Friday Focus: Making sense of dollars
August 5, 2021
— by Nettie La Belle-Hamer, interim vice chancellor for research
Most Americans think of money as coming in one color: green. But, money coming from different types of funding can be thought of as different colors in that one color of money cannot be used to pay for things of a different color. Wait! Keep reading — I promise I will try to make sense of dollars in 500 words or less!
Let’s start coloring the rainbow of money we have at UAF. First, there are two main colors: restricted and unrestricted. Restricted dollars come to us primarily from grants and contracts brought in by researchers who have proposed to do special projects for a funding agency or sponsor. The money received is restricted to be used for only what was specified by the agency at the time of award. That money can shift a bit, but only through approval of the funding agency for changes. Hence the name “restricted.”
Unrestricted dollars are not directly linked to expectations and come from three primary sources: state appropriations, tuition and indirect cost recovery. The third one — indirect cost recovery — while unrestricted, is an important part of the researchers support. Many things needed by research are not allowed to be directly charged on a grant or contract, but they incur real costs. Things like building maintenance, electricity, heat, a lot of the administrative support, and snow plowing are part of the facilities and administrative burden that must be paid by the university through indirect cost recovery.
You can think of the grant or contract itself as a prism for restricted funding in that it further splits out the colors as it flows into the system. Specific colors are attached to the restricted dollars through different categories, such as labor, services or equipment. Labor dollars are restricted to labor costs and therefore are a different color than equipment dollars or service dollars. Estimating as accurately as possible how much money is needed for each category is a big part of the proposal budget process for the researchers. The proposal developers in the various research units are in the trenches with the researchers figuring out what will happen over the next three or five years, depending on the proposal.
Unrestricted dollars also go through a prism of sorts, but it is far more complicated. In order to ensure that indirect costs are covered by the activities that generate the costs, tuition goes to units that teach and ICR goes to units that do research in proportion to the teaching or research, respectively, performed by that unit. Again, indirect costs does not mean no costs! The work needs to be supported in the unit that performs it. ICR is not profit; it is funding to cover real costs generated in the business of doing research. Tuition is not profit; it is funding to cover real costs generated in the business of teaching. ICR and tuition alone do not cover all the costs, which is where the state support comes in.
Dang. I promised 500 words or less!
Why should you care? Because decisions are often based on money. Because most people only know the one color of money they need to get their own work done. Because most administration is done with unrestricted funds, most administrators do not consider the complexity of restricted dollars and our dependence on ICR for research success. We need all administrators to understand the many colors of money for us to reach our goals.
We are charged to grow our research and we have our sights set on becoming an R1 Doctoral University at UAF. I am confident we can meet these goals, but to do that we need to be working together to strengthen our research support across UAF.
I hope this makes sense of dollars. Sorry about the extra 100 words.
Friday Focus is a column written by a different member of UAF’s leadership team every week. On occasion, a guest writer is invited to contribute a column.