Proposed Revisions to OMB
Cost Principles: Circulars A-21; A-87 and A-122 (August 12,
2002, Federal Register Notice)
October 10, 2002
Mr. Gilbert Tran
Office of Federal Financial Management
Office of Management and Budget
Room 6025 New Executive Office Bldg.
Washington, D.C. 20503
Subject: Proposed Revisions to OMB Cost Principles: Circulars
A-21; A-87 and A-122 (August 12, 2002, Federal Register
Notice)
Dear Mr. Tran:
The Association of American Medical Colleges (AAMC) appreciates
the opportunity to comment on the proposed revisions to OMB
cost principles in an effort to bring some uniformity to Circulars
A-21; A-87 and A-122. The AAMC long has had an serious interest
in OMB's cost allocation policies, especially in OMB Circular
A-21, based on our experience as the national representative
of all 125 U.S. medical schools, more than 400 teaching hospitals,
and 98 academic and professional societies, comprising more
than 100,000 faculty members. Our institutions perform over
half of the extramural research sponsored by the National
Institutes of Health (NIH), the nation's leading agency supporting
biomedical and basic science research, as well as conduct
research sponsored by other Public Health Service and federal
agencies. As such, AAMC, like has a long-standing interest
in efforts to streamlining the financial and administrative
management of federal awards.
We have reviewed the OMB's comparison of the cost principles
in the three circulars and the OMB's proposed changes. We
have also benefited from the extensive review performed by
our colleagues at the Council on Government Relations. We
commend to your attention and endorse COGR's detailed comment
letter. Like COGR, we conclude that the current OMB proposal
to streamline the cost principles is too far reaching and
clearly and inappropriately steps over the line into the area
of policy change. We join with others in the research community
in urging OMB to withdraw the proposal.
While we will not reiterate the comments of COGR and others
with whom we agree, several key proposed changes deserve special
comment:
Item 16 - Equipment: Under the proposed revisions
to part a.(1) and (2), the "original complement of low cost
equipment" required to outfit a new facility / building would
have to be capitalized, regardless of the cost. This would
create a significant and costly burden for university administration,
faculty, and research staff without apparent benefit and is
unnecessary.
Item 22. Interest: Sections b.(1) is new, and has
the effect of making currently allowable interest costs unallowable.
OMB revised the interest provisions of A-21 in 1996 to establish
more rigid criteria for reimbursement of interest costs, but
the 1996 revision did not eliminate the allowability of interest
costs incurred prior to that date. We oppose this change.
Item 48. - Travel Costs: A new subsection (e) is added
that states that that "Direct charges for foreign travel are
allowable only when the travel has received prior approval
of the awarding agency. Each separate trip must receive such
approval." Under authority provided in OMB Circular A-110,
most awarding agencies have waived the prior approval requirements
for foreign travel. Therefore, this new requirement would
be a step backward in administrative streamlining and we oppose
it.
Item 24. - Idle Facilities and Idle Capacity: This
section is new to A-21, but is currently contained in A-87
and A-122. Of particular concern are the definition and restrictions
surrounding "idle capacity" in Section 24.a.3., which seem
oriented to the manufacturing environment. The insertion of
this section into A-21 will enable federal F&A rate negotiators
to develop their own arbitrary positions on what constitutes
"idle capacity" which could result in contentious disallowances,
and further complicate the space allocation process. We believe
that existing language in J.12 is sufficient to determine
allowable costs, i.e., "Institutions may be compensated for
the use of their buildings, capital improvements, and equipment,
provided they are used, needed in the institutions' activities,
and properly allocable to sponsored agreements."
We recognize that OMB specifically states that its intent
in the proposal is not to add, restrict or modify current
requirements contained in the circulars. However, restrictions
and modifications have been introduced into A-21, which amount
to significant policy changes. We strongly request that OMB
reconsider its approach and consult with the research community
before proceeding further.
Sincerely,
Jordan J. Cohen, M.D.
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