1. MUSC Composite Fringe Benefits Rates Grants & Contracts Accounting Spring 2002

2. 2 Background zDecember 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 zF&A Cost Rates Proposal submitted March 2001 zComposite Fringe Benefits Proposal submitted November 2001 zDHHS 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. 3 Applicable Regulations zOMB Circular A-21 Section J.8.f allows universities to charge fringe benefits to university activities via: yDirect assignment to employees (current MUSC procedure) or, yAn allocation method with fixed rates applied through composite fringe benefits rates established by selective employee categories (new MUSC procedure)

4. 4 Advantages of Proposed Change zTo provide consistent accumulation and allocation of fringe benefits expenses to all functional activities as required by Cost Accounting Standards 501 and 502 zTo improve the budgeting process for all University funds zTo simplify the accounting for fringe benefits expenses

5. 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. 6 Employment Types & Composite Fringe Benefits Rates Employee Benefits Category Employment Type 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 Click here for current approved rates Temp Grant-No Benefits, -Ins. Only, -Leave Only, Student Students / Temporaries with No Benefits

7. 7 Transition & Implementation zScope yApply to Sponsored Projects Only during FY 2003 yConsider application to all fund sources in future years

8. 8 zNew Procedures for FY 2003 yMiscellaneous 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 yFringe 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 yOver- 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. 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 Function 2. If difference is positive => MUSC has over-recovered vs. actual expense 3. If difference is negative => MUSC has under- recovered vs. actual expense I. PAYROLL LEDGER (Actual) II. GENERAL LEDGER (Composite Rates) III. FINANCIAL STATEMENTS

10. 10 Allocation of Recovery zIt 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 zRecovered amounts will be allocated on a quarterly basis zGCA will analyze fringe benefits expenses and recovery on a monthly basis & recommend adjustments as necessary

11. 11 Future Procedures zOver- or under-recovery of expenses will be carried forward & included as an adjustment to the next fringe rates proposal zNext proposal will be based on FY 2003 expenditures & must be submitted by 12/31/03 zPossible application of composite rates to other fund sources in future years zPolicies and limits to be established for Sabbatical Leave, Tuition Assistance, and Retirement Incentive so that university does not over-commit fringe benefits expenses