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Budget Development

As you begin to develop a budget for your research grant application and put all of the relevant costs down on paper, many questions may arise. Your best resources for answering these questions is the Office of Research and Sponsored ذكذكتسئµs. Our pre-award specialists provide support to the ذكذكتسئµ University research community by reviewing and interpreting sponsor guidelines and regulations, budget preparation, budget justification, and reviewing proposal packages for conformity to sponsor requirements.
All budgets must be in compliance with the Federal Uniform Guidance (2 CFR 200) and applicable grant and contract regulations for institutions of higher education

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Preparing your budget

  • Direct Cost

    A direct cost must be necessary and reasonable to the proposal goals and objectives. Examples of direct costs are:

    • Salaries
    • Fringe benefits
    • Supplies
    • Equipment
    • Travel
    • Participant support
    • Consultants/Professional services
    • Sub-awards/Sub-contracts
  • Indirect Cost
    Indirect Costs, also known as Facilities and Administrative Costs (F&A) are charges that cannot be directly tied to the project. These are costs recovered by the university through the federally negotiated indirect cost rate. All proposals, unless stated otherwise in the funding announcement of a federal, state, or philanthropic foundation are charged the full indirect cost rate. A pre-award specialist will apply the indirect cost rate to the modified total direct costs (MTDC) during your budget meeting.
  • Allowable versus Unallowable Costs

    The basic considerations for determining the allowability of costs are:

    • Costs must be reasonable. This is defined as the action a prudent person would have taken under the circumstances.
    • Costs must be allocable to sponsored agreements under the principles and methods described in the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards issued by the Office of Management and Budget (Uniform Guidance). Costs are incurred to benefit the specific sponsored project and able to be assigned to the project with a high degree of accuracy.
    • Costs must be given consistent treatment through the application of generally accepted accounting principles appropriate to the circumstances. Similar costs are normally treated as either Direct or Indirect across the University.

    Generally Allowable Costs which may be charged to grants, contracts, and other agreements is the Uniform Guidance prepared by the Office of Management and Budget (OMB). The document identifies costs that may be charged as indirect costs. While not all of the projects sponsored at ذكذكتسئµ University are federally funded, and while not all sponsors allow the inclusion of indirect costs in a project budget, the distinction between direct and indirect costs must be maintained consistently throughout the University.

    Generally Unallowable Costs identify costs which cannot be included in the budget, although they would qualify as direct costs according to Uniform Guidance. Sponsors may also limit the dollar amount in certain budget categories. For example, limitations on salaries or minimums for participant costs maybe set in place by the sponsor. Many federal agencies also limit payment to individual consultants.

    For either Indirect (F&A) costs or direct costs, the federal government identifies specific activities or transactions that are not allowed to be charged to sponsored research, either as a direct cost or an F&A cost. The following costs have been specifically identified by the government as generally unallowable on government grants and contracts.

    The list below is not all-inclusive. Individual agency and program requirements may list other "unallowable" costs.

    • Advertising for general promotion of the University, including printed materials, promotional items, memorabilia, gifts, souvenirs
    • Advertising for recruitment purposes that includes color or is excessive in size
    • Alcoholic beverages
    • Alumni or fundraising activities
    • Antiques
    • Bad debt write-offs
    • Charitable contributions
    • Commencement expenses
    • Decorative objects for private offices
    • Entertainment
    • Fine/original art
    • Fines and penalties
    • First-class/business-class air travel differentials
    • Flowers
    • Gifts, prizes, and awards
    • Goods for services for personal use
    • Lobbying
    • Memberships in airline travel clubs
    • Memberships in civic, social, community organizations or country clubs
    • Faculty and exempt staff salary in excess of base rates paid by the institution
    • Social events

     

  • Cost Share

    Types of Cost Share

    1. Mandatory: When cost sharing is mandatory, the requirement for cost sharing will be described in the application guidelines. If the sponsor is silent about cost sharing or states that cost sharing is "encourage", cost sharing is not considered to be mandatory. For mandatory cost sharing the sponsor may require a certain percentage/type of cost sharing or that applicants "match" the sponsor's contribution according to a certain formula. Any quantifiable cost sharing described in the proposal then becomes a condition of the award thereby requiring the monitoring and reporting of the cost share expenditures to the sponsor.
    2. Voluntary Committed: Federal sponsors view any voluntary cost sharing offered at the proposal stage as "committed" cost sharing at the ward stage. This means that any quantified cost sharing offered in a proposal that is submitted to a federal sponsor becomes fiscally and/or programmatically auditable and must be documented and reported to the federal sponsor if the proposal is funded.
    3. Voluntary Uncommitted: Voluntary uncommitted cost sharing refers to any effort or resources contributed to the sponsored project beyond that which is committed and budgeted for in sponsored agreement. Such voluntary uncommitted cost sharing is not included in either the proposal budget or the narrative.

    Cost Sharing Mechanisms

    1. Waived Indirect Costs (F&A): When F&A is "waived" the University agrees not to charge its federally negotiated F&A rate to the sponsor. The portion waived is considered "unrecovered F&A" and can be used as cost share if this is allowed by the sponsor. AVPR approval is also required in such cases. PI's must work through ORSPA to obtain approval to waive F&A.
    2. Contributed F&A: If allowed by the sponsor, the F&A associated with any cash contributions being made to the project by the University. For example, if the PI plans to contribute time and effort to the project without compensation from the sponsor, the monetary value of this effort as well as the F&A associated with it may be offered as cost sharing.
    3. Cash Cost Share: Contributing the computed value of the effort that University-paid personnel are expending on the project without reimbursement from the sponsor, direct costs paid by the University, to be spent on the project.
    4. Third Party Contributions:  This is the computed value of any services and/or resources provided by a third-party in support of a sponsored project being administered by the University. Third-party in-kind contributions may be in the form of real property, equipment, supplies, and other expendable property, or goods and services directly benefiting and specifically designated for the University's project or program.

    Other Considerations

    • Always read the guidelines carefully for whether or not cost share is required, and if so, how much (1:1, 25% of the total project costs, etc.).
    • Federal grants must use non-federal money as cost share
    • Items shown as cost share must generally be accounted for during the approved project period (not before or after) and only for that particular sponsored project (and no other projects).
    • Discuss possible sources of cost share with your chair and/or dean.
    • All cost share must be documented in the same manner as actual expenditures.
    • Documentation of cost share can be audited, just as expenditures paid for by the sponsor.
  • Writing Your Budget Justification

    The budget justification is a categorical description for the proposed costs. Generally, it explains staffing and supply/service consumption patterns, the methods used to estimate/calculate (including escalation or inflation factors) and other details such as lists of items that make up the total costs for a category. The budget justification should address each of major cost categories (salaries, fringe benefits, travel equipment, supplies, other direct costs and indirect costs), as well as any additional categories required by the sponsor.

    A thorough written justification that explains both the necessity and the basis for the proposed costs must accompany the budget. The justification section is critical as it enables the principal investigator to emphasize the importance of essential project costs. A budget that is adequately and appropriately justified is the best way to assure a positive cost analysis by the sponsor.

    Helpful Tips

    • When constructing a budget justification, follow the same order as that in the itemized budget or sponsors budget form, so reviewers can easily compare the two documents.
    • Check to see if the sponsor limits the page length for the justification.
    • Be sure everything in your budget justification is referenced in the proposal description/narrative as well-and be sure everything mentioned in your proposal description that would incur cost is explained in the budget and budget justification!
    • Double check what expenses the sponsor will and will not allow, as these differ from sponsor to sponsor.
    • Remember, all costs must be reasonable, allowable, and allocable.
    • Allowable refers to costs that may be charged to a grant or contract.
    • Allocable refers to the ability to dispense and/or distribute group costs to grant projects bases on the benefit to the program.
    • Reasonable refers to actions a prudent business person would employ.