BUDGETING BASICS FOR BEGINNING RESEARCH ADMINISTRATORS

1. BUDGETING BASICS FOR BEGINNING RESEARCH ADMINISTRATORS Ellen D. Rogers Karen M. Pace University of Notre Dame For the NCURA Region IV Spring Meeting April 27-30, 2002 Madison, WI

2. Agenda • Acronyms and Definitions • Federal Regulatory Framework • Direct vs. Facilities & Administrative Costs • Categories of Costs • Budgeting Essentials • Summary and Q&A

3. Acronyms • OMB – Office of Management and Budget • S&W – Salaries and Wages • TDC – Total Direct Costs • MTDC – Modified Total Direct Costs • F & A – Facilities and Administrative Costs • TC – Total Costs

4. Federal Regulatory Framework • Code of Federal Regulations (CFR) • Federal Acquisition Regulations (FAR) • http://www.nd.edu/~research/award/award.htm

5. OMB Circular A-21 • OMB Circular A-21 • Applies to institutions of higher education • Establishes allowability, allocability and reasonableness of certain costs • Defines rules for direct costs and criteria for distribution of facilities and administrative costs • Defines cost accountingstandards

6. OMB Circular A-21(cont’d.) • Allowable costs include: • All expenses that have been incurred solely for work on the project (direct costs) • A share of other costs that are incurred primarily for necessary administrative and service function related to the sponsored research project (facilities & administrative costs)

7. Principles of Allowable Costs • Must be: • Reasonable • Necessary • Allowable • Allocable • Consistently treated

8. Unallowable Costs • Examples: • Alcohol • Entertainment • Fines and penalties • Membership or subscriptions • Postage for proposal mailing • Payment to someone for writing proposals • Travel on non-US carriers

9. Why all the Focus on Unallowable Costs? • Section K of A-21-Certification of Charges • Audit risk • Public perception • Unallowables appear where they are least expected

10. Budget terminology • Direct costs • Modified total direct costs (MTDC) • Facilities and administrative costs • In-kind costs • Cost-sharing • Matching funds

11. Direct Costs • Salaries & wages • Fringe benefits • Consumable supplies/expendable materials • Permanent equipment • Travel • Computer time

12. Direct Costs (cont’d.) • Subcontracts • Alterations & renovations • Other costs related to project service contracts analytical services phone, duplicating, publication charges, consultants

13. Facilities & Administrative Costs (F&A) • F&A costs are those that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, and instructional activity, or any other institutional activity. (OMB Circular A-21)

14. Facilities & Administrative Costs (F&A) (cont’d.) • Real costs that provide reimbursement for certain expenses incurred in conducting or supporting research. • F&A rate established by negotiation with cognizant federal agency • F&A rate proposal is audited before negotiation of F&A cost rates

15. Facilities & Administrative Costs (F&A) • General administration and general expense • Sponsored project administration • Plant operation and maintenance • Library expenses • Departmental administration expenses • Depreciation or use allowance • Student administration and services

16. F&A Agreement • University of Notre Dame negotiated F&A Agreement November 2, 1999 • Department of Health & Human Services (DHHS)-cognizant agency

17. Current University F&A Agreement (cont’d.) • On-campus Organized Research rate • 07/01/00-06/30/02 49% • 07/01/02-06/30/03 48.5% • On-campus Instruction rate • 07/01/99-06/30/03 50% • Off-campus Organized Research and Instruction rate • 07/01/99-06/30/03 26%

18. Off-Campus Projects • For all activities performed in facilities not owned by the institution and to which rent is directly allocated to the project(s), the off-campus rate will apply. Grants or contracts will not be subject to more than one F&A rate. If more than 50% of a project is performed off-campus, the off-campus rate will apply to the entire project.

19. Modified Total Direct Costs (MTDC) or Base • MTDC, consisting of all salaries and wages, fringe benefits, materials, supplies, services, travel and subgrants and subcontracts up to the first $25K of each subgrant or subcontract. • OR Total direct costs minus: equipment, subcontracts over $25K and participant support costs

20. Modified Total Direct Costs (MTDC) or Base (cont’d.) • Modified total direct costs exclude: • Equipment/capital over $2,500 • Participant support costs • Tuition remission • Rental costs of off-campus facilities • Scholarships and fellowships • Subgrants or subcontracts in excess of 25K

21. Cost-Sharing • Mandatory or required • Voluntary • Committed • Uncommitted • In-Kind • Cash

22. Cost-Sharing (cont’d) • Mandatory or required • Specified amount • Voluntary committed • Proposal defines amount of funds • Voluntary uncommitted • No requirement • Faculty effort over and above budget

23. Cost-Sharing (cont’d.) • A university's support of a project through either cash or in-kind services, required by some sponsors. • The support can be for • Research • Equipment acquisition • Demonstration projects • Programs • Institutions

24. Cost-sharing (cont’d.) • Example: A university receives a grant for a project estimated to have a total cost of $100,000. The sponsor agrees to pay 75% ($75,000) and the university agrees to pay 25% ($25,000). The $25,000 is the cost-sharing component. • The sponsor reimburses your institution for a percentage of the total costs of the project.

25. Matching Funds • Funds that must be supplied by the grantee and are equal to, or a percentage of, the award amount in order to receive the award. With federal grants, the matching funds must usually come from non-federal sources.

26. Matching Funds (cont’d.) • Institution puts in a dollar and the sponsor gives another dollar • Any ratio may be used

27. In-kind F&A Contributions • In-kind F&A Contributions • Sponsor allows zero or less thanfull F&A costs • Department or college contributes directcosts other than equipment or participantcosts • Calculation: University F&A costs minussponsor F&A costs

28. Before Preparing the Budget • What is the typical size of the award this sponsor gives? • What would you really like vs. what do you really need? • What items will and won’t the sponsor support? • Does the sponsor provide flexibility to rebudget between categories once funds are awarded? • Is cost sharing required?

29. Before Preparing the Budget (cont’d.) • Objectives of project • Single year or multiple years • On campus or off campus • Personnel to reach objectives • Supplies, equipment

30. Budget ConstructionSalaries and Wages • Salaries and wages • Faculty • Academic year salary • Summer salary • Postdoctoral research assistants • Technical support • Graduate student researchers • Clerical support • Undergraduate students • Increases for merit-based (3-5%)

31. Budget Construction Fringes • Fringe benefits are allowable as a direct cost (if not included as an indirect cost). • Fringes are in proportion to the salary charged to the grant • 20% of academic year salary • Employee benefits paid by the institution

32. Budget Construction Fringes • ND Fringe Benefits-Use correct rates-Calculate: • 20% of faculty academic year salary • 7.65% of faculty summer salary • 20% of technician, post doc, administrative staff • Zero fringe benefits for graduate research assistants • Zero fringe benefits for undergraduate if taking at least three credit hours. • 7.65% of salary if undergrad is not taking credit hours

33. Budget Construction Equipment vs. Supplies • Equipment: Tangible • Supplies: Expendable • Useful life: 2yrs./Acq. Cost: $5K PHS • Useful life: >1yr./Acq. Cost: $5K NSF

34. Budget ConstructionTravel • Travel • Adhere to institutional policy and agency guidelines • Distinguish between domestic and foreign travel • Costs must be reasonable

35. Budget ConstructionParticipant Support Costs • Direct costs for items such as: • Stipends • Subsistence allowances • Travel allowances • Supplies • Registration fees • F&A not allowed

36. Budget Construction Subgrants • Subgrants • A document written under the authority of, and consistent with, the terms and conditions of an award, that transfers a portion of the research or effort of the prime award to another institution or organization.

37. Budget ConstructionConsultants • Consultants • An individual hired to give professional advice or services for a fee but not as an employee of the hiring party.

38. Budget Construction (cont’d.) • Examples of other direct costs • Communications • Animal care costs • Human subject costs • Shop charges • Maintenance/service contracts • Computer costs • Graphic arts/photographic services • Rental/lease of facilities • Construction/renovation/remodeling costs

39. Budget Justification • JUSTIFY EVERYTHING • DON’T ASSUME THAT ANYTHING WILL BE OBVIOUS TO THE REVIEWER

40. Budget Justification (cont’d.) • Justify amount proposed to spend on project • Personnel • Indicate in detail how each salaried person (including yourself) will contribute to project • Fringe benefits • Equipment • Required materials and supplies with their estimated costs • Domestic & foreign travel • Participant support

41. Budget Justification (cont’d.) • Publications • Subcontracts • Consultant expenses • Primary organizational affiliation • Number of days • Normal daily compensation rate • Travel costs

42. Budget Justification Personnel • John Doe, Principal InvestigatorThe PI will be responsible for all aspects of this project, including preparation of manuscripts, progress reports and evaluating the progress of each objective. 25% of Academic Year salary is requested which is the minimum amount of time which will be devoted to the project during the academic year. The PI will devote 100% effort to this project during the summer. • Nick Yovanoff, B.S., Graduate Student ResearcherNick Yovanoff will be involved in the collection of data relative to . . . . . . (Objective 1). This individual will devote approximately 50% effort to this project during the Academic Year and 100% time during the summer. Three months of summer support is requested.

43. Budget Justification Travel Travel Costs PI and one Graduate Student to attend national meeting, May 24-27, 2002 Denver, CO 2 Round trip South Bend-Denver @$450 $900 2 Per diem @$125 x 3 days $750 Total $1650

44. A Good Budget… • Is complete • Is adequate • Is within sponsor norms • Follows sponsor guidelines • Is consistent with the narrative • Is justified clearly • Includes changes in costs over the course of the project

45. Key Budget Questions to Answer Before Submission • Are you providing sufficient resources to carry out your project? • Is the budget in the format desired by the sponsor? • Are the budget items related to project objectives? • Have you provided sufficient detail so the reviewer can understand how budget items were calculated?

46. Reasons for Rejection • Reasons why reviewers have rejectedproposals based on inadequate budgets: • Budget is too high for expected results • PI is requesting costs which should be borne by institution • Budget is excessive for objectives and activities • Budget is excessive and not justified • Budget is not tied to specific project objectives • Budget is not sufficiently explained or justified

47. Accuracy • Make certain your budget is calculated correctly!!!!!!!!!!!!!!!!!!!!!!!

48. Sources • Foundation Center Learning Lab, “Proposal Budgeting Basics,” 1995-2001. • Miner, Lynn E. and Jerry Griffith, “Proposal Planning & Writing,” Oryx Press, 1993. • Office of Budget and Management Circular A-21 (Revised 8/8/00) • Research & Sponsored Programs Accounting, “Indirect Cost Rate,” 2001. • Spina, Mary and Phil, “Budgeting Basics.”