The Mystery Revealed
In the business world, operating expenses cover just about everything required to run a business. There are plenty of websites with examples of operating expenses out there in cyberspace. Some types of operating expenses are general ones, but others are exclusively administrative. These distinctions can get murky in a college or university setting. Remember, a college or university is very much like a large non-profit organization.
How does one clear up the confusion?
Laboratory research proposals are mostly large project grants. These large project grants have direct costs. Direct costs are the general operating expenses of the project. Examples include payroll, benefits, equipment, consumables, supplies, travel, professional services, and other costs. People cost the most as they do the actual science proposed in the grant.
But, aren’t they already employees and on the payroll? Yes, they are, but the time spent on the project must be accounted for.
For faculty, typically this is some percentage of time or person-months of the academic year. For that time or percentage, that person’s salary and benefits come from the grant award in place of the university salary.
New laboratory equipment, above a certain cost, purchased from grant funds becomes the property of the university and on the inventory. Supplies and consumables of the lab are like kitchen equipment and food or paper products. Some items are around more or less permanently, some last awhile, and some are gone in a matter of days. It is not exactly like calling the plumber, but sometimes a project needs professional services as outside help. Back in my active research days, I had to send my DNA samples to another university for analysis.
Although scientists don’t think of it as marketing themselves, they do travel to professional conferences to present research findings. It’s all about communicating results to prepare for the next round of grant applications. Likewise, scientific publication in journals applies even more. There are publication costs from manuscript handling fees to page charges. Publication costs directly relate to the high library subscription rates for journals and the recent controversy about open access of scientific publications.
What happens with administrative operating costs?
Most research and similar grants have a budget category for Facilities and Administration (Indirect Costs). It is a negotiated rate that is the university’s cut for the privilege of providing space and everything else to the researcher. Rates differ from place to place, exact calculation, and with policies. For example, a grant with direct costs of $100,000 could have 40% F & A on total direct costs. That means, the grant request includes an additional $40,000. So the grant request isn’t $100,000, rather $140,000. In the world of university research, this is the rent, utilities, fixtures, insurance, computer network, telephone, compliance, grants administration, equipment, and more. This is an area where everyone, including struggling nonprofits, must be careful.