Developing a Budget and the Budget Justification

 

The budget is the financial expression of the project or program as approved during the award process. While the proposed budget represents an estimate of the monetary requirements needed in order to meet the proposed goals and objectives care should be taken to develop a realistic budget and not include costs that will not be needed. For example if academic time will not be needed or charged to the project it should not be included in the proposed budget. The applications typically include certifications attesting to the accuracy of the data contained in the proposal or require the institution to obtain the certification and maintain it for review by the federal government. The PRF gives assurance by the PI signature that the information submitted within the application is true, complete and accurate to the best of the PI’s knowledge. Including false, fictitious or fraudulent statements or claims may subject the PI to criminal, civil or administrative penalties.

The institutional official signing the application also certifies to the accuracy and completeness to the statements contained in the proposal. The following is the PHS certification, "I certify that the statements contained herein are true, complete and accurate to the best of my knowledge. I also provide the required assurances and agree to comply any resulting if I accept an award. I am aware that and any false, fictitious or fraudulent statements or claims may subject me to criminal, civil or administrative penalties." In signing the application the Institutional official relies on the assurance given by the PI in the PRF.

Direct Charged Expenses vs Indirect Expenses

Direct Charging Cost Normally Recovered Through Indirects

Direct charged expenses are those that directly benefit and can be easily identified to a specific project/projects or institutional activity/activities. Indirect costs (referred to as Facilities and administrative (F&A) cost by the federal government) are incurred for joint or common objectives and can’t be easily identified to a specific project or institutional activity. The federal cost accounting principles outlined in the Office and Management Budget (OMB) Circular A-21 identify cost normally be treated as direct cost and those normally treated as indirect costs. OMB A-21 also requires costs to be consistently treated within the University. See the Policy on Direct and Faculty and Administrative Costs

Allowable Costs

OMB Circular A-21 also sets forth requirements under which a cost is considered allowable to be direct charged to a federal project. The cost principles in OMB Circular require a cost to be reasonable, allowable, consistently treated as a direct or indirect cost and conform to any limitations or exclusions set forth in A-21 or in the sponsored agreement.

See OMB Circulars for access to Circular A-21 and other OMB circulars.

Reasonable Costs

Per A-21Section C3 a cost is considered reasonable if the nature of the goods or services acquired or applied and the amount involved reflects the actions a prudent person would have taken under the circumstances at the time of the purchase.

Major considerations involved in determining reasonableness are:

  1. Is the cost of a type generally recognized as necessary for the operation of the institution or the performance of the sponsored project?
  2. Have the restraints or requirements imposed by such factors as arm's length bargaining, Federal, state laws and regulations and the specific terms and conditions of the sponsored agreement been met?
  3. Did the individuals making the decision act with due prudence in the circumstances' considering their responsibilities to the institution, its employees, its students, the Federal government and the public at large?
  4. Were the actions taken with respect to incurring the costs consistent with established institutional policies and practices applicable to the work of the institution, including sponsored projects?

Allocatable Costs

A-21 Section C4 states a cost is allocatable to a particular cost objective (a specific function, project, sponsored agreement, etc.) if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or other equitable relationship. There must be a direct benefit to the project from the cost incurred. A-21 provides that a cost is allocatable to a project if one of the following conditions is met.

  1. The cost is incurred solely to advance the work under the sponsored agreement.
  2. The cost benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods.
  3. It is necessary to the overall operation of the institution and, in light of the principles provided in A-21 is deemed to be assignable in part to sponsored projects.

If a cost benefits two or more projects in proportions that can be determined without undue effort or costs, the cost should be allocated to the projects on the proportional benefit. If the proportional benefit cannot be determined because of the interrelationship of the work involved, then the cost may be allocated or transferred to benefited projects on any reasonable basis consistent with the cost principles. Common acceptable reasonable methods of allocating common use items include proportional benefit, FTE's on each award, based on the non salary budgets in each award, number of experiments or tests. If a reasonable method cannot ultimately be determined the costs may be charged to one project. In addition, supporting documentation explaining the allocation is required for all costs allocations that benefit more than one project whether charged to multiple projects or one project.

  • Allocation methods must be consistent and take into account all relative projects benefiting from the costs. For example if a PI has 3 projects using test tubes for which the cost is being allocated the same method should be used to allocate the costs to all 3 projects.
  • The allocation method must be identified in advance of incurring the costs and documented in an easily understood way. This documentation must be maintained by the PI and provided to ORA, other administrative offices, auditors and others as requested.
  • Rotating costs through projects is not acceptable nor is using up the remaining funds in an award budget.
  • Having the cost in the approved budget does not alleviate the requirements listed above.

Example: An equipment maintenance contract for a piece of equipment used 50% on the research project and 50% for instruction purposes cannot be charged 100% to the project, rather 50% should be charged.

Budget and Budget Justification

A detailed budget is required for all proposals. A Budget Template has been created to assist with budget preparation. If the sponsor does not require a detailed budget use the budget template or similar format to prepare a budget for submission to ORA.

The project budget is the financial plan reflecting the estimated costs of the project. As you develop the project, consider all areas where funding may be needed to successfully carry out the project. Will there be a need to hire special staff or students; is travel necessary; will there be subcontracts under this award or consultants? The ORA is available to help assess your needs and develop a reasonable budget given the parameters of the funding agency and your project requirements. Guidelines and requirements for selected budget elements are outlined below. Budgetary information is required for cost share or match as well as expenses to be paid directly by the sponsor. Multiple year budgets should include an inflationary factor for the future periods.

It is important to explain the budget in the proposal and link each budgetary item to the proposed work. The budget justification should clearly explain the need for each budgeted item.

Salaries

Salaries for all UMassD personnel involved with the project should be included. List all faculty, technicians, students, and others who will be devoting time to the project, include their salary and percent effort or month equivalent as required by sponsor. Salaries should be determined by the percent effort to be expended on the project. The budget justification should include the percent effort for all key personnel. A description of the work to be done by each individual or category of employee should be given to support the costs in the budget.

Faculty Salary

Faculty may request a portion of their academic year salary on grants. A course release has been determined to represent 20% effort during the semester (See http://www.umassd.edu/provost/policies/coursebuyouts.pdf) for additional information. The fringe benefits for faculty salaries on grants are calculated at the full fringe benefit rate. Fringe rates are listed at the end of the salary section.

Additional compensation may be charged to sponsored projects in the summer, up to maximum of 95% of 66 available days (63 days) salary. Summer salary cannot be used as add comp for effort expended during the academic year. Summer salary is based on the 9 month faculty base salary; one month summer salary equals one month academic salary. It is important to consider other commitments when determining how much time is available for summer work. Stipends received for directorship, associate dean or other similar positions may not be included when determining the monthly summer salary allowed.

Special notes regarding sponsor salary requirements

The NIH limits 12 month salary charged to NIH grants for Executive 1 Level employees. Please see NIH web site for additional information. Salary above the cap is treated as cost share.

The NSF allows up to 2 months salary for faculty charged to grants. This limit is based on all grants received by an investigator from the NSF. The 2 months can be charged throughout the academic and/or summer period coinciding with effort. If additional time is needed on the project it must be requested in the budget and justification and be specifically approved by the NSF.

Graduate Students Stipends and Curriculum Support Fees

UMassD has approved Guidelines for Graduate Financial Support providing standards for graduate stipends. Stipends for graduate and undergraduate students can be determined by contacting your Department Chair and/or the Office of Graduate Studies and Admissions. Checking with these sources will ensure that rates are consistent with University policies and that compensation does not fall below minimum levels.

Curriculum support fees for graduate research assistants are charged to sponsored projects based on the level of assistantship. Tuition is waived for graduate research assistants and is not charged to sponsored projects. Other student fees of a non personal nature may also be included in the sponsored projects in lieu of wages paid to the student. Fees that are not charged to grants include the Athletic fee, transcript fee, student fees and other activity fees unless specifically provided for in the award.

The curriculum support and other fees are included in the Other Costs section of the budget, not in salaries. Curriculum support fees are not charged indirect costs.

Clerical and other administrative

Clerical and other administrative salaries are normally treated as indirect (facilities and Administrative) costs according to OMB Circular A-21 and may only be included as direct charges on sponsored programs in certain unusual circumstances. Please see the UMass Dartmouth policy on Direct and Facilities & Administrative Costs. Contact ORA if you have any questions regarding the allowability of these charges in your proposal.

Undergraduate Students

Undergraduates should be budgeted at their hourly rate.

Other Professionals

This category includes technicians and researchers. These individuals should be budgeted based on a percent effort if salaried.

Fringe Benefits

The full fringe benefit rate is applied to all 12 month fully benefited employees and 9 month faculty during the academic year.

Summer salary for faculty and student payroll is charged only the payroll tax portion as are students during the full year.

Health and Welfare is charged for all employees once a year.

More information on the fringe benefit rates.

Travel

Travel costs are for University employees only. Since travel costs may change from the time you submit your proposal, request the standard rate and avoid special rates to ensure adequate coverage of your travel costs. Also consider full costs when determining hotel or room & board expenses, especially for international travel. Travel reimbursements must be consistent with University policy (Travel Manual) for additional information and current per diem rates.

Foreign travel and domestic travel are listed separately. The budget justification should include the purpose of the travel, location, dates and the travelers for each trip. The costs should be broken down by airfare, hotel, per diem and so on. Remember that many sponsors have Fly America Act Waiver Checklist requirements. See Internal Policies and Procedures for a copy of the Act and a form to request prior approval for use of a foreign air carrier. The Act describes in detail when a non US air carrier may be used and what approvals are required.

Business Meals

Allowability of meals on projects is determined by sponsor, federal and university policies and procedures. See Guidance on charging meals to sponsored projects for additional information.

Equipment

Equipment is any tangible item with a useful life of one or more years and has a unit cost of $5,000 or more. Depending on the nature of the equipment, calculate your costs based on several estimates. The purchasing department can assist with collecting quotes.

Each item of equipment should be listed individually; the justification should include why the equipment is needed for the project and why any existing equipment is not sufficient. Equipment that is normally considered office furnishings and office equipment such as personal computers are not allowed on most projects as a direct cost. The need for this type of equipment should be discussed with ORA to determine if allowable on the project prior to including in the budget. Additional documentation is required for these items if deemed allowable.

Publication Cost / Documentation / Dissemination

These include printing, layout, mailing, graphic design costs and other costs associated with publishing or disseminating your results. If you are developing a highly sophisticated report, brochure, or document, the costs can be substantial for the graphic design, layout and printing. Consider hiring a graduate student in graphic design or professional writing to assist you. Budgets should be based on quotes obtained or actual experience. The purpose of all such costs should be clearly explained in the budget justification.

Materials and Supplies

This will normally cover laboratory and/or studio supplies and software applications as well as equipment with a cost less than $5,000. Such costs should be specific to the project, reasonable and be based on actual costs or historical costs. The items do have to be listed separately but should be presented in classes of supplies such as glassware or chemicals.

The cost of office supplies is normally considered an administrative cost by OMB Circular A-21 and included in the F&A recovery and may only be charged to a sponsored agreement if there is a unique need for such items due to the nature of the work involved. Any such items charged to a project can only be used on that project. Please consult with ORA prior to including office supplies in your budget.

Consultants

Consultants are individuals who are hired for a specific task but are not involved with the project on a regular, consistent basis. List all consultants, rate of pay, description of work to be performed and dates the work will be performed.  Individuals in the UMass payroll system are considered employees and cannot be paid as a consultant on a sponsored project.

Subawards

A subaward is a contract that assigns some of the obligations of an award or contract to another party. A subawardee may not be an individual. The subrecipient organization must submit a letter of intent signed by an authorized institutional official along with the scope of work, budget and budget justification. The budget should be presented by line item or by task depending on the needs of the project. In most cases ORA will not issue a fixed price subaward and the subawardee budget needs to be in line item fashion similar to the budget ORA that sends to sponsors.

Most sponsors require that subrecipient be approved by them prior to issuing the subaward. It is important to clearly define the work the subrecipient is doing and their expertise in the budget justification.

Human Subjects Incentives

Human subject incentives may be budgeted for projects conducting research with human subjects. It is encouraged that the incentives be given in the form of gifts including gift cards rather than cash. A description of the incentive and cost is required in the justification. The IRB must approve all human subject research. Check with ORA to determine if the protocol must be approved prior to submitting the proposal.

Animals

A description of the type of animal, quantity and unit cost is needed. Check with ORA to determine if the protocol must be approved prior to submitting the proposal.

Other Direct Expenses

Other direct expenses include participant support costs, long distance telephone and other project related direct expenditures. Cost per unit should be included.

Facilities and Administrative (F&A) or Indirect Costs

Funding sources usually indicate whether or not F&A are allowable. F&A based on the federally negotiated rate are charged to all sponsors unless the sponsor has written policies and procedures stating otherwise.

The F&A rate is determined by prior negotiation with an agency of the Federal Government. UMassD's rate has been negotiated with the Department of Health and Human Services. The F&A rate covers all expenses incurred by the institution which cannot be directly attributable to the contract/grant (such as overhead expenses, supporting services and/or use of facilities). UMassD's negotiated rate effective July 1, 2010 will be based on Modified Total Direct Costs. Modified total direct costs exclude capital equipment, curriculum support fees, subcontracts in excess of $25,000.00, fellowships and scholarships.

See ORA Institutional Information page for the current rate. However, because this approved rate is not allowable for all funding agencies and some indirect rates may be calculated on total cost of the project, it is important to contact Office of Research Administration to determine the proper rate and budget calculation for a specific agency.

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