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Defining Federal Research Expenditures, Federal Research Obligations, and Federal Research Awards

Although University officials as well as external constituencies report and discuss the level of federal research funding secured by the University of ÑÇÖÞÓ°Ôº, it is not always clear how terms like expenditures and obligations are defined. In addition, we frequently do not understand how expenditures, obligations, and awards differ from one another, who provides these data to the National Science Foundation and other reporting agencies, and when (what fiscal year) these data are reported. This Issue Brief addresses these and similar questions.

Federal Research Expenditures

Federal research expenditures are reported by the institution and sent to the National Science Foundation (NSF) on an annual basis. The reporting cycle follows the institution's fiscal year. Typically, an institution's data are due to NSF in February each year and comparison data are available in December of the same year. Federal research expenditures, technically, refer to federal expenditures for science and engineering research and development.
Although NSF does not provide a specific definition of expenditures, all public institutions are required to report these expenditures in accordance with the National Association of College and University Business Officers (NACUBO) guidelines and consistent with the Governmental Accounting Standards Board (GASB) principles.

Regardless of when the research grant was awarded or when actual funds were received from the federal agency, federal expenditures are noted by the institution when research funds tied to a specific research grant are "expended" or "spent" and acknowledged in the accounting system. Likewise, these expenditures would be recorded in the fiscal year in which they were expended.

For example, let's assume that the University was awarded a five-year, 10 million-dollar federal research grant in FY1996. If the University actually expended 1.9 million dollars of the grant in the FY1996, then the University would report federal research expenditures associated with that research grant of 1.9 million dollars.

Federal Research Obligations

Federal research obligations are reported by the federal agency that has obligated these funds to the college or university. These obligations are based on the federal government's fiscal year (October 1 through September 30) and this information is generally not available (for the University of ÑÇÖÞÓ°Ôº or peer institutions) until at least two years after the end of the fiscal year. Federal research obligations, technically, refer to science and engineering federal research and development obligations.
The National Science Foundation (1997) provides the following definition: "The amounts for orders placed, contracts awarded, services received, and similar transactions during a given period, regardless of when the funds were appropriated and when future payment of money is required. Obligations differ from expenditures in that funds allocated by Federal agencies during one fiscal year may be spent by the recipient institution either partially or entirely during one or more subsequent years."

When an institution is awarded a federal research grant, the federal agency will typically obligate all or a portion of the grant in the first year. This can actually happen in different ways depending on the contractual agreement between the federal agency and the institution. For example, let's say that a federal agency awards a five-year, 10 million-dollar grant in FY1996 to the University. The contractual agreement states that the entire amount of the grant (10 million dollars) will be made available to the University during the first year. In this case, the federal obligation that the agency reports would be 10 million dollars in FY1996. The principal investigator (PI), of course, has the discretion to expend the money during any of the five years. Furthermore, in this example, the federal agency would not report additional federal research obligations associated with this grant in any of the subsequent four years.

The more common approach, however, is when the federal agency and the PI contractually agree to a budget that outlines the level of funding available each year of the grant's life. In this case, the federal agency would provide the PI with the authority to spend up to a specific dollar amount in the first year. At the end of the first year, if sufficient progress has been made on the grant, then the federal agency would again provide the PI with the authority to spend the amount previously budgeted for the second year. To put it another way, the federal obligations in any given fiscal year represent the maximum amount that the federal agency has made available to the university for a particular research endeavor.

Using the example provided above, if the University was awarded a 10 million-dollar grant over a five-year period and 2.5 million dollars were budgeted for the first fiscal year, then the federal obligations during FY1996 would be 2.5 million dollars. If satisfactory progress was made on the grant and 2.1 million-dollars were budgeted for the second year, then federal obligations for FY1997 would be 2.1 million-dollars.

Federal Research Awards

NSF does not provide a definition for this term nor does it formally report this category. As a result, this can lead to confusion regarding this term and its similarity to federal research expenditures or obligations. This is particularly true because the term is used extensively by higher education institutions, the media, constituencies of the college or university, and other external parties.
Consequently, some caution should probably be exercised when federal research awards are reported and/or when federal research awards are compared to federal research expenditures and obligations. For example, an institution might announce that it recently secured a three-year, twelve million-dollar federal research award. This award will be expended over the next three years and appropriately, acknowledged as federal research expenditures in the proper fiscal years. Furthermore, the federal agency will obligate portions of this award over the next three years and appropriately, acknowledge these funds as federal research obligations in the appropriate fiscal year. What occurs, however, is that for any given fiscal year the federal research awards, expenditures, and obligations seldom match. Moreover, some institutions will combine all newly awarded federal grants (e.g., the 12 million-dollar award above) with the federal obligations that have been promised in the same year. This combination is then considered as the total federal research funds (another term often used) secured by the institution in that fiscal year. In sum, more reliable and valid data can probably be secured by using federal research expenditures or federal research obligations. In addition, reliable data from peer institutions are available via NSF websites for only federal research obligations and expenditures.

Other Issues

There are other ways in which reports concerning federal research funding and related issues can be confusing.

• Sometimes the term "external" or "extramural" is used in announcements concerning funding. "External" or "extramural" would include funds provided by the federal agencies as well as funds secured from the state, industry, and/or any other sources outside or external to the institution. In addition, unless "research" is included in the title, it probably includes external funds for instruction, public service and/or other functions.
• Another term commonly used is "competitive" research funding. For example, the University of X received 24.5 million dollars in competitive research funding in FY1997. In this case funding from industry, the state, the federal government, and other sources might be included in this total.
• NSF does report the amount of industry-based research expenditures than an institution has expended in a given fiscal year. These data are calculated by the institution and forwarded to NSF at the same time the institution reports its federal research expenditures (February).
• The Carnegie Classification is based on total federal obligations (not only federal research obligations). This includes science and engineering obligations for research, research & development plant, facilities for instruction in science and engineering, as well as other federal obligations.

Information

• For the NSF statistical report on FY97 federal research expenditures, see .

Sources:

This Issue Brief was prepared based on the input of Richard Bennof at the National Science Foundation, Debbie Caselman, the Assistant Director of Sponsored Programs at UM-Columbia, and Larry Gates, Assistant Vice President, Office of Planning and Budget at the UM System.
National Science Foundation. (1997). Federal science and engineering support to universities, colleges, and nonprofit institutions: Fiscal year 1996. Author: Washington DC.