[eng, biz] ISO a word for a kind of business expense

[siderea]

I don't quite know how to go about googling for this. I'm looking for a technical term in business, accounting, finance, tax law, economics or other jargons, that refers to a specific sub-species of what may or may not be "overhead" expenses. Let me describe what I'm looking for.

Overhead in general means: all ongoing business expenses not

Comments

[siderea]

Well, as in all things, the question is matter to whom?

Here's an example: IIRC, techjob was required by NSF accounting requirements to classify all computer expenses, including all computer support expenses, as overhead. Techjob had different departments that had their own revenue streams - same as any corp with multiple lines of business. But some of those departments had digital products and programmers and web designers - and required hardware, and networking, and IT support - and some of them did not. But the way overhead expenses were covered, as is standard for grant-funded educational non-profits, is that each department serving a grant was charged an "overhead rate", which is N% of the amount of the salary of each employee working on the grant, charged against the money from the grant.

Well, one of the biggest revenue earners was a textbook department which used computers mostly just for publishing software; they placed minimal demand on the IT department[*]. They had a standing beef that the overhead rate they were stuck paying out of the grants they landed was higher than it needed to be - to their detriment - to subsidize other, web-based, projects that required higher levels of IT resources.

Which meant that every time the IT department budget was under discussion, they - and remember, they were big earners so enjoyed big clout - would kick up a fuss that their overhead was going to more IT staff they didn't see the benefit of or more bandwidth they didn't use or more 9s of reliability they didn't need or new hardware they'd never put anything on.

They sure cared, rather a lot.

But there's another, bigger reason one might care: one of the consequences of that bookkeeping decision actually is pretty radical.

Bidding on government grants is a competitive process, and applicants compete on, among other things, price - to be the lowest bidder.

By forbidding applicants from billing IT services accrued directly to grants, the NSF in its majestic equality is forbidding tiny three-person research shops without any IT departments at all and massive multi-department Institvtes with whole multiplexed IT organizations, both, from directly recouping the technical expenses of delivering the grant.

Which one do you think can afford to do that?

Basically, that accounting rule means that when you write the grant proposal, large organizations with pooled IT resources across multiple grants/projects are at a substantial advantage vs small one-grant-at-a-time shops. Bigger organizations can do what techjob did, and subsidize the more technical grants out of the overhead charges of the less technical grants. That meant its technical grant proposals could come in cheaper than smaller competitors.

An unintended consequence of this rule is that larger institutions are given a competitive advantage against smaller institutions, because they're all but required to cost shift the price of doing work with technology off the grant.

[* Well, maybe not as minimal as they thought, but for the sake of argument...]

[kelkyag]

the question is matter to whom?

That is exactly what I was missing (thinking only of taxes and internal accounting) thank you, and apologies for putting you to the trouble of a long -- but much appreciated! -- explanation. (The whole bid/apply-and-grant process sounds like an incredible headache with massive overhead ... but taking out that overhead seems like one'd wind up with an even higher fraction of grants going to shiny-looking proposals with nothing backing them up.)