Academic Affairs

IFC Communication on Grant Incentives

Dear Members of the IFC:

The report from the Grant Incentive Committee was discussed on Friday at the meeting of the General Officers. The General Officers identified potential strengths and advantages of the proposed program, but they also registered several concerns. It became clear during our meeting that further discussion and refinement of the proposed program will be necessary prior to any decision being made on its possible implementation.

Faculty input about the proposed grant incentive program is critically needed at this point to determine if such a program should be undertaken at this time. It is important for faculty to continue to identify any positive and problematic areas of the proposed program.

I have listed below the major points of the proposed grant incentive program with some clarifying comments, and summaries of the discussions with the Chancellors, Vice Presidents, chief academic officers, chief research officers, and committee members. Hopefully, the summary will be useful in your deliberations.

Grant Incentive Program Summary

Rationale:

The proposed program provides incentives to faculty to offset costs of conducting research or service currently being supported by General Operating (GO) funds.

Program Design:

1. Eligibility ensures the recovery of the full allowable Facilities and Administrative (F&A) costs for a research grant or contract.
   1. Clarifying Comment: The important term is "allowable F&A" rates set by the external agency and does not mean that a faculty member must recover NIH or NSF F&A rates to be eligible. However, the total amount of the incentive will be reduced related to the lower F&A costs recovered.
   2. Clarifying Comment: The term "qualifying competitive grants" will need to be revised. The intent was to include any source of external funds that support faculty efforts in research, teaching, and service that provide funds to offset current GO expenditures in F&A costs and salaries. However, the program will exclude funding received via an institutional request.
2. Incentives are linked directly to the annual amount of F&A recovery and salary release.
   1. Clarifying Comment: The incentives are one-time, taxable annual payments to the faculty member. The grant and contract incentive payment will supplement regular annual compensation and should not affect eligibility for merit or other salary increases.
3. All campuses, all departments, and all faculty (regular and non-regular) will be eligible to participate.
4. Faculty have the option to receive an incentive as compensation, redirect the incentive funds into an account that can support the research or contracted activity according to campus guidelines and procedures, or some combination of two.
5. The personal incentive is capped (greater of $30K or 30% of base salary).

Expected Benefits:

1. Institutional Benefits:
   1. A 50% increase in the recovery of allowable F&A costs, either through a greater yield of allowable costs or through changing the mix of agencies funding the research or activity, would generate approximately $5 million in additional revenue to the University.
   2. Encourages faculty who receive external grants or contracts to budget a larger portion of salary on the grant or contract, thereby reducing the fraction of salary encumbered by GO funds. Currently, only nine percent of the salary of ranked faculty is covered by restricted funds generated by external grants and contracts. If increased by an additional five percent, it would result in a GO cost savings of $7.8 million.
   3. Provides a mechanism to improve faculty compensation during a period of shrinking state subsidy that will better position the university to retain its faculty.
   4. Enhances the overall research enterprise.
2. Faculty Benefits:
   1. Provides faculty researchers direct control over a portion of their compensation without depending on GO funds.
   2. If the University could improve its recovery of F&A costs related to grants and contracts and increase the amount of salary release on a grant, the offset GO funds could support academic programs.
   3. Based on FY 2002 grant awards, it is estimated that approximately 30% of the faculty would receive incentives. The estimated mean incentive payment is $3000. (These estimates were extrapolated from data submitted from three campuses. Once UM-Columbia completes it analysis, I will share an updated estimates on participation rates, range of incentive payments, and mean incentive).

Expressed Concerns About the Program:

1. The proposal is mute about how the costs associated with the proposed program will be funded. Some campuses may tax the current flow of GO funds offset by the recovery of F&A costs to the academic unit, and other campuses may fund it "off the top". If funded through the taxing of the unit’s current share, implementation of the program would create an "unfunded mandate" for the academic units. Moreover, using either the campus or the unit’s share of the GO funds offset by the recovery of F&A costs to fund the program could reduce support for research infrastructure.
   1. Response: The proposed program structures the incentives to promote the offset of current expenditures covered by GO funds with external funds (F&A costs and salary). In doing so, it increases the amount of GO offset dollars that are available to distribute to both the campus and the academic units. It will take some time for the incentives to impact the overall structure of the grants and contracts in ways more beneficial to the University, but the program can eventually have a net positive effect on the financial status of a campus and the academic unit.
2. The same objective of increasing the offset of current expenditures covered by GO funds with external funds (F&A costs and salary) can be achieved with new regulations and procedures concerning F&A costs and salary release during the academic year. Such regulations and procedures, if strictly enforced, can achieve the same fiscal goals without incurring any additional costs associated with the incentive payments to faculty.
   1. Response: Compliance approaches have been difficult to implement in the past. The proposed program establishes an alliance with the faculty member, so both the faculty member and the campus negotiate from the same position with an external agency on salary release and F&A costs.
3. The program creates an imbalance in incentives for different faculty roles (i.e., teaching and research). It provides incentives for faculty to retreat from the core mission of instruction.
   1. Response: This is a significant potential negative impact of the proposed grant incentive program. It has been suggested that this negative impact might be mitigated with the inclusion of an instructional criterion for eligibility. A suggested addition to the proposal may be:
      
      To be eligible for the incentive, the department chair must certify that the faculty member has completed the instructional assignment and met the appropriate instructional standards of the department during the period of the grant and contract.
      
4. The program could create a conflict of interest for department chairs in which they would direct departmental funds to enhance competitiveness of their future grant proposals in order to avail themselves of the incentive payments.
   1. Response: It would be very difficult to build in safeguards to prevent such inappropriate behaviors on the part of a departmental chair. Departmental faculty should be involved in the investment of departmental funds on research as a matter a best practice.
5. The plan complicates the role of the department chair in evaluating faculty productivity and recommending merit pay increases.
   1. Response: The incentive payment is a supplement to the regular annual compensation of the faculty member. The proposal states explicitly that a grant and contract incentive payment should not affect a recipient’s eligibility for merit or other salary increases.

The faculty leadership may identify other potential downsides to the proposed grant incentive program, and may react to the responses to those potential negative impacts above. My purpose here is to provide a summary of the ongoing conversation concerning the proposed program that will hopefully support conversations among your faculty colleagues.

I look forward to receiving your input on the proposed program at the next IFC meeting. However, if you have any questions or want to share comments prior to the next IFC meeting, please contact me directly. Also, Peter Wilden and I would be willing to participate in any discussions among your faculty colleagues about the program if you think such a format would be a productive way to solicit feedback. Please let us know if we can provide you any additional information.

Steve

Cc: Vice President Ken Hutchinson
Peter Wilden, Faculty Fellow