BUDGET PREPARATION

Developing A Budget

Direct Costs

Personnel
Fringe Benefits
Equipment
Supplies and Materials
Travel
Consultants
Subcontracts
Other

Matching and Costsharing

Budget Review Checklist

Budget Justification

  DEVELOPING A BUDGET

Preparation of the budget is for many the most difficult section of the proposal. Granting agencies see hundreds of proposals yearly and are proficient at comparing levels of funding requested to the project proposed; either overestimating the funds requested or underestimating budgetary needs may lead to proposal rejection.

The budget is either the first thing that reviewers see or the last. The budget for the project should be directly related to the scope of work that is to be carried out. Every item in the budget should be completely justified as to why it is needed and how it is related to the activities proposed. If an item cannot be easily justified and supported in the body of the grant, then that item should be removed or the justification rewritten. The amount that you ask should be reasonable for the scope of work which is outlined. It is just as bad to ask for too much money as it is to ask for too little. To ask for inadequate amounts to support the tasks that are called for can be a fatal flaw. Reasonableness and justification should be the attributes that are readily apparent in your budget presentation.

Items listed in the budget form should have a reference to specific justification items. When giving a specific amount, include the rates or how that figure was arrived at. Block amounts are sometimes subject to arbitrary cuts or elimination. Do not forget to include such items as fringe benefits and indirect costs, if the latter is allowed by the sponsor. It is always best to discuss your draft budget with the OGCD before putting it in final form. It is possible to find out how much was awarded in the past for similar projects from the funding agency. This information can be quite helpful in preparing your budget. If the average award for your type of project has been $75,000/year, you may have difficulty in getting a $200,000/year budget approved.

DIRECT COSTS.
Direct costs are costs which can be directly identified with your project. The federal government also provides definitions of what are allowable and unallowable direct costs in OMB Circular A-21,Cost Principles for Education Institutions, Direct costs include:

Personnel. List each person who will work on the project by name or job type and indicate the amount of time that person will devote to the project. A project may employ current university employees or may hire new employees with the understanding that their employment is for the duration of the grant.

The time University employees devote to the project while under contract to the University can be release time, overload, or a change in employment status. A proposal may also provide for summer employment for nine-month employee(s). When the agency assumes a faculty or staff member's time for work on a project, it is reimbursing the University for a portion of that person's academic year salary. You do not receive any increase in your salary, unless the work on the project is taken on in addition to regular duties as overload. According to federal policies and regulations, no employee can exceed 100% of his established salary on federal money. You can request that your effort on a federal project be carried out above and beyond or in addition to your regular duties - this must be specified in the budget narrative and approved by the program officer. You can also request release time or overload approval from the University for yourself to be used as costsharing on a project. All time commitments to a project by a current University employee must be cleared initially with the department chair. Note: Under OMB Circular A-21 Clerical salaries are no longer allowable on federally funded projects unless the project is a "major project."

Fringe Benefits. For each dollar paid as salary or wage to an employee, the University incurs associated costs for fringe benefits. These benefits include F.I.C.A., worker's compensation, unemployment compensation, retirement, and health insurance. Note: Do not hesitate to request assistance from the OGCD when calculating fringe benefits. The Fringe Benefit Detail for figuring fringe benefits on various classes of employees is found in the MURC Data Sheet. Please refer to the Data Sheet for the most recent Fringe Benefit Rates.

A simplified example of how to calculate fringe benefits is as follows:

MU Individual's project salary $36,000 per year (25% time commitment)

• $9,000 x fringe rate 30% = $2,700
  Total fringe benefits for the individual = $2,700

Equipment. List each piece of permanent equipment not already available that is needed to conduct the project. (At present, most federal government agencies define "permanent equipment" as any unit costing $500 to $1,000 or more and having a useful life of two years or more; state agencies define it as property having an acquisition cost of $1,000 or more and a useful life of one year or more.) Be as specific as possible in your description, including model numbers and types.

Supplies and Materials. Itemize the expendable supplies needed for your project. Basic office supplies are not allowable direct expenses under OMB Circular A-21, unless these expenses are for a "major project."

Travel. Travel costs include travel necessary to collect data, consultant travel, and travel (when allowed) to present research results at professional meetings. Be specific. List costs for transportation (based on coach airfares) and per diem separately and include the number of people. Mileage reimbursement in privately owned automobiles cannot exceed the amount of coach airfare to the same destination. If you are requesting support to attend a professional meeting, indicate the professional organization involved and the site if known.

Consultants. The use of paid consultants may be justified when the project calls for expertise of a well-defined nature for a fixed period of time. Consultants should be budgeted only for tasks where on-campus expertise does not exist or is not readily available. Normally, consultants are paid a consulting fee plus travel expenses. Many sponsors do not permit payments to consultants, and some restrict or limit such payments. If in doubt as to the allowability of consultants or rates paid to consultants, consult the sponsor's program literature. When possible, identify the proposed consultant by name, indicate the number of days of work, and provide a vita for the consultant in the proposal. Consultants are not employees, the IRS 20 Rule Test should be used to determine whether or not a consultant relationship exists. Note: Consultants should not be listed under personnel, they cannot be university employees, and fringe benefits are not calculated for consultants. If you want to use a University employee in a "consulting role" contact the Office of Grants and Contract Development.

Subcontracts. If your project involves expenses associated with a cooperative organization or a tiered agreement, those expenses should be included as a subcontract in the proposed budget. The total subcontract cost should appear as a line item in your proposal budget, and a separate budget breakdown for subcontract costs should follow the proposal budget. In addition to a detailed subcontract budget, a letter signed by the individual authorized to contractually commit the subcontracting organization should be included in the proposal. Subcontract costs should include the subcontracting organization's fringe benefit expenses and indirect cost expenses at the organization's negotiated rate. Indirect costs in a subcontract must be in compliance with the sponsoring agencies guidelines. If the subcontracting organization does not have a negotiated rate, no indirect for the organization should be included. For further assistance contact the Office of Grant and Contract Development.

Other. Other expenses are typically those which do not fit into the established budget categories, such as publication costs. At times consultants and subcontracts are recorded as other expenses.

INDIRECT COST.
In addition to costs that are directly related to your project, the University incurs certain costs that indirectly relate to your project. According to OMB Circular A-21, Cost Principles for Education Institutions, these indirect costs include building space, utilities, and related University services (i.e., the Office of Grant and Contract Development, Payroll, Purchasing, University security, and custodial support) In other words, they include all those things essential to support sponsored activity which cannot be broken down and directly charged to a specific grant or contract. Indirect cost rates are determined annually from actual cost records through a detailed cost accounting procedure and are audited and approved by the federal government.

Any under-recovery of the indirect cost due to grantor restrictions must either be treated as costsharing on behalf of the University or supplied from other funds. All proposals submitted on behalf of the University must include indirect costs either as a request from the grantor or as costsharing on behalf of the University. While the University may decide to costshare on these expenses when the sponsor administratively limits indirect cost recovery, it is not subject to arbitrary adjustment either by the University or by the sponsor. Costsharing will only be accepted for projects which directly support the University's mission and priorities and only on behalf of organizations which have an established (written) policy of awarding only a specified rate. The Executive Director of the Research Corporation is the only person with the authority to enter into costsharing on behalf of university indirect costs.

MATCHING FUNDS/COSTSHARING.
Some agencies require matching funds and/or costsharing. Matching funds are normally defined as cash (e.g. a percentage of the cost of a piece of equipment), whereas costsharing is usually in the form of contributed time and effort by the project director or other project staff.

If costsharing is required, OGCD can provide suggestions as to sources of funds. Some sources of costsharing are release time, graduate students, and computer usage. Matching funds may be available for projects which significantly further the University's primary mission. The University can also coordinate matching fund solicitations and contributions on behalf of corporations or foundations if the project is funded.

BUDGET JUSTIFICATION.
A budget justification is a narrative explanation of budget items in the proposal. The justification should follow the proposal budget.

Sample Budget Justification--PDF File