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Budget Development Guidelines (Archived)

 

Contents        

 

Overview

A proposal budget reflects the Principal Investigator's best estimate of the costs for conducting the project within a defined time period.  The time period is usually specified by the sponsor in the Request for Application (RFA) and most projects are funded for at least a one year period.  OSP generally recommends an inflationary increase between 2-4% for all budget categories when appropriate.

In all cases the proposal budget should follow the sponsor’s published guidelines (included as part of the RFP or located on the sponsor’s website). When the sponsor does not provide a budget or justification template or related instructions, we recommend using the following budget guidelines with the understanding that there can be exceptions for each category.  Contact your OSP representative for further guidance

 

Budget Justification

A budget justification is usually requested by the sponsor so they can understand the types of costs planned, the details related to the quantity or quality of those costs and the PI’s rationale for why the costs are needed for the project.  While the budget alone may seem self-explanatory and obvious to us, the sponsor’s proposal reviewers may or may not have an accounting background.  Therefore, having a well written budget justification will enhance the likelihood of a positive review outcome which may tilt the funding decision to our favor.

 

Budget Categories
Standard budget categories are: Salaries, Fringe Benefits, Equipment, Travel, Participant Support Costs, Publication Costs, Supplies and Materials, Consultants, Computer Services, Subawards, Other (e.g. tuition remission, patient care, human subject pay, space rental costs, scholarships, fellowships) and Facilities and Administrative (F&A) costs (also called Indirect Costs or Overhead).

Salaries [FAQ]:
The salaries category is for MSU employees providing effort to the project.  At a minimum, the budget should show the employee's name, role on the project (e.g. PI, Co-PI, MSU-HR title if appropriate), level of effort stated in person-months and the amount requested from the sponsor.  The justification should include a brief description that identifies them to specific project activities.

 

Salary Rates – MSU faculty and staff salary rates can be found using the OSP Salary Budget Builder.  The Salary Budget Builder pulls an employee’s Institutional Base Salary (IBS), which includes the following activities: instruction, research, public service, outreach, and administration.  Graduate Assistant salary ranges can be found at: HR Grad Assistant Salary Ranges.  The rates should be inflated in the 1- 4% range for each succeeding year. Please note that some federal agencies, require special justification for annual salary increases in excess of 3% for multi-year proposals. For MSU faculty and staff, documentation of time expended on federally sponsored projects is based on percentages of effort worked rather than hourly rates.  If a sponsor requires an hourly budget breakdown and the tracking of cost share/effort reporting on an hourly basis, we should include the following statement at the bottom of the budget:

 

“The hourly rates reflected above are being provided for informational and comparison purposes only.  MSU does not maintain documentation of hours worked for its faculty and staff, with the exception of undergraduate students, but rather maintains documentation to support time expended on federally sponsored projects based on percentages of effort worked.  This documentation is maintained in accordance with OMB 2 CFR Part 200- Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.”

 

To calculate an hourly rate use the individuals base salary divided by:

  • 1,832 hours for faculty with annual appointments (12 month or AN - 2,080 less vacation hrs 176 less holidays hrs 72)
  • 1,504 hours for faculty with academic appointments (9 month or AY - 2,080 less holidays hrs 56 less summer hrs 520)
  • 2,080 for full time staff appointments

 

NIH Salary Cap – The National Institutes of Health (NIH) imposes a cap on the level of salary an individual can be paid on an NIH funded award.  The current salary cap is set at the Executive Level II salary, which is $183,300 ($137,475 for AY faculty).  The salary cap will be increasing to $185,100 ($138,825 for AY faculty) effective January 10, 2016.  When developing your budgets, if you’re proposal calls for a detailed budget you should include the full salary rate and include a note in the budget justification notifying NIH that the individual is over the established salary cap.  NIH will cut the award by the amount over the current salary cap at the time the award is made.  If your proposal calls for a modular budget, you should develop your modular budget using the capped rate when determining which module to request.

 

Administrative and Clerical Staff – If administrative or clerical services are integral to the proposed project or activity, and the individuals involved can be specifically identified with the project at the award stage, then the cost should be identified in the proposal budget with a detailed description of the duties to be performed in the budget justification.


Fringe Benefits:
Fringe amounts are calculated on the budgeted salary using the Specific Identification (SI) method (see link for more detail). 
To assist you with calculating the appropriate SI rates we have provided the following budget tools:


Equipment:
Equipment should be listed individually with a description and estimated cost.  The budget justification should address the project need and the lack of available comparable research equipment or other related devise. Equipment is defined as having useful life of more than one year and a stand-alone per-unit acquisition cost which equals or exceeds $5,000 (see the Materials and Supplies category when less than $5,000 or having a useful life of less than a year).  The acquisition cost can include modifications, attachments, and accessories necessary to make the property usable for the purpose for which it was purchased (excluding such items as maintenance plans and warranties, operating supplies, handling fees, training costs, software licenses and project personnel salaries related to fabricated equipment).  Where appropriate, an analysis shall be made of lease and purchase alternatives to determine which would be the most economical and practical procurement method.  Leasing of computer equipment is budgeted under the Computer Services category.  Equipment costs are usually excluded from the Facilities and Administrative (F&A) cost calculation (exceptions apply).  See the MSU Manual of Business Procedures (MBP) for more information. 

Travel:
Travel costs should be specified, itemized and justified by destination in relation to the proposed activities. Allowable associated project travel activities include field work, meetings and conferences attendance, subsistence and other travel.  Attendance at meetings or conferences should be budgeted only for activities that are necessary to accomplish proposal objectives, or disseminate its results. Make sure to read the solicitation and note any travel requirements that must be included in the proposal budget.  See the travel section of the MSU MBP, the MSU Travel Office and the OSP International webpage for more information.

Participant Support Costs (PSC):
PSC are direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with conferences or training projects and are usually excluded from the Facilities and Administrative (F&A) calculation (exceptions apply).

Who are participants? Participants may be students, national scholars and scientists, private sector company representatives, state or local government agency personnel, teachers and others who attend and participate in a conference, symposia, workshop, or short-term training activity supported by a particular award. Participants perform no work or services for the project or program other than for their own benefit; they are not involved in providing any deliverables to the University or a third party and may not be a MSU employee or MSU student that is receiving compensation directly or indirectly from the project.  Research subject incentives can be easily confused with PSC.  A research subject incentive description is listed below in the "Other" category.  See the Federal Uniform Guidance definition for more information.

What may be included as participant support costs? Some examples include:

  • Event registration fees.
  • Event support costs for lodging and meal expenses paid directly to the event facility, only if the payment is made on behalf of, or reimbursed directly to the participant.
  • Tuition if required to participate in project.
  • Laboratory or training materials if required.
  • Stipend – predetermined amount to be paid directly to participant.
  • Subsistence allowance – predetermined amount to assist with costs (such as lodging, meals, and laundry) necessary to participate in the project. Note that local area participants are exempt from having these costs covered.
  • Travel costs when the sole purpose of the trip is to participate in the project activity.
  • Meals and incidentals when on travel status.

What costs are not considered participant support costs? Some examples are:

  • Room rental and related expenses (e.g. presentation technology support).
  • Payments made to research subjects as an incentive for recruitment or participation in a research project. (This is a common budgeting mistake.)
  • Guest speaker consultant costs (includes consultant fees and related expenses such as travel, etc.).
  • Expenses for the PI, project staff or collaborators to attend meetings, conferences or seminars.
  • Payments to Graduate Research Assistants.
  • Payments to trainees who are receiving compensation, either directly or indirectly, from other Federal government sources while participating in the project.


Publication Costs/Documentation/Dissemination:
Publication costs are those costs that make available the findings and products of the project and include activities such as documenting, preparing and publishing (e.g. reports, reprints, page charges or other journal costs (except costs for prior or early publication); necessary illustrations; cleanup, documentation, storage and indexing of data and databases; development, documentation and debugging of software; and storage, preservation, documentation, indexing, etc., of physical specimens, collections or fabricated items).

Supplies and Materials:
Project-specific supplies are tangible items such as chemicals, lab notebooks, beakers, etc.,  In the specific case of computing devices, charging as a direct cost is allowable for devices that are essential and allocable, but not solely dedicated, to the performance of the project (See Equipment category when a stand-alone per-unit acquisition cost equals or exceeds $5,000 and has useful life of more than one year).  Cost breakdown should (sometimes required per the sponsor) be listed for items that represent a substantial amount of the budget category.  See the CGA Federal Cost Policy for more information.

Consultants:
Each consultant should (sometimes required per the sponsor) be justified in relationship to the project activities and information furnished on each individual’s expertise, primary organizational affiliation, normal daily rate of pay, and number of days of expected service.  The consultant can also budget their travel and subsistence costs within the consultant category.  If requested, the consultant must be able to justify that the proposed daily rate of pay is reasonable.   Consultant services are allowable when reasonable in relation to the independently rendered services by persons who are members of a particular profession or possess a special skill. 

Computer Services:
Computer services category may include items such as computer-based retrieval of scientific, technical and educational information following institutional rates, and leasing of computer equipment.  The budget justification should state that the budgeted amounts are based on the established computer service rates or documented computer leasing analysis.  General purpose (such as word processing, spreadsheets, communication) computer equipment should not be requested.  See the MSU Research Support Centers and MSU-IT webpages for more information.

Subawards:
If known at the time of proposal submission, the intent to enter into such arrangements should be disclosed in the proposal. A separate subaward budget, budget justification and signed MSU Subrecipient Commitment form should be provided for each subrecipient along with a description of the work to be performed.  The portion of each subaward in excess of $25,000 is usually excluded from the Facilities and Administrative (F&A) cost calculation (exceptions apply).  See OSP’s Subcontract Q&A for more information.

 

Other:

Tuition Remission - Graduate tuition remission is a contractual cost for a graduate assistant (GA) appointed on a project and is usually excluded from the Facilities and Administrative (F&A) cost calculation.  See the published GA Fringe and Tuition chart located at the bottom of OSP’s Fringe Benefit page. 

Patient Care - NIH defines patient care costs as the costs of routine and ancillary services provided by hospitals to individuals participating in research programs.  Few budgets contain patient care expenses, however if inpatient and/or outpatient costs are requested, the following information should be provided:

  • The names of any hospitals and/or clinics and the amounts requested for each.
  • If both inpatient and outpatient costs are requested, provide information for each separately.
  • Provide cost breakdown, number of days, number of patients, costs of tests/treatments.
  • Justify the costs associated with standard care or research care.

Additional information can be found on the following NIH website link.

 

Research Subject Incentives - Payments to volunteers participating in a grant-supported project or program (e.g. $50 compensation to run on a treadmill or $10 for completing a survey).  These costs are not considered Participant Support Costs, because they are not included as part of a workshop, conference or training.  When budgeting research subject incentives please keep in mind that compensation to subjects should never be so high as to constitute an undue influence to participate in research.  For additional information on the post award implications of research subject incentives please visit the MSU HRPP/IRB website, paying particular attention to the HRPP Manual, Section 6-5.


Meals and Coffee Breaks - MSU’s cost principles state that costs of entertainment, including amusement, diversion, and social activities and any costs directly associated with these costs (such as tickets to shows, or sports events, meals, lodging rentals, transportation and gratuities) are generally unallowable*.  Meals for individuals not in travel-status could be considered entertainment or unallowable by auditors.  Due to the restrictions imposed by a sponsor, each case must be examined on its own merit.  In almost all cases, agency approval is predicated on explicitly budgeted meals and meeting costs or written agency approval within the specific terms and conditions of the award.


Facilities and Administrative Costs (F&A):
Except where specifically identified in a program solicitation or other published sponsor guidelines, the applicable MSU federally negotiated Facilities and Administrative rate (F&A) should be used in computing F&A for a proposal.  The F&A rate is applied using a Modified Total Direct Cost (MTDC) basis.  MTDC basis means that equipment, graduate tuition & fees, participant support costs, capital expenditures, charges for patient care, space rental costs, scholarships, and fellowships as well as the portion of each subaward and subcontract in excess of $25,000 shall be excluded from the total direct costs when determining the applicable basis amount.

  • F&A related to cost share: If the University offers to cost share a portion of the direct costs of a project, the F&A costs associated with those direct costs may also be used for cost sharing if not restricted by the RFA.  Additionally, if the sponsor limits F&A costs, the difference between the full recovery of F&A cost and what is allowed by the sponsor may be shown as a University cost-sharing contribution if not restricted by the RFA.

See MSU’s F&A webpage for more guidance and applicable rates.

 

Budget FAQ’s by Budget Category

Salary Q&A:

Q. What is included in Institutional Base Salary?

A. Regular Pay, Summer Pay and Administrative Increment.  Excluded items include: Outside work for pay; Health Service Related Component (HSRC); Overload payments; Miscellaneous pay; One time merit pay; Special project pay; Fellowships; Longevity; Overtime; Student hourly pay; On call/temp pay; Workers compensation


Fringe Benefits Q&A:
Q. Retired PI: can a retired PI submit a proposal and what would be the applicable fringe?
A.  Yes, a Chair can approve a retired (also called emeritus) PI to submit a proposal.  The PI should obtain an appointment commitment letter from their Chair addressing salary and any needed resources (e.g. office space, etc.) if the project is funded and process an eTransmittal before the proposal is submitted.  A retired PI's fringe benefit cost is usually 7.65% of salary to cover FICA (Federal Insurance Contributions Act) tax; the PI and Department may want to confirm this with MSU HR when budgeting fringe.


Equipment Q&A:


Supplies and Materials Q&A:


Travel Q&A:


Participant Support Costs Q&A:

Q. Why is the participant support cost classification important?
A. There are two main reasons for classifying participant support costs correctly. First, if an expense is incorrectly identified as a participant support cost, the Federal funding agency may not consider it an allowable cost as defined by the Federal Uniform Guidance (2 CFR 200.75). Second, participant support costs are handled differently when assessing Facilities and Administrative Costs (F&A). The Uniform Guidance states that participant support costs are exempt from F&A in federally sponsored projects. Therefore, you need to exclude PSC from the MTDC base so they will not accrue indirect costs. This is why participant support costs are included in their own category in Federal budgets.  For non-Federal awards, sponsor-specific guidelines should be utilized to determine if F&A is allowable on participant support costs. If there are no sponsor-specific guidelines, the Federal Uniform Guidance, which excludes F&A from PSC expenses, should be followed.
Q. What are the post award impacts of budgeting participant support costs?

A. Why is the participant support cost classification important?
There are two main reasons for classifying participant support costs correctly. First, if an expense is incorrectly identified as a participant support cost, the Federal funding agency may not consider it an allowable cost as defined by the Federal Uniform Guidance (2 CFR 200.75). Second, participant support costs are handled differently when assessing Facilities and Administrative Costs (F&A). The Uniform Guidance states that participant support costs are exempt from F&A in federally sponsored projects. Therefore, you need to exclude PSC from the MTDC base so they will not accrue indirect costs. This is why participant support costs are included in their own category in Federal budgets.  For non-Federal awards, sponsor-specific guidelines should be utilized to determine if F&A is allowable on participant support costs. If there are no sponsor-specific guidelines, the Federal Uniform Guidance, which excludes F&A from PSC expenses, should be followed.
 

Subawards Q&A:


Consultants Q&A:


Computer Services Q&A:


Subawards Q&A:

 

Facilities and Administrative Costs Q&A:

Q. What if the RFA restricts the indirect costs to a percentage of the total budget; how do  you calculate the effective rate?

A. If the RFA states, for example, that the indirect cost is 15% of the total award, the effective rate is 15/85 or 17.65% of the total direct costs.  For this example, an award of $100,000 would have a direct cost of $85,000 and $15,000 of indirect cost.

 

Q. If an RFA indicates that the project could be funded by a different Federal agency (e.g. "an interagency partnership between NSF and USDA/NIFA"), what applicable F&A rate should be used?

A. The full F&A rate should be used unless the RFA states otherwise.  Usually, PIs will be asked to withdraw their original proposal and resubmit it to partner agency in accordance with instructions given by the cognizant partner agency Program Officer. Subsequent grant administration procedures will be in accordance with the individual policies of the awarding agency.

 


Other Q&A:

Q. What if the solicitation does not require a budget?

A. When the sponsor does not request a specific budget target, detailed budget or justification in the RFA, we highly recommend preparing an internal MSU budget so that the statement of work can be tied to the total estimated requested amount.  However, OSP understands that this may not practicable or practical.  In these situations, the normal processes listed in the OSP Proposal Preparation Guide should be followed and the eTransmittal should include a note explaining rational for not preparing an internal MSU budget.  Include in the note the possible award range if specified by the RFA and use estimates for the first year and total project requested amounts.  Contact your OSP representative for further guidance.

 

 

Category: Operations    Subcategories: Budget, CGA, OSP, Policy

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