjV!P Oߌ+u(5c&""7E4A6vMZ *f4h&,%R.KVϩ|:t>VoXw&y:1~Y/]3XK9me2# ^Ԡe;;v^$㺫"nFu]QVQB QsEWOks`]GowL0)bZB:=CnJ1*pXbinw ԅ,Bp;ǧYp{W(9 bv좗Н'/=Xz᮱r~AMVnE<0NN1腙S `p;@O84MЌ%r* RˬWc&%SG ~t2,GR{&h!`RqfJkӠ_0-H6H:GW ^X`uz*1bDkgԞh7 8S! 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