ORGANIZATION, TERMINOLOGY, AND FUNDS FLOW SCHOOL OF MEDICINE ORGANIZATION, TERMINOLOGY, AND FUNDS FLOW April 2010 Billy Newton Vice Dean for Finance and Resource Planning School of Medicine DUKE MEDICINE

School of Medicine organization Topics for Discussion School of Medicine organization The “big picture”: financial structure of the School of Medicine The smaller picture: What types of funds do faculty members typically have? How are different kinds of funds handled in the accounting system? What exactly is “overhead”? Where to direct questions What does the term “Indirect Costs” mean? How is it calculated? What is the Duke indirect cost rate? How are indirects utilized? School of Medicine DUKE MEDICINE

Some Terms We Will Talk About: Reserves Quasi endowment Overhead General Funds Allocated Funds Restricted Funds Direct Costs versus Indirect Costs Who the heck sets the Indirect Cost rate and where does that person live? School of Medicine DUKE MEDICINE

Duke University Organizational Structure Central Administrative Provost Area Management Center Central Administrative Management Center Duke Medicine Trinity College of Arts & Sciences University Finance Human Resources Facilities Athletics Etc School of Medicine Duke University Health System (DUHS) Separate 501c3 Non-profit Professional Schools Graduate School School of Nursing Private Diagnostic Clinic (PDC) Separate for-profit partnership School of Medicine DUKE MEDICINE 4

Administrative Functions Exist at Multiple Levels University Central Admin Services -Accounting (General Ledger) - Budget - Payroll - Post award grant accounting - Gift records - Human Resources, including Benefits - Legal - Internal audit, compliance School of Medicine Management Center Finance, Planning Pre award office -Human Resources -Compliance IRB, IACUC Medical Education admin Department Chair’s Office Division -Lab School of Medicine DUKE MEDICINE

Overhead is Allocated Based on Use University Central Admin Services Overhead allocated to School’s central budget based on statistics (budget size, headcount, etc.) School of Medicine Management Center Overhead allocated to departments based on discretionary and program expenditures (not on sponsored funding) Department School of Medicine DUKE MEDICINE

Basic Funds Flow School of Medicine University Central Budget Allocated overhead Unassigned income Allocated overhead School of Medicine Health System Services (to depts) Academic support 5b Academic Transfer (to depts) Medical Director services PDC Space, Capital (to Building Fund) School of Medicine DUKE MEDICINE 8 8

Basic Accounting Organizational Structure of the SOM Central – Dean’s Office General Funds Central Reserves Allocated annually via budget process by the Dean ~70% of School of Medicine revenue Department/Center General Allocated Externally Endowment Funds Funds Restricted Funds Allocated by Chair 5b Investment Income Start-up Grants Endowment Distributions Gifts School of Medicine DUKE MEDICINE

Basic Accounting Organizational Structure of the SOM Central – Dean’s Office General Funds Central Reserves Allocated annually via budget process by the Dean SOURCES: -Tuition -Indirects -Endowment Income -Gifts -Other USES: -Dept Support -Administration -Plant Ops -G&A Expense -Student Aid SOURCES: - Health System Support - Portion of F&A - Philanthropy USES: - Chair Commitments, - New Buildings, - Program Investments, etc. School of Medicine DUKE MEDICINE

Sources of School of Medicine General Funds (approximately $187 million of the $1.0 billion Total School expenditures) School of Medicine DUKE MEDICINE

Total School of Medicine Expenditures ( in millions) School of Medicine DUKE MEDICINE

Indirect Cost Rates Quick reminder on what indirect cost (or “Facilities and Administrative” percentage) really means: It’s not “profit” – it helps to cover facilities and administrative costs to administer research at Duke University Research: 56% MTDC (on campus) NIH Training: 8% MTDC Clinical Trials: 28% MTDC DTMI: 25% TDC School of Medicine DUKE MEDICINE

Components of Our Rate: School of Medicine DUKE MEDICINE Exclusions: Equipment > $5k, patient costs, aid, etc.

Duke NIH Trend (From NIH Information) Award Amounts Per Year (000s) $328.2 mil School of Medicine DUKE MEDICINE

Duke School of Medicine NIH Ranking Over Time School of Medicine DUKE MEDICINE

Comparison of Duke’s NIH Growth Rate to NIH Overall Growth Two year rolling average growth rate School of Medicine DUKE MEDICINE

School of Medicine Finances on a More Detailed Level (i.e., so what does all this mean to you?) Externally sponsored research A fund code is established which links the grant to the department with you identified as PI. Part of your salary should be charged against this code, depending on your effort. Other than the indirect cost rate, there are no institutional “taxes” or overhead assessments. School of Medicine DUKE MEDICINE

School of Medicine Finances on a More Detailed Level (i.e., so what does all this mean to you?) General Funds: The allocation of the central budget from the Dean to the Chair/Director. The allocation is fully flexible to the Chair. Allocation formula is: -% of indirect cost recovery to department -50% of median Chair compensation -Remuneration for faculty UME & grad student teaching effort -All space expense charged to the department School of Medicine DUKE MEDICINE

School of Medicine Finances on a More Detailed Level (i.e., so what does all this mean to you?) Department and discretionary funds: Includes the PDC transfer (for clinical departments), gifts, start-up funding. Clinical departments are now assessed overhead at a rate of 10% of expenses on these funds to recover overhead charged to the School of Medicine by the University. Basic science departments, centers, and institutes are charged 2%. School of Medicine DUKE MEDICINE

What Happens If I Bring In A Gift, And I Want It To Be Directed to My Research? Is it really a gift or is it a grant? (F&A vs. overhead) Does Development and Gift Records know about it? How restricted is it? Department should deposit funds into a gift code with you listed as PI Please consult with your departmental business manager. (FYI – the School of Medicine has over 17,000 fund codes!!) School of Medicine DUKE MEDICINE

Where Do You Go With Questions On: Finance/accounting: Start with your department or division business manager Grants: Your department’s grant manager and the Office of Research Administration. http://research.som.duke.edu School of Medicine DUKE MEDICINE

If processes seem confusing, we want to know about it. We have a University-wide initiative focused on improving efficiency, especially in grants administration. And remember, there are worse places to be… School of Medicine DUKE MEDICINE

THANK YOU FOR YOUR TIME Are there any questions? School of Medicine DUKE MEDICINE