Budget Preparation and

DevelopmentBasic Budget Construction

Budget Preparation and Development

Module 4

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Sponsored Programs Office Contact Information

OSP Director

Jeanne Wicks 472-1825 jwicks2@unl.edu

Associate Director

Suzan Lund 472-1930 slund2@unl.edu

Assistant Directors

Deb Arent 472-6327 darent1@unl.edu

Mike Behne 472-6323 mbehne1@unl.edu

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Sponsored Programs Office Contact Information

Grant Coordinators

Nancy Becker 472-3601 nbecker1@unl.edu

Shelly Cutsor 472-2247 mcutsor2@unl.edu

Julie Poykko-Post 472-6174

jpoykkopost2@unl.edu

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Sponsored Programs Office Contact Information

312 N 14th StreetAlexander Bldg West Lincoln, NE 68588-0430Ph 402-472-3171Fax 402-472-9323http://research.unl.edu/sp1

Official Applicant/Recipient Entity:The Board of Regents of the University of Nebraska for the University of Nebraska-Lincolnuse same address as above

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Purpose and Elements of a Good Budget

Purpose– Present and justify financial needs to fulfill the scope of the

project– Provide a roadmap for successful progress of work– Reflect project goals financially

Qualities:– Clear– Realistic– Conforms to regulations and policies

• federal• agency• institutional• program specific

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Common Reviewer Issues to Avoid

• Budget too small for project size

• Budget inflated for project size

• Justification does not support budget

• Budget and justification do not reflect project aims

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How to Develop a Good Budget

• Read and follow all sponsor instructions

• Work with PI or designee to understand project needs

• If available, read current draft of proposal

• Note possible expenses and other questions to address with PI– who is mentioned in the text – key personnel?

– equipment mentioned?

– humans or animals involved?

– subawards involved?

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Budget Considerations

• Costs to a project must meet the criteria in OMB Circular A-21 (if a federal project)

• Primary Principles – all costs must– Be reasonable– Be allocable– Be allowable

The cost is unallowable if these aren’t all met!

Costs must also be treated consistently across the institution

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Budget Considerations

Be reasonable – the cost must• reflect the action that a prudent person would have

taken under the circumstances prevailing at the time the decision was made to incur the cost

• be necessary – support the project• benefit the grant directly – be a direct cost• be accountable – explainable• follow federal and state laws and all applicable

regulations

Document the prevailing circumstances!

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Budget Considerations

Be allocable – the cost must

• be incurred solely to advance the work under the sponsored agreement

• benefit both the sponsored agreement and other work of the institution in proportions that can be approximated using reasonable methods

• be necessary to the overall operation of the institution and deemed to be assignable in part to sponsored projects

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Budget Considerations

Be allowable – the cost must

• Be allowed per the sponsor rules, regulations and guidelines

• Also be allowed by institution, state and federal rules, regulations and guidelines

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Budget Considerations

Be treated consistently• The cost type must be treated the same

regardless of source of support

• The cost can’t be treated as both an indirect and a direct cost unless granting agency specifically authorizes

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Facilities & Administrative (F&A) Costs

• Also known as overhead or indirect costs• Costs incurred for common or joint objectives that

cannot be readily and specifically identified with a single sponsored project

• Real costs to the university to maintain resources and infrastructure to do research– Heating and air conditioning– Building maintenance– Administrative salaries– Snow removal

• UNL has a federally negotiated rate agreement through our cognizant agency - DHHS

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Facilities & Administrative (F&A) Costs

• UNL’s F&A rate is applied to Modified Total Direct Costs (MTDC)– MTDC includes all direct costs except

• equipment (over $5000)• capital expenditures • charges for patient care • tuition remission• rental costs• scholarships and fellowships • the portion of each subaward in excess of $25,000

• F&A costs are incurred on actual expenditures

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F&A Policy• Request full negotiated rates on all proposals.

• If sponsor has a published standard limited rate or does not allow F&A costs, UNL will accept (usually foundations).

• Waivers of F&A costs are generally not allowed.

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Direct vs. F&A Costs

• Appropriate federal regulatory document– Educational Institutions: OMB Circular A-21– Nonprofit Institutions: OMB Circular A-122– State, Local and Indian Tribal Governments: OMB Circular A-87– Hospitals: Appendix E of 45 CFR part 74– Commercial Organizations: FAR 48 CFR part 31

• Normal treatment of expenses• “Unlike circumstances”

Good litmus test question: Would you have this expense if you didn’t have this grant? If no, then most likely a direct cost.

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Direct vs. F&A Costs

Direct Cost Examples• Portion of Principal Investigator, other investigators or

key personnel salaries related to scope of work

• Lab supplies needed specifically for project

• Lab equipment specially needed for project

• Survey instruments

• Project-related travel expenses to attend scientific meetings and present results

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Direct vs. F&A Costs

F&A Cost Examples• Furniture

• Utilities

• Computers

• Administrative support salaries

• Memberships and dues

• General office supplies

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Budget and Budget Justification

• Follow sponsor format/guidelines• If no budget format provided, use standard format

– personnel– fringe benefits– equipment– travel– materials and supplies– other– subawards, if applicable– F&A (aka indirects, indirect costs or overhead)– cost share, when required

• Budget narrative critical to understanding budget –briefly describe each category/line of costs shown in budget

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Key Personnel

• All individuals responsible for the design and conduct of the study

• Usually includes PI, co-investigators and essential collaborators

• Key personnel must be reported on in progress and final reports

• Changes to key personnel may require sponsor approval

• Be judicious in determining who is “key” to the project

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Budget Items – Personnel

Who is going to be working on the project?• PI and other senior personnel

• Other local personnel– lab techs, graduate students, undergrad students

– usually not considered Key Personnel

• Amount of effort for each – usually in person months

• Collaborators– sometimes paid as local personnel or through subawards

– sometimes committing expertise without compensation

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Budget Items – Personnel Costs

• Reasonable salaries to cover the effort of any employee of UNL who will be working on this project – salary costs should relate to amount of effort

• Administrative and clerical salaries are normally not treated as direct costs

• OMB Circular A-21 Exhibit C provides examples of a "major project" where direct charging of administrative or clerical staff salaries may be appropriate – support that is significantly greater than the routine level of the services provided by academic departments

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Budget Items – Fringe Benefits

• Rates are based on an average and should be consistently applied

• A higher or lower rate may be estimated on a case-by-case basis, if justified in the proposal

• Actual individual employee benefits will be charged on project

• Never indicate to sponsor that benefits are a fixed rate

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Fringe Benefit Rates (9/23/08)

• Faculty, Managerial/Professional Employees, Post-Docs - 28% of salary

• Full-time hourly employees - 42% of salary• Graduate assistants - 32% of salary for tuition remission

– Plus health insurance at the following estimated rates: 7/1/08 – 6/30/09 $925

7/1/09 – 6/30/10 $9707/1/10 – 6/30/11 $1,0207/1/11 – 6/30/12 $1,0707/1/12 – 6/30/13 $1,125(Increase by 5% per year thereafter)

• Undergraduates (full-time students): None• Temporary Employees (including part-time students) - 9.0%

(FICA, Medicare, Workers Compensation, & Unemployment insurance)

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Budget Items – Equipment

• Defined as a single item costing $5,000 or more and having a life of a year or more

• Multiple items may be purchased to build a single piece of equipment – these items would be considered equipment even though they may not meet the definition individually

• Justification should include a vendor quote whenever possible– Sole source vendor requirement– Custom manufacturing requirement

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Budget Items – Equipment

• General purpose equipment is usually not allowable on federal grants

• Scientific equipment is generally allowable with sponsor approval

• NIH modular grants do not always require sponsor approval for scientific equipment unless changes number of modules requested

• For audit purposes, departmental records should clearly indicate the need for the item in relationship to the grant

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Budget Items – Travel

• Indicate if domestic or foreign– foreign travel may not be allowed or require special

approval, even if accepted in proposal budget

– foreign travel is subject to FLY AMERICA act

• When budgeting for travel, consider the effect of inflation on multi-year awards. (What will the price of gas be in 2012?)

• When traveling with students, be sure to include cost of required insurance

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Budget Items – Travel

• In budget justification indicate– number of trips

– number of people traveling

– location and type of meeting

– purpose of travel

Note: Check program announcement for required investigator meetings

to be sure you include them in budget.

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Budget Items – Participant/Trainee Support

• Some agencies include a category for participant support costs on their budget forms.

• Only for conference proposals or training proposals such as National Science Foundation Research Experiences for Undergraduates (NSF/REU) proposals

• Not used for general travel to conferences or to bring collaborators together to meet and discuss the project

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Budget Items – Participant/Trainee Support

• Funds proposed in this category and approved by the agency cannot be rebudgeted for use in other categories without the prior approval of the agency.

• These funds generally incur F&A

Note: NSF does not allow participant support costs to be included in the calculation of F&A costs. This is an NSF rule, however, not a general rule for all participant support costs. Check sponsor guidelines before excluding participant support from the Modified Total Direct Cost and provide OSP with a copy of the rule.

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Budget Items – Materials & Supplies

• Specific items needed to perform the project

• General use items – pens, pencils, paper, general lab supplies – are generally not allowable

Some auditors take the stance that if you budgeted for 6 widgets at $1200, you are limited to 6 widgets – even if you have the budget to purchase 7. Appropriate justification can help.

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Budget Items – Human & Animal Costs

Human Subjects Participation• Patient care expenses• Travel, food, other reimbursements• Participant incentives• Number of participants• Timeline of activities

Animal Use• Type of animal• Sole source vendor• Housing expenses• Special needs

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Budget Items – Consultants

• A consulting agreement typically defines a scope of work and terms under which a private individual performs activities

• Under a consulting agreement, an individual (typically) provides professional or highly technical advice or assistance to the university

• Provide hourly or daily rate and number of hours or days estimated

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Budget Items – Consultants

• University controls the results but not the manner in which the service is performed

• Consulting agreements are not considered subawards

• Consulting agreements are handled at the department level

• UNL employees cannot serve as paid consultants on a UNL grant

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Budget Items – Other Expenses

• Services• Specialized equipment maintenance• Publication costs• Fee for service vendors• Animal maintenance

• If allowed. . . – printing and duplication– computer services– rent and utilities– communication costs– alterations or renovations

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Subrecipients vs. Vendors

Subrecipient is responsible for • Carrying out a portion of the grant program as

defined in the subaward

• Having its performance measured against the grant program objectives

• Programmatic decision making

• Adhering to applicable federal program compliance requirements

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Subrecipients vs. Vendors

Vendor• Provides goods and services within normal business

operations

• Provides similar goods and services to many different purchasers

• Operates in a competitive environment

• Provides goods and services that are ancillary to the operation of the grant or contract

• Is not subject to compliance requirements of a federal grant or contract

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Subawards

Deliver these items to OSP prior to submission• Letter of intent/commitment signed by subrecipient’s

institutional official (original, fax or scanned copy). We also will accept a signed cover page (SF424).

• Subrecipient’s detailed budget and budget justification (prepared using prime sponsor forms/format).– Subrecipient budget/budget justification becomes a sub-part of

your budget and justification

• Subrecipient’s statement of work for their work only

Note: Read agency guidelines to determine how sub’s F&A costs are to be calculated in your budgets.

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Budget Items – Cost Share

• Project costs not borne by the sponsor• Cannot be met through federal sources• Two types – mandatory and voluntary• Voluntary cost share becomes mandatory if the

proposal is awarded• When cost share is required, the difference

between UNL’s full F&A rate and sponsor’s limited rate should be used to meet this requirement, if allowed by sponsor

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Budget Items – Cost Share

• Cost sharing has to be tracked and reported• Don’t quantify unless needed• Examples of acceptable wording to avoid

quantifying– The PI will devote the necessary time to complete the project

– The department of X will provide the necessary equipment to accomplish the proposed research.

– Computer support for the project will be provided by the College of X.

• You cannot cost share an item more than once• As a general rule, avoid it, if possible!

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Other Considerations

• Cost of living increases on multi-year awards

• Cost share requires institutional approval prior to proposal submission (NUgrant)

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Budget Justification

• An explanation of the items included on budget form

• Most important part of the budget!

• Fully justify every person listed in the proposal

• Fully justify every budget category in order of budget form

• Make it easy for a reviewer to understand the proposed costs on the budget

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Budget Justification

• Justify any items that would normally be unallowable or treated as F&A cost or require sponsor approval

• Provide budget details in the justification rather than list in budget– Cost Accounting Standards 501 requires that our

accounting system accumulate level of detail that is proposed in the budget

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Budget Development

• Dr. Smith, PI, effort = 15%.• Dr. Jones, Co-I, effort = 25%• Graduate Student, effort = 100%• Travel to DC to present finding to NSF as required; also travel to

conference for both Dr. Smith & Dr. Jones• Needs lab supplies, $13,000 per year• Needs a new more powerful spectrometer, $7,500• Dr. Johnson at XYZ Corp. will be consultant in year 3, $3,500• Would like a new computer for his office

Dr. Smith is writing a proposal for a three year project and has asked you to assist with the budget development. He provides you with the following information:

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Steps for Developing a Budget

• Ask Dr. Smith for RFP or solicitation to help determine which costs are allowable, allocable, and reasonable for this proposal

• Ask Dr. Smith what he would like the start date to be – make sure it falls within sponsor guidelines

• Determine if cost share is needed, and if F&A is allowable or restricted

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Steps for Developing a Budget

• Begin populating a budget spreadsheet with the information provided. In order to populate the spreadsheet you will need to:1. Find salary amounts

2. Determine if personnel are appointed 9/12 or 12/12

3. Calculate salary request

4. Calculate person months

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Salary & Person Months

Dr. Smith’s annual salary is $105,592; he is 12/12, effort 15%

• Salary requested from sponsor = salary x effort

– $105,592 x 15% = $15, 838.80

• Person months = appointment x effort

– 12 months x 15% = 1.8 calendar months

Dr. Jones’ annual salary is $73,900; she is 9/12, effort 25%

• Salary requested from sponsor

– $73,900 x 25% = $18,475

• Person months

– 9 months x 25% = 2.25 academic months

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Salary and Person Months

• Graduate students start at $18,000– $18,000 x 100% = $18,000

• Person months for GRA (only when required)– 12 x .49 = 5.88 calendar months

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Equipment

• Dr. Smith has been shopping around for a spectrometer and the best quality for the best value came in at the $7,500 price

• If the work can’t be done without this equipment, if it is allowable according to the RFP and if it can be specifically allocated, this expense can be included

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Travel

• RFP requires presentation of progress annually in DC.

– PI indicated 2 days total, 2 nights hotel and airfare $900 each, both PI & Co-I will attend

– Increase at 3% each year to account for estimated price increases

• Conference will be to present findings in third year

– 2 people 4 days, 4 nights, previous conferences ran about $2,500 for each person

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Supplies

• Dr. Smith gives you a list of supplies that are necessary to perform the project, like beakers, gases, etc. He estimates cost of $13,000 based on average prices.

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Consultant

• Dr. Johnson from XYZ Corporation in year 3– $500/day x 7 days = $3,500

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Office Computer

• According to A-21, computers are an F&A expense

• NSF is not restricting F&A

• Therefore this request would not be allowable and should not be included on the budget

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Other Expenses

• Publication expenses in year 3 for presentation at the conference estimated at $500

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Budget Justification

Personnel

Dr. Smith, PI, (effort = 1.8 calendar months) will be responsible for the overall project management as well as experiment development, data analysis and reporting to NSF.

Dr. Jones, Co-I, (effort = 2.25 academic months) will share the responsibility of overseeing the overall project management as well as supervising the graduate student.

TBD, GRA, (1 full-time at .49 FTE) will be responsible for conducting the experiments and assisting in analyzing data.

A 3% cost of living increase has been applied to all salaries in years 2 and 3.

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Budget Justification

BenefitsFaculty and Staff benefits are estimated at 28% of salary. GRA benefits include tuition remission estimated at 32% of salary and health benefits estimated at $970 in year 1; $1,020 in year 2; and $1,070 in year 3. The actual cost of benefits for each person will be charged to the project.

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Budget Justification

EquipmentSpectrometer 75000B, this spectrometer is necessary to perform the experiments for the direct benefit of the project.

TravelThe PI and Co-I will travel to DC annually to present the progress report at NSF. In year 3 the PI and one other person will travel to a conference to present their findings.

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Budget Justification

Travel expenses to DC estimated at $900* per personAirfare: Lincoln, NE to DC $400Hotel (2 nights) $300 Meal Allowance $100 Ground Transportation $100

*this amount is increased by 3% in years 2 & 3 for estimated price increases

Travel expenses to conference estimated at $2,500 per person

Airfare: Lincoln, NE to Conference Site $650Hotel (4 nights) $650 Registration $700Meal Allowance $250 Ground Transportation $250

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Budget Justification

SuppliesCosts are estimated at $13,000 in year 1 with a 3% increase in years 2 & 3 to purchase consumable materials and supplies for the proposed experiments, such as [give examples of the necessary supplies].

ConsultantDr. Johnson from the XYZ Corporation will be hired in year 3 of the project. She will provide consulting services for 7 days. Dr. Johnson’s rate is $500/day. We are requesting $3,500 in year 3 for her consulting services.

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Budget Justification

Facilities & Administrative Cost

UNL’s federally negotiated rate is 47.5% MTDC for organized research.

61http://research.unl.edu/nuramp