MUSC Composite Fringe

Benefits Rates

Grants & Contracts AccountingSpring 2002

2

Background

December 2000 - Indirect Cost Steering Committee requested that GCA develop a Composite Fringe Benefits Rates Proposal for submission to DHHS in conjunction with F&A Cost Rates Proposal

F&A Cost Rates Proposal submitted March 2001

Composite Fringe Benefits Proposal submitted November 2001

DHHS approved Composite Fringe Benefits Rates Agreement dated 2/28/02 establishing fixed rates with carry-forward provisions for two-year period, 7/1/02 to 6/30/04

3

Applicable Regulations

OMB Circular A-21 Section J.8.f allows universities to charge fringe benefits to university activities via:

Direct assignment to employees (current MUSC procedure) or,

An allocation method with fixed rates applied through composite fringe benefits rates established by selective employee categories (new MUSC procedure)

4

Advantages of Proposed Change

To provide consistent accumulation and allocation of fringe benefits expenses to all functional activities as required by Cost Accounting Standards 501 and 502

To improve the budgeting process for all University funds

To simplify the accounting for fringe benefits expenses

5

Composite Rate Components

• Social Security/Medicare• Retirement Contributions• Deferred Compensation• Health Insurance• Dental Insurance• Workers’ Comp• Unemployment Insurance

• Retirement Incentive *• Termination Pay *• Tuition Assistance *• Sabbatical Leave *

• Employee Assistance Program• Employee Health Services

Traditional & Misc Fringes

Allocated Fringes+FRINGE BENEFIT EXPENSE POOL

Divided by

SALARIES EXPENSE BASE

=

(* Miscellaneous Fringe Benefits which are currently treated as “Salaries”)

6

Employment Types & Composite Fringe Benefits Rates

Employee Benefits Category

EmploymentType

Approved Rates

Staff

Post-Docs, Temp Faculty, & Temp Non-

Faculty

Post-Docs / Temporaries

Faculty, 9-Month Faculty, Unclassified Non-Faculty,

Classified,Temp Grant-All Benefits

Click here for current approved rates

Temp Grant-No Benefits, -Ins. Only, -Leave Only,

Student

Students / Temporaries with No Benefits

7

Transition & Implementation

Scope

Apply to Sponsored Projects Only during FY 2003

Consider application to all fund sources in future years

8

New Procedures for FY 2003

Miscellaneous Fringe Benefits (Termination Pay, Tuition Assistance, Sabbatical Leave, Retirement Incentive) may not be charged directly to Sponsored Projects since these are included in the composite rates

Fringe benefit expenses will be calculated using negotiated composite rates & will be charged to Fringe Benefits Expense account (50189) => these amounts will be billed to sponsors

Over- or under-recovery of fringe expenses will be accounted for by function at the Financial Statements level (new account 50190) and not by individual project

Transition & Implementation

9

Proposed Process

1. Employee is paid Salary & Fringe Benefits under normal MUSC payroll procedures

2. MUSC employer portion of Actual Fringe Benefits is recorded in Detailed Payroll Ledger

1. Project is charged in General Ledger for Composite Fringe Benefits equal to (Salaries X Applicable Composite Rate)2. Sponsor is billed for Composite Fringes + All Other Expenses (within budgetary constraints)

1. Difference between Composite Fringes and Actual Fringes is calculated by Function2. If difference is positive => MUSC has over-recovered vs. actual expense3. If difference is negative => MUSC has under-recovered vs. actual expense

I. PAYROLL LEDGER(Actual)

II. GENERAL LEDGER (Composite Rates)

III. FINANCIAL STATEMENTS

10

Allocation of Recovery

It is anticipated that two percent (2%) of Sponsored Project Salaries Expenses will be recovered from the sponsors and can be set aside in order to assist the colleges in funding Miscellaneous Fringe Benefits Expenses

Recovered amounts will be allocated on a quarterly basis

GCA will analyze fringe benefits expenses and recovery on a monthly basis & recommend adjustments as necessary

11

Future Procedures

Over- or under-recovery of expenses will be carried forward & included as an adjustment to the next fringe rates proposal

Next proposal will be based on FY 2003 expenditures & must be submitted by 12/31/03

Possible application of composite rates to other fund sources in future years

Policies and limits to be established for Sabbatical Leave, Tuition Assistance, and Retirement Incentive so that university does not over-commit fringe benefits expenses