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Queen's University
 

Financial Services

Overhead Commitments Now to Appear in Research Projects

As a result of feedback received from the Queen’s research community, and in a continued effort to provide meaningful financial information, Research Accounting is implementing a new process effective immediately, and will be reflected in the February 2014 Research Statements of Operations.

This new process involves committing funds budgeted to pay for the Indirect Costs of Research, also known as Overhead.

Some, but not all, external funding agencies will provide funds as a part of the project budget to pay a portion of the indirect costs of carrying out the research. Commitments will be made to reserve project funds that are to be used to pay for indirect costs.

Why is this change being made?
We have received feedback from the research community that it is difficult to understand how much is available to spend on direct research costs (e.g., salaries, supplies, etc.) when the indirect costs have not been reserved or committed.
By committing funds for indirect costs, researchers will have a more accurate view of the funds available for the direct costs of the research project.

How do I know if this affects me?
The best way to tell if your project includes funds to pay for indirect costs is to look at the budget information on the Statement of Operations – Research report.  If there is a budget amount against account 693000 (BUD-Overhead), this represents the amount that should be reserved for indirect costs.

How will I see the commitments on my reports?
Encumbrances will appear in the summary section of the Statement of Operations – Research report much the same way as salary encumbrances, but will appear beside the 693000 (BUD-Overhead) account lines.

How are the commitments calculated?
The most accurate information available on the amount of funds to be used to pay for indirect costs in a research project is the amount budgeted.  This amount comes from the Data Summary and Signature (DSS) form.
The amount of indirect cost funds that will be committed will be based on the amount of the budget loaded into PeopleSoft.  For example, if the budget is loaded annually, then the indirect cost funds for that budget year will be committed when the annual budget is loaded.  If the entire budget is loaded at the beginning of the project (CFI and ORF-RE projects, for example) the full amount of the indirect cost funds will be committed when the budget is loaded.
The commitments will be drawn down as actual indirect costs are charged to the research project.
Therefore, the commitment will be the amount budgeted less the amount charged to the project.

What should I keep in mind?
It is important to note that the amount committed will be up to the amount of indirect costs budgeted in the DSS.  If direct costs (travel, salaries, etc.) are incurred in differing amounts than anticipated in the budget, and different indirect cost rates apply to different types of direct costs, the overhead commitment may be differ from the indirect costs eventually incurred.

Example:  Assume 40% indirect cost funds are provided on salary expenses, and 2% indirect cost funds are provided on supply expenses.

Budget
Salaries $40,000
Supplies $10,000
Indirect Costs $16,200 ($40,000* 40% + $10,000* 2%)
Actual
Salaries $45,000
Supplies $5,000
Indirect Costs $18,100 ($45,000* 40% + $5,000* 2%)

In this example, indirect costs will be encumbered at $16,200, but $18,100 will actually be incurred.

Who can I contact with questions or concerns?
This is a significant change in the financial reports that you will be seeing.  In addition, overhead expense has always been a source of confusion.  If you have any questions, please contact Jennifer Mallon, Associate Director, Research Accounting at mallonj@queensu.ca or extension 75737.

Kind Regards,

Queen's Financial Services

Kingston, Ontario, Canada. K7L 3N6. 613.533.2000