January 12, 2001
OMB Changes F&A Policy on Tuition Remission, Voluntary Faculty Effort
The Office of Management and Budget (OMB) has released a memorandum to all executive department heads making major changes to the interpretation of OMB Circular A-21, the circular that guides facilities and administrative (F&A or indirect) cost policy. The changes concern the treatment of voluntary faculty effort and tuition remission. The policy changes, which OMB calls a "clarification," are a result of the four-year Office of Science and Technology Policy-led review of the federal-academic research partnership and President Clinton's related executive order issued Dec. 29.
OMB has announced that voluntary uncommitted faculty effort will no longer be included in the organized research base for computing the F&A rate or reflected in the allocation of F&A costs. In addition, such faculty effort will now be excluded from effort reporting. The recent application of Cost Accounting Standard to A-21 had the effect of reducing F&A reimbursements as a result of voluntary faculty effort on federally supported grants. This perverse outcome has been a source of significant friction between academic institutions and federal agencies for several years.
OMB also has announced that the tuition remission costs of graduate students charged to federal programs under the provisions of A-21 are not contingent on there being an employer-employee relationship, for tax purposes, between the institution and the graduate student. For several years, agencies have interpreted A-21 to mean that, for tuition remission costs to be allowable, students must be treated as employees of the university, for tax purposes, which would mean that students' tuition remission benefits must be treated as taxable wages. OMB has provided criteria under which tuition remission and other forms of support are allowable, regardless of whether they qualify as wages for tax purposes. OMB says the change "recognizes the reality that research activities are an essential component of the individual's educational activities."
Information: Tony Mazzaschi, AAMC Division of Biomedical and Health Sciences Research, 202-828-0059.
