Policy Statement on the Use of Faculty Research and Discretionary Accounts
Office of the Provost
This policy statement contains the rules that govern the funds in discretionary or research accounts that are created to support the work of individual faculty members.
The accounts have a variety of funding sources, some internal and some external, and are called by a variety of names. This policy statement will refer to these as “research and discretionary accounts,” which should be interpreted as being inclusive of all such accounts. [Note: sources include, but are not limited to: General Funds, returns based on indirect cost recoveries from sponsored projects, research incentive plans, endowment flows, gifts or grants directed to support the work of a particular individual, and designated revenues from departmental activities.]
These accounts may be provided to support the work of a faculty member whose appointment is instructional, clinical instructional, research, librarian, curator, or archivist. The term “faculty” as used in this policy is intended to cover all of these, whether appointed in a regular or supplemental capacity.
Regardless of the name used or the source of funds, these research and discretionary accounts are University assets and the funds in them are provided to support an individual’s work as a faculty member of the University of Michigan. This principle guides the formulation of the following standards.
- Purpose of funding:
Funding in faculty research accounts is intended to promote the research and scholarship, or work in the creative arts, of the University of Michigan faculty member to whom it was granted. By promoting the research, scholarship, and work in the creative arts of University faculty, the University benefits in the quality and visibility of its research enterprise, and in the reputation of the University for intellectual and creative accomplishment. Graduate students play a critical role in assisting faculty members’ endeavors in these realms, and their support falls within the intended purposes of expenditure noted in this document.
Even though a faculty member is given decision-making authority for the expenditure of funds, it is important to remember that these are University funds and they should be used to further the missions of the institution through the work of its faculty. The school, college, or unit has a fiduciary responsibility and, as with all University funds, must be sure that expenditures and use are appropriate and follow University requirements of financial control and oversight (SPG 500.1). Any funding from external sources must adhere to the conditions of the gift or grant, and to the University’s rules governing use of sponsored funds.
Funds in faculty research and discretionary accounts may not be used for purposes other than research, scholarship, or support of work in the creative arts. In particular, items that represent personal expenses are not permissible expenditures. For example, travel to a professional conference contributes to the scholarship of the faculty member and is an appropriate use of research and discretionary account funds. However, travel to and from a vacation home is a personal expense, even if the faculty member works on his or her research while there.
- Equipment, other property, and all tangible, non-consumable items:
If funds are used to purchase tangible, non-consumable items, those items are University property even though they may be for the exclusive use of the individual faculty member during his or her career here. If items are no longer needed for University purposes, the University’s surplus property policy provides guidelines for disposition (SPG 520.01).
- Salary payments for faculty holding regular, active appointments on-campus:
In general, since these accounts are under the control of an individual faculty member, it is inappropriate to permit the faculty member to pay him or herself salary from this source. Most of the academic units prohibit this practice; however some units have policies that permit active faculty members to draw on accounts for some kinds of salary support for summer salary, sabbatical salary, or at-risk components of salary.
There are two principles that apply to this case. First, a faculty member should not be able to determine how much salary he or she should receive, and this funding source may not be used to increase the salary of active faculty members above the level of a full-time, full year salary (100% for 12 month appointments or 100% for 11/9ths for University year appointees). Research account funds may not be used to make lump sum or supplemental salary payments to the faculty member that would exceed this level. [Note: this prohibits a third month of summer salary but permits summer, sabbatical, and at-risk salary, if unit policy explicitly permits such use and the funding source is appropriate for the type of pay.]
Second, even if the expenditure is consistent with unit policy, a faculty member may not use his or her own account to pay salary to him or herself without the prior approval of the department chair and dean or, in the case of accounts in research units, the Vice president for Research. This rule is intended to ensure that all salary payments receive adequate scrutiny and oversight to avoid the conflict of interest that arises when faculty members decide to pay themselves rather than spend their funds in other ways. Deans and department chairs should approve such expenditures only when the payment is consistent with unit policies and is appropriate compensation for the work to be performed, and when they are confident that the expenditure on salary is the best use of the faculty research account under the particular circumstances.
These guidelines do not preclude the use of these funds for salary payments to individuals hired to assist with research, scholarly, or creative work of the faculty member. Graduate student support often is an important and critical use for these funds. Likewise, the faculty member may decide to hire administrative or research support on a temporary basis, including the hire of supplemental or emeritus/a faculty. Unit and University policies on hiring, appointments, salary, salary equity, job classification, conditions and benefits of employment all must pertain to these hires.
- Salary payments to emeritus and emerita faculty:
Funds provided to support the continuing work of an emeritus or emerita faculty member may not be used to pay salary to that individual. Although there may be circumstances when existing research or discretionary funding continues to support work or projects of retired faculty members (further detail in item 6), the faculty careers of these individuals are officially completed as a result of their retirement. Using research or discretionary accounts to continue paid appointments for these individuals is outside of the intended purpose of the funding.
Retired faculty members may hold formal (active) paid appointments as emeritus/a professors with specific work assignments such as conducting research on a sponsored grant or teaching. This policy does not prohibit such appointments nor limit the unit’s ability to make appropriate salary payments for such work. However, it does preclude using the funds in the control of a particular individual as the source of salary payment to him or her.
- Disposition or use of funds by faculty members after their resignation or retirement:
When a faculty member resigns or retires from the University, remaining funds in that faculty member’s research account revert to the source of funding (usually the department, school or college, vice president’s, or provost’s office). If there have been multiple sources and funds were commingled, the department chair and dean or the relevant vice president have the authority to determine the distribution of residual funds, honoring any conditions set forth as funds were granted.
There are a limited set of occasions when a faculty member who has retired or resigned might still be engaged in University work, and it might be appropriate for research account funding to support that work. The judgment on whether this is permissible should be made by the dean, in consultation with the department chair, or by the relevant vice president. The judgment should be guided by the principle that these funds are to be used to further the University’s accomplishment of its missions.
- Use of funds by faculty members employed elsewhere while on a leave of absence from the University:
Unit policies and the particular circumstances of both the employment elsewhere and the leave dictate whether it is appropriate to allow the faculty member to continue to have expenditure authority over research or discretionary account funds. prior to the commencement of the leave and at any renewals of it, the department chair, dean, or vice president should determine whether the faculty member can spend from the research or discretionary accounts while he or she is on leave. If allowed, it is imperative that the faculty member and the unit be diligent about ensuring appropriate University oversight of all financial transactions since the combination of a leave coupled with outside employment creates an inherent conflict of commitment that needs to be managed jointly.
- Transferring funds in Research Accounts to other Institutions
a) The faculty member may request approval from the Dean or Vice president to use the remaining funds after his/her resignation or retirement for continuing or completing ongoing projects or for continuing support for current graduate students while they continue to work towards completion of their degrees.
b) Approval of such requests may be granted if the Dean or Vice president believes the proposed uses are compatible with the purpose of advancing research at the University. From a fiduciary standpoint, all decisions to expend University funds should be made by a member of the University’s active faculty or staff. Therefore, the unit would need to set up appropriate oversight and financial control mechanisms that ensure that the University’s interests are served by the expenditures.
c) Approval will usually be denied when a faculty member has resigned (or retired) to take a faculty position at another university and proposes to spend his or her University of Michigan funds in another institution or to support work that will be associated with his or her position at the other university. There is an inherent conflict of interest when an individual is a faculty member at another institution and yet has authority over UM funds. It is difficult to make the case that UM benefits from work done by an individual who is on the faculty of another institution, since current activities of faculty members almost always are attributed to the individual and the new institution.
d) Approval will usually be denied when a faculty member proposes to use the funds to begin a new project after his/her resignation or retirement.
e) An exception to (d) is that emeritus/emerita faculty members may request approval for continued use of their accumulated research funds for expenditures in support of new research or creative work if they have active and productive programs of research underway at the University of Michigan, and the dean and department chair or the vice president determines that the expanded activity warrants support due to its value to the University.
f) Faculty members who exceed their spending authority so that their research accounts are in deficit at the time of their resignation or retirement are expected to repay the University for the amount of the deficit before leaving unless there is an explicit plan to cover the deficit which has been approved by the dean and department chair or by the relevant vice president.
a) Funds in a faculty member’s research/discretionary accounts that were received payable to the University of Michigan, whether these funds accompanied a faculty member when he/she came to the University or whether these funds were received while the faculty member was active at the University, are presumed to remain with the University should the faculty member resign or retire from the University with funds unspent.
b) Under some circumstances in which the funds originally came from a non-University source, the University may choose to return residual unspent funds to the original donor, sponsor or source, after the faculty member resigns or retires. The decision to return such funds will be made on a case-by-case basis by the provost and the Executive Vice president and Chief Financial Officer according to the intent of the original donor or sponsor. The calculation of the residual will be based on the original amount of funding less any expenditures, but without any imputation of interest earnings, or market appreciation or depreciation.
c) There are rare instances where the funds in a University account are truly personal assets of a faculty member rather than University funds. If the faculty member has paid personal income tax on the funds at the time they were earned and the funds have been deposited to an account at the University rather than donated to the institution, then they may be removed by the faculty member, and transferred to another institution at the faculty member's direction. This practice of depositing personal funds into University accounts is not encouraged. It is generally only used for exceptional circumstances such as a major prize or award that is made to an individual but where the institution assists with the administration. In most instances, such an arrangement requires the establishment of an agency relationship.
Schools, colleges, and research centers may create rules for the use of faculty research or discretionary accounts that are more restrictive than the University rules.
Related policies and guidelines:
SPG 500.01 Fiscal Responsibilities (http://spg.umich.edu/policy/500.01)
SPG 520.01 Acquisition, Use, and Disposition of property (http://spg.umich.edu/policy/520.01)
Suggested procedures for Determining a Departmental policy to Allocate Fund for the provision of professional Services (Attachment A)
University of Michigan Office of Technology Transfer, (http://www.techtransfer.umich.edu/resources/investors/royalties.php)