Fact or Fiction?Financial Myth Busters

for New Grantees

Presented by:

Christen Castellano, MBAChief Administrator , Department of Pediatrics

Chief Operations Officer, Steele Children’s Research Center

October 19, 2010

When I think about…

● Dealing with my department’s business and accounting group…

● Dealing with lab finances and institutional leaders…

● Reading and submitting financial reports for my research grants…

A Moment to Reflect…

It Drives Me Crazy!

It Makes Me Happy!

I’d Prefer to Ignore It!

In Any Case, Is There a Perceived Struggle?

Money Scientific

Research

Do any other industries share similar tensions?

Purpose of Today’s Financial Myth Busting

Build awareness

Broaden perspective

Provide guiding principles

Empower you

Enable you to take action

Lead and inspire your lab staff

Five Financial Myth BustersAre the underlying concepts surrounding these

statements fact or fiction?

1. “I’ll do the research and let the business people worry about the money.”

2. “As soon as I get the grant, I’ll involve the business office.”

3. “It’s only $50 so there is no big deal about spending it.”

4. “We’re in research, so it’s inappropriate to discuss funding with my lab group.”

5. “I’d like to work less and make more.”

Myth Buster #1: Fiction. “I’ll do the research and let the business

people worry about the money.”

A close partnership to move forward in an agile, balanced way to ultimately optimize resource utilization

And to avoid Overspending and Underspending

Avoid Underspending to…

Maintain Budget Accuracy for the Non-Competing Award Process: NIH eSNAP Report Question, “Do you expect to have more than 25% of your grant’s original budget left at the end of the grant year?”

Eliminate Waste: Eliminate the need for rush items or purchasing items that you may not need.

Rush = Added Expense

(and sometimes mistakes and waste.)

• It’s about sustainability of your research not money.

• It’s about optimizing value for those who fund you.

• Every successful research lab strives to add value and be sustainable.

Have you really gotten to know the folks

in your business office?

● To learn how to stretch limited resources.● To identify mistakes.● To identify allowable versus non-allowable expenses.● To understand the nuances of the financial data.

Business Office and Researcher An Integral Relationship

For Financial Data to Have Integrity and Be Useful, They Must Be….

● Accurate: Errors happen in complex system

● In a Useable Format: Managerial versus financial

accounting (e.g., eSNAP report)

● Timely: A snapshot in a moment in time

Financial Myth Buster #2: Fiction. “As soon as I get the grant, I’ll involve the

business office.”

Award Deposited

Post-awardActivities

Pre-awardActivities

9 months – 18 months

1st Time Funded Grants: The Cycle from a Financial Perspective

Pre-Award Activity: The Proposal Routing Process

An Example: Importance of Data Accuracy

SPACE FUNDING & RESEARCH DATABASE

INFORMATION FY 09

NAME Total Sq Ft Total PI Amount PI Amount/Sq Ft Actual IDCActual IDC/sq ft

Dr. X 1,552 $520,115 $335.13 $0 $0

Dr. Y 1,234 $437,127 $354.24 $0 $0

Benchmark PI Amount/sq Ft = $325/sq ft

Benchmark Actual IDC/sq ft = $ 90/sq ft

From the University of Arizona College of Medicine Space, Funding & Research Database (COMSFRD) Copyright © 2005 University of Arizona College of Medicine

Expand Your Concept of Managing Your Lab’s Resources to Include:

Money: Sustains your research efforts

Space: Essential for research activities

A Pre-Award Activity: Budget Development An Example: Importance of Data Timeliness

FY 2011

$40,000 Base salary for staff

17,960 Current ERE rate for UA staff is 44.9%

$57,960 Total direct impact to your research grant budget

1 Year Earlier in FY 2010

$40,000 Base salary for staff

16,440 ERE rate for UA staff in FY 09 was 41.1%

$56,440 Total direct impact to your research grant budget

It’s “only” a $1,520 difference to the budget.

It all adds up!

It’s only $50 five times per work day

$50 X 5 =$250 per work day

And there are 261 work days in the year

$250/work day x 261 work days/year =

$65,250 per year!

Financial Myth Buster # 3: Fiction.“It’s only $50 so there is no big deal about spending it.”

To Put it Into Context…

Only $65,250 per year on a $250,000 annual award (the modular limit)

is

26% of your annual funding.

Some Ideas to Prevent “Compounding”

• New Equipment: Negotiate and buy expensive equipment toward the end of the vendor’s fiscal year.

• Demo Equipment: Consider purchasing demo equipment carrying the same warranty as new equipment.

• Shop around: University contracts are not always the least expensive. Use the web and your business office.

More Ideas To Prevent “Compounding”

• Animal Expenses:

The size of animal colonies can get out of hand so manage expenses monthly.

• Shelf Life:

Supplies with limited shelf life can be wasted if not tracked closely.

• Shipping:

Distributors often do not charge for shipping. Manufactures almost always do.

• Tax Exempt Status:

Check the tax exempt status of your institution and what

it applies to and use it!

R01-Equivalent Grants Average Size Source: NIH RePORT

In the Aggregate, Small Changes Have a BIG Impact

Leadership and management require a systematic disciplined approach.

Rarely is there a “silver bullet” to stretching your dollars, but rather multiple

opportunities that in the aggregate make a substantial difference.

Myth Buster #4: Fiction.“We’re in research, so it’s inappropriate to

discuss funding with my lab group.”

• Don’t be afraid to discuss budgets, spending habits and opportunities with your lab staff.

• The success of your research program becomes a group effort and will be less overwhelming for you.

• Broaden your trainee’s learning beyond science.

Model excellent resource management.

• You will inspire them to look for opportunities.

Further Expand Your Concept of Resources to Include:

Money: Sustains your research efforts.

Space: Critical for research activities.

People: Have tremendous influence on stretching your supply and equipment dollars. Also, they typically represent 60 - 80% of research expenses.

People: Your Most “Valuable” Resource

Typical Staff Costs in a Research Lab

Total Compensation

Base PayBenefits

Costs

VacationExpense

ProfessionalDevelopment

RetirementContribution

SickLeave

Expense

Travel Expense

Track, monitor and educate yourself and lab staff about these costs.

The Surprise Expense:Vacation Payout

Example:

Research Specialist becomes disillusioned

and submits a resignation with 20 days

of vacation accrued in the system.

The employee is fully funded by your grant

and makes $40,000 per year salary.

Cost: $19.23/hour * 160 hours

$3,076.80 plus ERE rate (44.9%)

= $4,458.28 cost to your grant

Understand Your Influence on Lab Funding…And Educate Your Staff About Their Influence

Multiple funding sources (revenues) that you may have access to:

● Grant/Contract Funds: Use it or lose it, renewed annually.

● State Funds: Use it or lose it, allocated annually.

● Philanthropic Dollars : Typically donors want a relationship and a return on investment.

No matter what type of funds, look for the investment. Avoid a “subsidy mentality.”

Specific Examples to Get the Lab Involved…

On the Funding (Revenue) Curve:

● Demonstrate that you like writing grants.

● Apply for T32 Grants: The NIH funds programs for graduate students and postdoctoral fellows through this funding mechanism.

● Explore other funding opportunities, like philanthropic dollars, local contracts and grants and get them involved.

Understand your Influence on Lab Expenses…And Educate Your Staff About Their Influence

Direct Costs Staff: How many and what types of activities should they be performing?

Operations: What do you need? How much do we need? Are there less expensive alternatives?

Equipment: What do you need? Best way to purchase?

Travel: Book early. Shop on-line.

Indirect Costs

Overhead: Building repair, heating, cooling, administrative and accounting personnel.

Specific Examples to Get the Lab Involved…

On the Expense Curve:

● Give greater thought to experiments so they are well designed and not repeated.

● Participate in price comparisons for lab supplies and equipment.

● Encourage and develop a partnership with the business office to get the best deals to avoid re-work and delays.

Revenues - Expenses =Money Available or Money Returned

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11

Revenue

Expense

Myth Buster #5:“I’d like to work less & make more.”4 common metrics for perceiving our personal wealth:

Sources: Anrig, August 2010 Akcay and Cornell, December 2009

Myth Buster #5: Fiction.“I’d like to work less & make more.”

Busy is a new measure of success and way of life.

“I’d like to work less and make more”

is frequently a cry for efficiency. It can sometimes represent an individual’s feelings of being overwhelmed.

So…..Look for ways to reduce re-work and inefficiency in your lab.

Source: M. Harris, July 2010

Complete Your Concept of Resources to Include:

Money: Sustains your research efforts

Space: Critical for research activities

People: Have tremendous influence on stretching your supply and equipment dollars. Also, they typically represent 80% of research expenses.

Time: Efficiency is everything in today’s busy and stressful society.

Another Opportunity for Efficiency…

To avoid duplication of work, collaborate, share reagents and models: NIH resource-sharing policy dictates that all resources generated with federal funding are to be shared with other investigators.

All it takes is …

• A friendly e-mail• Federal Express Number• And sometimes an MTA agreement

Our Leadership Responsibility…

Expand your concept of resources.

Resource data are tools…

So use the tools to get to the right places, the right way, the first time.

Inspire others to join you and

develop strong partnerships:With your business office

With your lab staff

With other lab groups

Great Uses of Financial & Resource Data

Financial or Resource Data:

• Can help you stretch your dollar

• Can inspire and avoid burn-out of lab members

• Can improve the efficiency of your research program

• Allow you to effectively control and manage your life/career

• Can illustrate success to decision makers for lab space

• Can help you adapt during a bad economy

“Approach all areas of life with bold enthusiasm.”- from my fortune cookie last week

“ ..it’s an opportunity to think creatively and envision making real progress towards understanding a disease. It makes it easier for trainees to be inspired...”

- Margaret Briehl, Ph.D., on grant writing with a bold enthusiasm

Many thanks to:Fayez K. Ghishan, MD

Eugene Gerner, PhD

Pawel Kiela, PhD

Pat Plunkett, CPA

for broadening my perspective of science, grants management and leadership.