Because of the campus's investment in new research facilities over the past decade, the federal government has agreed that UC Davis can gradually increase its research overhead charges by 4 percent over the next five years to 48.5 percent. At the same time, the campus is reorganizing the way that it uses its share of the overhead to more directly benefit researchers, reports Robert Grey, provost and executive vice chancellor. "This will ensure that growth in extramural funding is rewarded in direct proportion to the overall success of the campus in obtaining contracts and grants," he said. The new programs are already getting nods of approval from faculty members. "The plan is wonderful," says Dallas Hyde, professor of anatomy, physiology and cell biology, and associate dean of research in the School of Veterinary Medicine. "It meets the needs we have in our school to support the administration of grants within departments. As it currently stands, we have to use teaching funds to administer grants, and that's counterproductive to research." The proposed changes will deliver tangible rewards soon. According to Grey, his new programs plus next year's increase in the overhead charge are expected to boost funding to campus units and faculty members by $2.2 million in 1999-2000. Next year, for instance, with a 46 percent overhead charge, for every dollar that the campus receives for the direct costs of a research project, it can charge the government (as well as private donors) as much as an additional 46 cents for the associated research costs. Of the total overhead money, 43 percent is sent to the state government to offset its payments to the university; a proportion goes to the Office of the President -- about 3 percent -- for administrative costs; and the remaining 54 percent comes to the campus. Collecting $28.8 million in overhead Last year, the university collected $28.8 million in overhead charges from UC Davis federal contracts and grants. The money finally returned to campus was $12.4 million. The campus's share of overhead funds is used to pay for utilities, libraries and administrative costs related to research that are not easily divided accurately among projects. Last year, about $5.4 million, or 44 percent of the campus's share, was allocated directly to campus units or as grants to faculty members. The Planning and Budget Office estimates that the new indirect-cost return programs will increase these allocations to 56 percent of the campus's share. The rest of the campus overhead share pays for graduate student support, as well as the capital and operating costs of buildings that house research. This can include paying the debt service for buildings such as Academic Surge and investing in capital projects like the Life Sciences Addition or the upgrading of the campus's air-conditioning system. The campus hired the national accounting firm KPMG Peat Marwick in late 1998 to analyze the current overhead rate and then used the information to negotiate with the U.S. Department of Health and Human Services, which sets overhead rates for most universities. KPMG concluded that the real overhead cost to the campus from doing research is a little over 60 percent, according to Kevin Smith, vice chancellor for research. However, pressure from Congress and faculty members nationally -- along with various overhead-misuse scandals from universities -- have reinforced the government's bargaining stance so that rather than a 16 percent requested increase, UC Davis received the 4 percent increase over the five-year period. UC Davis is a bargain UC Davis is expected to maintain its position as having the lowest rates among UC campuses over the next five years. "UC is already very low, and we at UC Davis are a bargain in what we charge the federal government to do work on our site," Smith said. UC Davis has a fairly modest rate by national standards, too. The national average for public universities was 48.3 percent in 1998, according to the Chronicle of Higher Education. Pri-vate universities averaged more, at 59.5 percent. In that January 1998 Chronicle survey, while UC Davis ranked 33rd among the top 100 public and private universities in national research funding, it ranked 92nd in its overhead charges, Smith points out. The campus already returns funds to academic departments proportional to the past year's generation of overhead through a program called the Federal Indirect Cost Return Program, which was created in 1990. Grey expects that funds allocated through this program will increase both through the increase in the overhead charge and as the level of federally sponsored research activity increases. Smith has been put to work by Grey to iron out the details for the new indirect-cost return programs by July 1. They are: Private Indirect Cost Return Program: Parallel to the Federal Indirect Cost Return Program, this allocation program would return to UC Davis units 25 percent of overhead funds from private grants and contracts received by the campus. Private funding is a growing segment of research funding at UC Davis. It now comprises about 10 percent of the whole. Off-the-Top Return Program: Dealing with the administrative costs of research, this program would increase the amount of overhead-generated funding to departments to pay for staff members whose jobs directly support the research endeavor, such as office accountants. "A certain amount of the money is already there," Smith said, "But nobody seems to recognize it. We want to make it much clearer that these funds are to support the administration of research." Indirect Cost Block Grant: The Academic Senate's Committee on Research will receive a fiscal boost to its campus competitive-grant programs, which suffered during the bad-budget years of the mid-'90s. While the committee was able to distribute $1.16 million in internal research grants in 1990, this year the committee's budget was $950,000. "We want to repair part of the damage from Phase III cuts," Smith said. "We plan to allocate a good part of $500,000 this next year and over time I plan to increase these funds to meet campus needs." Charging for overhead is sometimes unpopular among faculty, but it's a normal cost of doing business, says Ahmad Hakim-Elahi, director of sponsored programs for the Office of the Vice Chancellor for Research. "In the private companies, it's much higher than at the university," he said, pointing to his experiences as a scientist, in-house counsel and director of resarch for a biotechnology company for 12 years. Chancellor Larry Vanderhoef said he himself has experienced indirect cost issues from both sides of the academic aisle. "As a researcher, some of my grants were from the National Science Foundation. The indirect costs had to come straight out of my total budget, and I saw them as the devil's work. I wrote letters to the editor about their evil nature. "Now I see that real indirect costs to the university are about 60 percent, and the feds give us less than 50 percent, and I again see them as the devil's work. But I no longer write letters to the editor."