Introduction to Budgeting

Intro to Budgeting
Lori Schultz, Sponsored Projects Services
Sept 2014
Today’s Agenda
 Where do we start?
 Basic framework for budgeting in sponsored research
 OMB Circular A-21 General Costing Principles
 The rules
 Mechanics of building a budget
 Categories of costs
 Common Issues
 Preparing the budget
Where do we start?
 Program/Sponsor restrictions
Total dollar limits
Unallowed items of cost
Required items of cost
Cost sharing
 Who else is involved? Other units/PIs?
 Deadline
 Sponsor Format
 Relative difficulty (have we done this before?)
Mechanics of Building a Budget
 What can I charge?
 Budget & Justification should make sense when read along with
the science
 Rules for federal awards
 The specific RFP may prohibit or require certain classes of
OMB Circular A-21 (Federal Rules)
 What is/was it?
 OMB: Office of Management and Budget
 Cost principles for federally sponsored projects
 Guidance for determining direct vs. indirect costs
 Replaced by OMB “Omni Circular” (2 CFR 200)
on Dec. 26, 2013
 No substantial change in cost principles
Cost Principles
 Reasonable –
 OMB A.21, C.2(a)
 Allocable –
 OMB A.21, C.2(b)
 Consistent –
 OMB A.21, C.2(c)
 Allowable –
 OMB A.21, C.2(d)
Direct vs. Indirect Costs
 Direct Costs
 Can be identified specifically with a particular sponsored project
(OMB A-21 D.1.)
 Indirect Costs
 Facilities & Administrative Costs [F&A], Overhead (OMB A-21 E.1.)
 Incurred for common or joint objectives - cannot be identified
readily and specifically with a particular sponsored project
 Administrative expenses (staff, supplies)
 Utilities
 Building renovations, maintenance
 Depreciation, debt service, central administration
Direct vs. Indirect Costs
 Costs must be treated consistently - either as a direct or an F&A cost
 ‘Like costs treated in like manner’
 Institution’s DS-2 often details which costs will be viewed as direct
vs. indirect
 UA Direct/Indirect Cost policy:
Common direct cost questions
 Can I charge a computer/mobile device to my project?
 Yes – if being used in a programmatic way
 Connected to a scientific piece of equipment for data
collection; Needed to run simulations, analyze data,
 No – if being used in a general way
 Check email, browse internet, word processing, etc.
 Updated guidance is more flexible
 Not required to be dedicated to a single project
 ALWAYS ensure it is well-described in the
Common direct cost questions
 Can I charge office supplies to my project?
 Typically no, due to lack of allocability
 However, they are allowable when in unlike circumstances
 Used in a programmatic way: conference
materials, pamphlets, surveys, etc.
Common direct cost questions
 Can I charge my administrative assistant to
my project?
 Typically no, due to lack of allocability
 However is appropriate on a ‘major project’
 Outside of general job duties
 Coordinating large numbers of collaborators or participants
 New guidance is more flexible here
 “Major projects” language removed, but requirement for allocability
still exists
Cost Sharing
• Matching funds / in-kind contributions
• Anything necessary for the completion of
the project that is not paid for by the
– College/dept/central funds to pay for salaries, portion of
equipment, F&A restrictions, etc.
Cash or in-kind
• Cash: cost of cost-shared effort
• In-Kind: reduced indirect cost rate
3rd party contributions
Cost Sharing
 The general rule: DO NOT include cost sharing unless it is required
by the program.
 When required, be sure it is clearly stated in budget & justifications
 Two categories:
 Committed – must be tracked
 Required by sponsor (committed in proposal)
 Not required, but committed in the proposal 
 Uncommitted – does not need to be tracked
 ‘Volunteering’ of institution resources without mention of a specific
dollar amount 
Cost Sharing & Allowability
 Remember reasonable, allocable, consistent, allowable?
 All of those apply!
 In general cost-shared expenses are subject to the SAME
rules as direct expenses on the award:
 Allowable costs, allocable items
 Consistent & reasonable treatment
 Within project start/end dates
 Not otherwise prohibited by sponsor or program
Cost Sharing & Allowability
 Sponsor F&A limitations:
 Is this cost share?
Yes, but:
Am I allowed to include it in my cost sharing total?
 Maybe, maybe not
 I have two related federal projects. Can I use my NSF funds as cost share
for my USDA project?
 Federal sources are almost never allowed as a
cost share source.
Getting started
 Usually best to start with a common format, even when the
sponsor has forms:
 Review at multiple levels is easier
 Changes are easier
 Many sponsor formats don’t calculate except simple addition
 We’ll illustrate with the CALS format
Direct Costs
– Salaries
– Fringe benefits / Employee Related Expenses
Budget Basics - Categories
 Personnel
 Name/(TBD) and effort devoted to project
 % effort or person months (PM)
 PM = % effort X appointment, so: 10% effort for AY = 10%
X 9mos = .9 person months
 Grad Students or Student workers : salary/stipend or hourly rate
 Salaries/hourly wages
 Current faculty/staff: Ask department
 To-be-hired:
 ERE rates
Budget Basics - Categories
 Personnel costs are the biggest portion of most budgets
 Most likely to be restricted:
 NIH Salary cap: $181,500 IBS (translates to full FY salary)
 NIH graduate compensation limit
 NSF 2-months salary
 Other sponsor restrictions
Budget Basics – Categories
 Travel
 For budgeted project personnel
 Project-related conferences, required grant meetings,
subrecipient site visits, field work, etc.
 Transportation, lodging, per diem, etc.
 Costs based on:
 Searching fares for providers (airline, etc)
 Historical costs for conferences (fees / hotel)
 Limits on lodging/per diem by location
Budget Basics – Categories
– Defined by our rate agreement:
• Tangible, non-expendable, useful life >1 year
• Acquisition cost of $5,000+/unit
Depending on the program & cost of equipment
Formal quotes
Informal quotes
Acquisition cost includes tax, shipping, & installation
Budget Basics - Categories
• Materials and
– Items to be used for
the project
Ex: chemicals to be used
for experimentation
Ex: printer paper for a
research survey
Ex: computer to run a piece
of lab equipment
• Contractual
– Services to be performed
by another entity for the
Ex: 3rd party vendor to perform
DNA sequencing
Ex: evaluator to assess
effectiveness of education
– Subaward
Budget Basics - Categories
 Collaborator from another institution?
 Subaward (subcontract)
 Distinguished from a vendor by the intellectual contribution to the
project outcome
 Provide SOW, budget, and budget justification prior to
 A single line item on your budget
 Subaward budget must comply with sponsor guidelines,
subrecipient institution policies, and all federal regulations
 F&A only charged on first $25,000 of each
Indirect Costs (F&A)
• Applied to costs specified in federally
negotiated rate agreement
– Modified Total Direct Cost (MTDC)
• All costs excluding tuition, equipment, patient care, off-site rentals,
scholarships, fellowships, and all subaward costs exceeding $25,000
• We are a DHHS institution
• Sponsor stipulations & F&A Waivers
Working out a budget…
The Parameters
 Sponsor: NIH
 Total direct cost limit/yr: $250,000 (modular)
 Cost sharing: Mandated by cap
 On-Campus Research project for F&A
 The PI is Dr. Lecter, in SWES. He makes $300,000 total IBS and
is an academic employee. He plans to spend 15% effort in the
And another one…
 Sponsor: NSF
 Total direct cost limit/yr: Not specified
 Cost sharing: prohibited
 On-Campus Research project for F&A
 Subcontract to Whatsamatta U.
 The PI is Dr. Lecter, in SWES. He makes $300,000 total IBS and
is an academic employee. He plans to work the entire
You WILL use algebra again…
 A sponsor limits the project budget total to $150,000 and will
pay full F&A rate of 53% MTDC.
 The project budgets nothing that would be excluded for F&A
purposes (tuition, equipment).
 How much money is available in direct costs?
 Total / 1+ F&A Rate = Direct Cost
 $150,000/1.53 = $98,039
 $98,039 * .53 = $51,961
 $98,039 + $51,961 = $150,000