Criteria of a Good Budget

1. Budget Development, Proposal Routing/Processing and Grant Submission TimelineAshley W. Turbeville, MBA, CRADirector, Health Systems GrantsAdministration and DevelopmentFaculty Research OrientationNovember 9, 2012

2. Criteria of a Good Budget • Translates resource needs to dollars • Conforms to agency guidelines • Realistic estimates • Supports the program • Explains itself • Plans ahead • Identifies organizational concerns/issues

3. Budget Basics Project Budget • Direct Costs • Indirect Costs • Cost Share

4. Budget Basics – Direct Costs Direct Costs • Salaries / Fringe Benefits • Subcontracts / Consultants • Tuition • Equipment • Supplies • Travel • Other Costs

5. Allowable Costs – Direct Costs Compliance Requirements – Direct Costs • Direct costs are those costs that can be easily identified specifically with a particular sponsored project, institutional activity, or that can be assigned to such activities relatively easily with a high degree of accuracy. Identification with the sponsored work rather than the nature of the goods and services involved is the determining factor in distinguishing direct costs from indirect costs. • Costs incurred for the same purpose in like circumstance must be treated consistently. Note: Budgets should recover all costs to conduct the specific project without being over estimated

6. Budget Basics – Indirect Costs What are Indirect Costs? The cost for all of the administrative infrastructure necessary to conduct the project. It includes the services of Human Resources, Information Systems, Purchasing, etc. It also includes the cost of maintaining offices and providing basic utilities. An institution receives an Indirect Rate (a percentage of certain direct costs) through negotiations with the cognizant federal agency.

7. Direct Costs - Labor • On Average 80% of Direct Costs are Labor - Salaries - Fringe Benefits Salary Formula Institutional Base Salary x Percent Effort = Salary Costs or Institutional Base Salary / academic appointment (i.e. 12 or 9) x person months of effort

8. Labor Institutional Base Salary Institutional Base Salary (IBS): The total amount paid by the institution to the employee. IBS Includes: • Academic Salary • Clinical Salary • Administrative Stipends IBS Doesn’t Include: • Outside Consulting Fees • Other Clinical Appointments (i.e., VA Hospital)

9. Fringe Benefits Fringe Benefits are expressed as a percentage of Labor Costs. The Fringe Benefit Rate we use is 25%. The Formula Labor Cost x Fringe Rate = Fringe Benefits $10,025 x 0.25 = $2,506 NOTE: Post-doctoral Fellows do not get a 25% fringe rate. USA only takes FICA at a 7.65% rate. Also, graduate students do not get a 25% fringe rate. No rate at all is taken on the salary of a graduate student.

10. Direct Costs Tuition and Stipends Fellowship – Financial support that may or may not include a stipend in return for service to the institution and that may or may not provide tuition remission Stipend – Financial consideration paid for services Rendered (Remember stipends are paid the same as salaries). Tuition Remission – Tuition waved on behalf of an individual who performs services for the institution

11. Direct Costs Tuition and Stipends Example: Dr. Jones has a grant that calls for the services of Greta Grad-Student, who will work fulltime in his lab. Greta is receiving a stipend of $24,000 per year and tuition remission to pursue her degree. Salaries: $24,000 Tuition: $8,500 (In State)

12. Direct Costs Tuition and Stipends Tuition can be a direct cost to the extent that the student is working on the project: 50% Effort = 50% Tuition Most state institutions use the “in state” tuition rate on their grant budgets. Note: Some sponsors like NIH have specific guidelines regarding items of cost and if these items are an allowable expenditure on grants. An example would be tuition on an NIH Research grant.

13. Direct Costs - Subcontracts Subcontractors vs. Consultants Subcontractor – A third-party organization that conducts a significant part of the research, assists in making programmatic decisions, and has deliverables to the final product. Consultant – An individual who lends specific technical expertise and whose relationship with the project is of limited duration and scope.

14. Direct Costs - Subcontractors Budget Considerations On subcontracts, only the first $25,000 is subject to your institution’s F&A Recovery (Indirect Costs). Consultants and Purchase Orders are subject to full F&A Recovery (Indirect Costs).

15. Direct Costs - Equipment Equipment: Items with a useful life of more than one year and that cost more than $5,000.* *Some sponsors set the limit at $1,000 Component Parts (that can’t function separately) are counted cumulatively: $2000 + $2000 + $2000 = $6000

16. Direct Costs - Other • Travel – Subject to your institution’s travel policies and to the General Services Administration regulations on per diem. • Supplies – Should be itemized by general classification (chemicals, glassware, etc.) for expenditures of $1,000 or more. • Office Supplies – WARNING!General office supplies are typically considered overhead.

17. Direct Costs - Unallowable • Business Meals (non-travel) • Computer Supplies (paper, toner) • Copier Charges • Entertainment • Fixed Phone Charges • Maintenance of General Purpose Equipment • Membership and Dues • Office Supplies • Postage • Secretarial/Clerical Support • Software (General Purpose) • Subscriptions

18. Indirect Costs Indirect Costs are typically expressed as a percentage of Direct Costs, with certain items excluded. The technical term: Modified Total Direct Costs (MTDC)

19. MTDC Base Modified total direct costs (MTDC), consisting of all salaries and wages, fringe benefits, materials, supplies, services, travel and sub-grants and subcontracts up to the first $25,000 of each sub-grant or subcontract (regardless of the period covered by the sub-grant or subcontract). Modified total direct costs shall exclude equipment, capital expenditures, charges for patient care, tuition remission, rental costs of off-site facilities, scholarships, and fellowships as well as the portion of each sub-grant and subcontract in excess of $25,000. Indirect Cost Formula Direct Costs – Equipment ($5,000 or more) – Subcontract (in excess of $25,000) = MTDC MTDC x Indirect Cost Rate (38%) = Indirect Costs Direct Costs + Indirect Costs = Total Costs

20. Cost Sharing • Cost sharing occurs any time that the institution absorbs direct costs for sponsored research. These costs must be: a. Directly identifiable and beneficial to the project b. Allowable under the guidance of the funding agency c. Incurred during the performance of the project d. Verifiable from financial records e. Not used as a cost share on any other federally- funded project

21. Types of Cost Sharing • Mandatory – required by a program as a condition of the award and, therefore, it is obligatory. • Voluntary – Offered by the institution when not specifically required by the funding agency. NOTE: Only your Chair, Dean and Division head can approve the inclusion of cost share in your grant application.

22. Kinds of Cost Sharing • In-Kind – An item of cost for which support is already in place; therefore, no cash outlay is required. (Examples: Salaries, fringe benefits and supplies). • Cash – Funds contributed from unrestricted institutional resources. • Third Party Contributions – Either in-kind or cash contributions from an outside organization that is participating in the project. NOTE: Once the institution has committed to cost share (even if the cost share is voluntary) the commitment must be honored and cannot be rescinded unilaterally.

23. Budget Justification General Principle: • Write a justification for EVERYTHING (You probably don’t need it if you can’t write a good justification) • Detailed explanations for A-21 items of cost should be listed to show how the expense is project specific and should be a direct charge verses an indirect cost • Personnel-describe and justify specific functions/responsibilities of each job title and their role on the project, including the PI; specify necessary training required; indicate the percent of effort for each. • Consultants-describe and justify the services to be performed; indicate # of days/hours necessary, rate of compensation (which may or may not include travel accommodations and any other related costs necessary to each consultant)

24. Budget Justification (continued) • Travel - describe the purpose and destination of each trip requested; trip must be related to the purpose of the grant; indicate person(s) for whom travel funds are requested and the benefit to the project. • Supplies – describe and justify in detail for each category (e.g. biological, chemical, instructional) • Equipment – describe and justify the specifics of the equipment (brand/model/ & accessories) • Other – check the RFP to determine what the sponsor considers ‘other expenses’; describe and justify expenses for these types of applicable charges

25. Common Mistakes (Not that we make them…) • Make sure to cap salary at current NIH rate if applying for NIH grant • Double check salary/FB amounts • Make sure numbers tie to budget justification • Did you calculate indirect cost correctly??? • Are you committing cost-share that has not been approved by the institution?

26. Touchy Points Impeding Budgets and Compliance • Understand the RFP and what is allowed in the budget-does it conform to university policy…(e.g. paying a current employee and salary limits) • Is the salary/benefits correct and in accordance with university policy and records? • Who is responsible for monitoring/documenting release/reassigned time at your institution – learn the difference between an employee, consultant and an independent contractor • Obtain and use report confirmation before reclassing any salary/benefits • Make certain your travel office contacts you regarding grant travelers (particularly foreign travel) • Understand when a sub contract is required, determine due dates for reports and complete required monitoring. • Is the required cost share legitimate and adequate • Cost transfers (are they required and why)

27. Proposal Routing and Processing Proposal Routing Overview • The University Transmittal Form documents the understanding among the Principal Investigator, Co-Principal Investigators and his/her Department Chair, Dean, and University Officials of the expected allocation of institutional resources and the terms and conditions of the anticipated grant/contract award. It is the obligation of the Principal Investigator and Co-Principal Investigators to ensure all entries on the University Transmittal Form are completed and are accurate. • In order to assist faculty with the expeditious return of signed proposals, proposal applications (signed through the college-level)  are to be submitted to the Office of Sponsored Programs (OSP) or the Office of Health Systems Grants Administration and Development (HSGAD) at least five working days prior to the proposal deadline date. This time is required to adequately review proposal budgets and forms and to obtain university-level signatures. Please contact the OSP or HSGAD promptly if you are unable to meet this required five-day deadline. • All proposals, whether paper or electronic submission, must be routed through the university approval process via the University Transmittal Form. Most electronic submissions will be handled through OSP or HSGAD with the exception of those completed by the Principal Investigator such as American Cancer Society grants. Reference: http://www.usouthal.edu/osp/proposalrouting.html

28. Proposal Routing Chart Reference: http://www.usouthal.edu/osp/proposalrouting.html

29. Submission Timeline Electronic Submission, Mailing and Final Copies • For most electronic submissions, OSP or HSGAD will make the submission directly to the agency. For a paper submission, the Principal Investigator is responsible for completing the application package according to the agency guidelines, making all necessary copies of the application, and mailing the application package to the agency after the Authorized Organizational Representative has signed the Transmittal Form. Please note the University Transmittal form is a University form only and should not be mailed with your application. • For grants submitted electronically by OSP or HSGAD please allow two to three days before the submission deadline for review of the electronic application and submission to the sponsor. This will guarantee adequate time for the principal investigator to correct errors in the application identified by OSP or HSGAD and submission to the sponsor by the deadline day and time. This will also allow time to correct identified errors upon validation by Grants.gov, eRA Commons or NSF FastLane and re-submit the grant application. • Final copies of the full proposal, including proposal narrative and appendices should be filed with the OSP and HSGAD. Reference: http://www.usouthal.edu/osp/proposalrouting.html

30. Resources for Faculty • Health Systems Grants Administration and Development website http://www.southalabama.edu/hsgrants/index.html • Office of Sponsored Programs http://www.southalabama.edu/osp • Office of Grants and Contracts Accounting – Cost Accounting Standards Policy http://www.southalabama.edu/financialaffairs/grantsandcontracts/index.html

31. References 1. Jeff Ritchie , Grants Management Analyst , Aurora Health Care Presentation May 13-16, 2007 - NCURA Regional Meeting in Nashville, TN FRA – February 21, 2005 2. Eric Pownall, Children’s Hospital of Philadelphia 3. Pat Whitlock, University of North Carolina at Wilmington 4. Matthew Staman, Huron Consulting Group NCURA-FRA VIII Conference, Grapevine, Texas - April 2, 2007 5. Jacqueline Eberts, Director Fiscal Grants Mgmt., University Research Services, Salisbury University 6. Valerie Riley, Director and Compliance Officer, Embry-Riddle Aeronautical University