Research Administration Office

University of California

No. 7-81

July 30, 1980


In connection with implementation of the addition to Appendix A of the Contract and Grant Manual entitled "Basic Information and Procedural Guidelines for Recovery of Indirect Costs on Work for Major Laboratories", LBL's Associate Director Pappas recently provided comments on future changes in the level of funding for work placed at campuses. Attachment 1 is a copy of Mr. Pappas' letter of June 5, 1980, together with the letter of May 24, 1980 to which it responds. Mr. Pappas points out that the level of work placed at campuses may change because of expected reductions in Department of Energy funding, as well as because of programmatic changes.

Refer: P. Klenz, 2-2593

Index: Indirect Costs

David F. Mears

University Contracts and Grants Coordinator


Lawrence Berkeley Laboratory

University of California Berkeley, California 94720 Telephone 415/486-4000 FTS: 451-4000

5 June 1980

Mr. David F. Mears

Coordinator, Contracts & Grants

UCSA - 491 UH


Dear Dave:

This is to respond to your letter of 24 May 1980, regarding the above-captioned subject.

You ask if there were any other research projects performed by Campuses for which indirect costs were not accrued. To the best of our knowledge, the answer is negative.

To relieve Riverside's financial concern, we have arranged to pay the retroactive indirect cost in the next fiscal year.

As an aside, your letter states that we assured Chancellor Bowker that indirect cost recovery would not diminish direct project support. This applied only to projects for FY 1977 and FY 1978. Regarding the funding of projects in subsequent years, I wrote, in my letter of 4 April 1978 to Dick Wolfe, "The level of funding for many of the projects has changed mainly due to work being completed or expanded depending upon our programmatic requirements". Depending upon how our program requirements change in the future, there will very likely be changes in the level of work placed with a Campus, including termination. Moreover, our current and immediate future budgets are very susceptible to adverse funding changes, which events will further adversely impact on the work placed with Campuses. As you are undoubtedly aware, the Congress is currently in the progress of reducing FY 1980 and FY 1981 budgets of the Department of Energy. This action will have an adverse effect on some of LBL's programs. Furthermore, the reductions being proposed for FY 1981 will be even greater. I am reciting this to make clear that LBL has not given assurances to anyone that budgets beyond FY 1978 would remain at their current levels. In the current funding climate, to the extent burdens are necessarily applied, they would most probably impact the direct research budget.

Sincerely yours,

George Pappas

Associate Director for Administration

cc: VP Lamson; Asst. VP Levin; Acting Asst VP Pastrone

Office of The Vice President--

Financial and Business Management

May 24, 1980


Indirect Cost Recovery on LBL Memorandum Request 7100410 Issued to Riverside Campus: Project 'Reservoir Engineering Techniques' under the Direction of Dr. Wilfred A. Elders

Mrs. Jeanne Thornburg, Manager, Contracts and Grants, Riverside campus, has sent me a copy of your April 9th letter concerning the subject Memorandum Request relative to a discrete research project. You stated that "the only funds currently available to make that ($43,533.25 retroactive indirect cost) payment will have to come out of the current year's budget" (for the project).

I share Jeanne's puzzlement over your interpretation of the November 20, 1979 letter from Vice President Jenkins, but my primary bewilderment and concern is your statement that because you had not received a billing from the Riverside campus you did not accrue costs against the project funds, thus you intend to pay the retroactive indirect costs from the project's FY 1980 budgeted direct costs. This position contradicts our understanding of LBL representations up to this point. On the basis of correspondence over the past several years and our more recent discussions with you and Mark Owens, I have been given to understand that funds had been set aside, prior to campuses' billings, to cover the retroactive implementation of indirect cost charges on discrete research projects. Since the project at Riverside falls within the category of a discrete research project, it is consistent to expect that funds to cover indirect costs were set aside. We provided as much advance notice of this policy as possible. Implementation retroactive to October 1, 1977 was called for in the draft guidelines of August 23, 1978, in President Saxon's January 15, 1979 letter to Chancellors and Lab Directors, and again in the final guidelines issued November 20, 1979.

For our information and for the campuses' benefit, are there any other research projects performed by campuses for which LBL funds for indirect costs were not accrued?

Regarding the project at Riverside, I agree with the Riverside campus's position that Dr. Elders' project should not be curtailed because of the apparent administrative error to which you refer. I am therefore asking that you review this matter to find an alternative source for the $43,533.25 in indirect costs charges. This maybe possible by means of a budget reallocation in the current year to cover the amount of indirect costs, or by augmenting the project budget next year (and deferring payment to the Riverside campus until that time). I believe that it is important that the project's current funding not be reduced, in view of the heavy emphasis placed on this issue during the planning and coordination of implementation of this indirect cost recovery, You and Mark Owens will recall participating in 1978 in the careful review carried out in order to assure Chancellor Bowker that indirect cost recovery would not diminish direct project support, I therefore ask that you consider these suggestions and any other measures which will resolve this problem.

Let me know if I can assist in any way, or if you wish to meet to discuss this matter. i would like to have an early informal response to relay to the campus, since Dr. Elders has been asked to submit his plan for a reduced scope of work by May 28th.


Vice President Lamson

Assistant Vice President Levin

Acting Assistant Vice President Pastrone

Deputy Associate Director Owens, LBL

Manager Thornburg, UCR