Budget Development
“It’s clearly a budget. It’s got a lot of numbers in it.”
-George W. Bush (43rd US president)
Budget Development – General Considerations
- The proposal budget should be directly derived from the project plan.
- Budgets are generally computed on a 12-month basis.
- Read the solicitation:
- Total award limits
- Budget Restrictions
- Cost Share requirement
- Include direct and F&A costs.
Budget Development – General Considerations
- Request enough funds to cover anticipated cost increases (3% inflation for personnel costs and 4% inflation for non-personnel costs is typically considered to be reasonable).
- If cost sharing is included, each budget period should include a column for both sponsor and non-sponsor costs.
Budget Development
Direct Costs:
- Costs that can be identified specifically with a particular sponsored project, an instructional activity, or any other institutional activity; or that can be directly assigned to such activities relatively easily with a high degree of accuracy
Budget Development
Facilities and Administrative (F&A) Costs
- Costs that are incurred for common or joint objectives, and, therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity.
Examples of F&A Costs:
- Building utility and maintenance costs
- Purchasing, BSC’s, Library
Budget Development
Elements of Direct Costs
- Salaries and Wages
- Fringe Benefits (FB)
- Equipment ($5,000 and over)
- Expendable Supplies and Materials
- Travel
- Subcontracts
- Consultants
- External
- Other
Budget Development
Salaries and Wages
- Summer Salary
- Postdoctoral Research Associates
- Undergraduate & Graduate Students
- Technical and Clerical Support - may be charged to projects under circumstances enumerated under Uniform Guidance 2CFR200
- Use Percent of Effort, Not Hourly Wage
- Include Increases for COLA and Merit-based Adjustment
Budget Development
Equipment
- The Federal government defines equipment as an item of property that has an acquisition cost of $5,000 ($3,000 for State of NH).
- Equipment not capitalized but with a value of less than $5,000 should be included in the supplies line item and described in the budget justification.
- General purpose equipment is not allowable as a direct cost unless programmatically necessary and used exclusively/primarily for research.
- Special Note On Computing Devices: Considered supply costs (if it’s under $5K); can be charged as a direct cost when devices are “essential and allocable to a project”, but not “solely dedicated” to the performance of the award
Budget Development
Expendable Materials/Supplies
- Must be programmatically necessary; general office supplies should be treated as an F&A cost – unless a major program.
Travel
- Adhere to Institutional Policy and Agency Guidelines
- Distinguish between Domestic and Foreign Travel
- Foreign Travel may require prior approval from sponsor prior to trip (even if in original budget/proposal)
Subawards
- Proposed costs should be Reasonable and Allowable (however, keep in the mind the subcontractor may be under different cost principles, i.e., industry subcontractors)
Budget Development
Consultants
- External: required expertise needed for the project which cannot be provided by faculty or staff at the institution; rate must be reasonable; in most instances, consultants’ level of effort and participation should not rise to the level of “key personnel” – that would imply substantive programmatic work
- Interdepartmental: in some instances, a faculty or staff member may serve on a project as a consultant, but only if the expertise required is not part of this person appointment or job function: “same or similar duties” Interdepartmental consultants are paid through the University payroll system and should be included in the budget under personnel costs.
Budget Development
Other Direct Costs
- Communications-cell phone charges are generally unallowable
- Publications
- Animal Care Costs
- Human Subject Costs
- Shop Charges
- Maintenance/Service Contracts
- Computer Costs
- Graphic Arts/Photographic Services
- Rental/Lease of Facilities
- Tuition Remission
- Construction/Renovation/Remodeling Costs
Budget Development
What Does “Allowable” Mean?
- An allowable cost must be:
- REASONABLE: A prudent business person would have purchased this item and paid this price.
- ALLOCABLE: It can be assigned to the activity on some reasonable basis.
- CONSISTENTLY TREATED: Like costs must be treated the same in like circumstances, as either direct or F&A costs.
- If a cost cannot meet the above criteria, it is unallowable, no matter what it is for.
Budget Development
What Does “Allowable” Mean?
- An “allowable” cost is one that is eligible for reimbursement by the federal government.
Contrast with:
- PERMISSIBLE BY INSTITUTION: A cost is permitted by institution, as outlined in its various administrative policies or procedures.
- ALLOWABLE BY AGENCY: A cost is permitted by the policies of the sponsoring agency or the terms of an award.
Budget Development
Assessing Whether a Cost Is Allowable or Unallowable
- A cost may be “expressly” unallowable, i.e., it is always unallowable as either a direct or indirect.
- Unallowable activities: Fund raising, alumni relations, lobbying, etc.
- Unallowable transactions: Alcohol, entertainment, fines, etc.
- A cost may be allowable but only as an indirect/F&A cost, not a direct charge, e.g., proposal preparation
The Front Page of the Newspaper Test
“Contemplating any business act, an employee should ask himself whether he would be willing to see it immediately described by an informed and critical reporter on the front page of his local paper, there to be read by his spouse, children, and friends.”
-Warren E. Buffet
Budget Development
Third Party Agreements
- Types of third party agreements:
- Purchase Order
- Subaward/Subgrant/Subcontract
- Consulting Agreement
Budget Development
Purchase Order
- A particular kind of agreement issued to enter into a legally-binding commitment with an outside vendor or the acquisition of goods and services.
- Issued to an organization that provides the goods or services to many different purchasers as part of its normal business operations within a competitive environment.
- These subcontracts (or purchase orders) are not subject to compliance requirements of the Federal award.
- Normally the purchasing department is responsible for purchase orders, and for their negotiation or revision where necessary.
- Subject University of New Hampshire Procurement regulations.
Budget Development
Subawards/Subcontracts/Subgrants/Subagreements
Whatever you call them…
- Subrecipient Subawards: used to procure substantive programmatic (scope) work under a grant or contract.
- The sub-recipient has responsibility for programmatic decision making and measurable performance requirements related directly to the award.
- Sub-recipients must adhere to federal compliance requirements.
Budget Development
Subaward Process Requirements – what SPA needs at the time of proposal submission:
- Letter of Intent signed by authorized official
- Statement of Work
- Period of Performance Budget
- Other Documentation
- F&A Cost Agreement
- Cost Justification
- Statement of Work Approval
- Certifications/Assurances (these are usually part of the subaward agreement)
Budget Development
Consulting Agreement
- A form of subcontract
- Consulting agreements are typically not issued to procure “substantive programmatic work.”
- Consultants operate as independent contractors without detailed supervision, like subcontractors.
- Unlike subcontractors, they most often participate on a “work-for-hire” basis.
Budget Development
Consulting Agreements
- Remember – a “consultant” is not an “employee.”
- If an employee is misclassified as an “consultant,” the institution is subject to fines and penalties.
Budget Development
Cost-Sharing/Matching Costs
- Cost sharing is defined as the portion of the cost of a project not borne by the sponsoring agency
- Types of cost sharing:
- Mandatory-required by the agency for award
- Voluntary Committed-not required for the award but committed in the budget
- Voluntary Uncommitted-not required by the agency as a condition for the award, not committed by the faculty, but effort may be recorded.
Budget Development
Cost-Sharing/Matching Costs
What Can be Used to Meet Cost Sharing?
- Contributed effort by the PI/co-PI (preferred)
- Cash
- Third Party Contributions (however, federal funds cannot be used as cost sharing on federal funds)
- Unrecovered F&A costs (can be used if agency has approved)
- If cost sharing is included anywhere in the proposal, it is auditable and requires tracking and may require reporting.
Budget Development
Cost Sharing Considerations
- Are verifiable from the recipient’s records
- Cannot be used as cost sharing on other federal projects Are necessary and reasonable for accomplishment of project objectives
- Are allowable under the cost principles
- Are not paid by the Federal government under another award
- Are provided for in the approved budget when required by Federal agency
- Are incurred within the project period of performance.
Budget Development
Facilities and Administrative Costs
Points to Consider:
- F&A costs are REAL COSTS!
- F&A cost recovery is the reimbursement for actual costs incurred by the institution in support of sponsored projects
- F&A costs are incurred on all institutional activities, not just sponsored research
- A significant portion of F&A cost not recovered
- When an external sponsor pays less than the full F&A rate, the unrecovered F&A costs must be absorbed by the institution (it’s an institutional decision)
Budget Development
Types of F&A Rate Bases
- Total Direct Costs (TDC)
- All direct costs of research, excluding tuition remission
- Modified Total Direct Costs (MTDC)
All direct cost of research less:
- Equipment $5,000 and over
- Subcontracts in excess of $25,000
- Tuition Remission
- Participant Support Cost
- Scholarships & Fellowships
- Other items may be excluded where necessary to avoid a serious inequity in the distribution of F&A
Budget Development
On-Campus Research Rate
- Applied to on-campus organized research activities
- Most frequently used rate; may be the only rate negotiated
Off-Campus Research Rate
- Performance at the off-campus site must be on a continuous basis; intermittent performance is not sufficient;
- The University personnel working or engaged on the project must be physically located at an off-campus site; and
- The off-campus performance must be of sufficient duration; normally a full semester, summer term, or the period of performance of the sponsored agreement
UH-OH!
Professor White submits a last-minute proposal to you that must be out the door within the hour to meet the deadline. As you look frantically at his budget, you notice that he has included a huge amount of his own cost-shared time. You call Professor White and ask if he really is going to spend 100% of his time for 3 months for the next 3 summers on this project. He says, laughing, “Oh, of course not. You know, you just put that stuff in to make it look good.”
What do you do?
OH NO!
- I’m doing research at 2 universities but I only want to pay indirect once on my NSF grant.
- But I can’t get my budget in early because my research is so cutting edge. How late can I walk it through? (How is your luck?)
- I have two federal grants for two separate projects but I keep them completely separate (except for the fact that I only have one lab).
Thank you.
Questions?
Knowledgeable research administrators are essential to the management of the research enterprise and play a critical role in research administration at the University.
Next Session:
When: January 20, 2014
- Session I 9:00-10:15 am
- Session II 10:30-11:45 am
Where: TBA
What: Accounting for Sponsored Programs
