Contracts and Grants Procedure 3 – Preparing the Budget

Preparation of the budget is, for some researchers the most difficult section of the proposal. Granting agencies see hundreds of proposals yearly and are proficient at comparing level of funding requested to the research work proposed. Therefore, it is important that the budget section of the proposal reflect, as accurately as possible, the funding needed to carry out the proposed research. Again, the investigator should not seek to overestimate the funds requested or to underestimate budgetary needs. Either of these strategies may lead to proposal rejection. However, a carefully prepared budget which details as accurately as possible the funds necessary to carry out the project described in the technical section of the proposal can be of major advantage in strengthening the total research proposal and can substantially increase the likelihood of funding. Furthermore, a carefully thought out budget can often identify weak areas in the proposal narrative and result in improvement of the technical proposal. The Office of Sponsored Programs staff can provide information on the amount of money awarded by various Federal agencies under past programs, whether or not an agency has increased or decreased levels of funding for the upcoming fiscal year, and special instructions which may update the program announcements or guides which the principal investigator may have on file.

The Office of Contracts and Grants’ staff can provide expertise in reviewing your budget and budget narrative. Contingent on your specific needs, the review of the budget and budget narrative can be simple and brief or can require an extensive review. You may initially want to meet to discuss methodology regarding how to prepare a budget, specific agency requirements and whether or not matching should be included as part of your overall budget. You might need to schedule a second meeting for a review of your draft budget. For more routine proposals, you might just need the final budget and budget narrative reviewed.

Regardless of the type of budget review you need, please submit the hard copy of your final proposal preferably two business weeks in advance, but no later than three working days before the sponsor’s mailing date for review and approval. As a means to better serve you, Contracts and Grants would appreciate it if you would e-mail at least two business days in “advance” of your budget proposal meeting a copy of your abstract, budget narrative and an electronic budget spreadsheet. Contracts and Grants recommends that if you need assistance you seek guidance from The Office of Contracts and Grants in the “preliminary/draft budget” phase of your proposal. Please call us at 334-5091 and schedule an appointment for us to review your budget.

A. Fiscal and Statistical Information
The basic statistical information used in budget proposals can be found in Appendix No. 2.

B. Direct Costs
In an effort to simplify your budget preparation process, please refer to the following line item budget information.

1. Salaries and Wages

Many sponsors require an estimate of the percentage of effort to be allocated to a project by each faculty or staff member. Regarding faculty time, the percentage of effort indicated and salary support requested must be reasonable and consistent with effort devoted to faculty duties and other sponsored projects. In some instances, a faculty member may propose to devote a percentage of effort to a federal project without charge thereto. Inherent in this commitment is a prior determination at the department level that an acceptable funding source, other than federal funds, will sustain the cost of the contributed effort. Contributed effort of this nature should be reasonable and capable of fulfillment without jeopardizing other commitments. Some federal agencies, such as the Agency for International Development and the National Institutes of Health, have placed ceilings on the annual salary rate assessable against agency awards. Waivers are difficult to obtain and a department must be prepared to absorb any unreimbursed amounts. Contact the Contracts and Grants Office for information about current ceilings.

To determine total salaries and wages, list the amount of time to be spent by each person who will be working on the project. Time should normally be shown in terms of a percent of full-time effort or as person-months . Show breakdown between summer and regular academic year.

The principal investigator may not schedule activities in excess of 100% of effort in any given month. As what constitutes a full course load varies contingent upon the school or center, the buy out rate per course varies.

Salary and wages rates cited in a proposal must be consistent with actual rates authorized and paid under University policy but should take into consideration known impending cost of living increases, promotions, merit increases, etc., and should include an allowance for such items in the budget estimates for the out-years of a project. Guidelines are set forth in Appendix No. 2.

University salary and wage policies, not the proposal budget, determine the rate ultimately paid an individual recruited for or assigned to positions budgeted in the proposal.

Compensation levels and new job classifications must conform to the policies established by the State Personnel Commission and should be cleared with the Office of Human Resource Services prior to submitting a proposal that includes new positions. Normally, include budget increments for professional and non-professional personnel on proposals extending more than one year. If specific increment figures are not available, estimate at 4% per year.

The maximum use of graduate students is encouraged. Graduate student payments should be consistent with those customarily paid within the department or college. Part-time (hourly-monthly) employees should be identified either as students or non-students.

Individuals employed in temporary positions (with special skills, for interview purposes, peak workloads, etc.) will be placed on the University payroll and therefore subject to federal withholding tax and FICA contributions.

Non UNCG faculty or staff members scheduled to participate in a research project should not be included under the UNCG salary and wage category. Necessary explanatory notes should be included to delineate the key roles of such individuals without conveying the impression that they are UNCG personnel. Personnel costs for such individuals should be included under consultant or subcontract cost categories as is appropriate and consistent with the contractual arrangements to be utilized.

2. Fringe Benefits

Salaries and wages are subject to employer-paid fringe benefits such as social security, retirement, medical insurance, and unemployment compensation.

The fringe benefit rate is determined on an annual basis and may not remain the same in future years. Therefore, when preparing a budget, refer to Appendix No. 2 or call the Office of Contracts and Grants to verify the current rate.

Fringe benefits are not normally part of salaries and wages and normally should be budgeted separately.

3. 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. By definition, consultants are not employees of University of North Carolina at Greensboro. 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 or contact the Office of Contracts and Grants. When possible, identify the proposed consultant vitae for the consultant in the proposal. Note that fringe benefits are not calculated for consultants.

If consultants are used from within the University, this should be clearly delineated in the proposal with the names of consultants indicated where known. Intra-University consultation should be nominal and not of such a recurring or repetitive nature as to make it more properly considered a part of the normal salary and wage distribution process.

Consultant costs require thorough justification to the sponsor agency and are subject to individual agency limitations and approval requirements.

Associated with professional consultant fees are attendant travel costs which should be handled as follows:

If travel allowances for consultants are to be included in the payments for professional services, the associated travel requirements should be grouped as part of the Consultant Fee line and appropriate explanation and justification included.

Unlike state funds, where no breakout is necessary between fees and travel allowances, when paying a professional fee, all professional and consultant arrangements on contracts and grants must separately detail on the Contracted Personnel Services form the amounts paid for fees and for travel and subsistence. This is necessary to demonstrate that sponsor agency limitations on daily consulting rates have not been exceeded.

While consultant travel and subsistence allowance are not subject to usual travel settlement procedures, allowances should be consistent with University travel policies. Complete justification for any exceptions considered necessary should be included on the authorization form or attachment thereto.

Air fare authorized is based on tourist or coach class. Per diem subsistence rates cannot exceed in-state or out-of-state rates without justification.

If payment to a consultant includes travel and subsistence, the department must assure that lodging and meals are not also charged against departmental or other accounts. Reservations for housing arrangements made on behalf of a consultant should be made in the consultant’s name with specific instructions that the consultant is responsible for all related charges. Additional charges for lodging, meals or other travel elements are not allowable where a consulting payment includes a predetermined amount for travel and subsistence.

4. Travel

Most sponsors will pay domestic travel costs if requested. Reimbursement for travel expenses is subject to State and sponsor regulations. Each proposed trip should be itemized and should include cost estimates for transportation costs, number of days of travel, and per diem. However foreign travel normally requires agency approval and thereby needs to be specifically declared.

5. Permanent Equipment

Items proposed as equipment should clearly meet the definition of “equipment” as defined under sponsor agency guidelines. Items that do not meet the equipment criteria should be included in the supply category. Permanent equipment is generally defined by the State and most federal agencies as personal property having an acquisition cost of $5000 or more (including installation charges and freight) and a useful life of one year or more is of non-expendable material and is not consumed. For additional guidance refer to Policy No. 11. Budget all the equipment that will be needed to perform the proposed tasks including the estimated costs of freight and installation. Many sponsors will not support the purchase of general purpose office equipment or data processing equipment.

Project-related and necessary technical or scientific equipment is a permissible cost element in research and training proposals. However, there is increasing sponsor emphasis on justification. Department, school, or center equipment resources should first be considered before including equipment requests in a proposal.

6. Expendable Supplies

Normally, a research project will consume expendable supplies such as laboratory items, teaching aids, and office supplies. A reasonable amount should be budgeted for these items.

Faculty who anticipate the use of a particularly large number of research animals of an exotic type should consult with the Animal Care Facility to see whether the funds estimated will be adequate.

Funds requested for supplies should correlate with the type and scope of work and include a reasonable provision of escalation if budgetary planning for future project years is involved.

7. Publication Costs

Budget the anticipated cost of publishing the results of the research, keeping in mind that page charges may vary from journal to journal. Consider both page charges and reprint costs.

8. Computer Usage

Computer costs should be included as a budget item. If non-sponsor funded computer time is needed, arrangements must be made in advance. Should the proposed work require a substantial amount of computer services, scheduling arrangements should be made with the Office of Information Technology to avoid time conflicts and to assure the availability of services when needed. Current rates are available from the Office of Information Technology.

9. Subcontracts and Subgrants

Proposals which contemplate subcontracts to named subcontractors must be accompanied by a statement from the subcontractor of his/her intent to participate in the program if it is funded and signed by an authorized institutional officer. This offer should include a statement of work, an estimate of the time required to complete the work, and a proposed budget (including applicable facilities and administrative costs) as well as a copy of their most recently negotiated Facilities and Administrative rate. Subcontracts and subgrants are included in the “other direct costs” category of proposed budgets. The subcontractor amount includes both their direct and indirect costs.

10. Other Direct Costs

Consider, as appropriate, costs for copying, long-distance telephone calls, postage, reference books and materials, equipment maintenance, library search services, stipends or subject payments, and In-State or Out-of-State Tuition, if being paid to the student via Financial Aid. Food expenses are generally not an allowable use of federal funds. There are some noted exceptions to this rule. NIH says, “Meals are allowable for subjects and patients understudy only, or where specifically approved as part of the project activity, provided that such charges are not duplication in participants’ per diem or subsistence allowances, if any.”

11. Participant Support Costs

Participant support costs 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 meetings, conferences, symposia or training projects. Payments to UNCG students must be made via Financial Aid. Other participant payments must go through Accounts Payable (excluding University personnel).

For agencies such as the National Science Foundation, funds provided for participant support may not be used by grantees for other categories of expense without the specific prior written approval of the agency. Therefore, awardee organizations must account for participant support costs separately.

C. Matching Funds/Cost-Sharing

Some agencies require matching funds and/or cost-sharing. Matching funds are normally defined as cash (e.g. a percentage of the cost of a piece of equipment), whereas cost-sharing is usually in the form of contributed time and effort by the principal investigator and his/her associates. All requests for matching funds must be approved and identified by source in advance by the principal investigator’s department chair and dean. Cost-sharing commitments in excess of 25% of the investigator’s time and effort should be discussed with the Office of Contracts and Grants.

D. Facilities and Administrative (Indirect) Costs

Unless prohibited by the funding agency, all requests for extramural funding must include facilities and administrative (F & A) costs. There are F & A rates for on and off campus activities. Based on the terms of UNCG’s federally negotiated Facilities and Administrative agreement, the off-campus F & A rate applies to all activities performed in facilities not owned by the institution and to which rent is directly allocated to the project. UNCG is on a modified total direct cost basis. Modified total direct costs normally consist of all project costs less the following: student aid, off-campus rentals, maintenance costs, capital outlays and the portion of subcontract costs in excess of $25,000. Please note the federal negotiated facilities and administrative costs rate are subject to change. Researchers should be prepared to make adjustments in budgets for such changes and should contact the Office of Contracts and Grants for specific information.

Facilities and Administrative costs reimburse the University for laboratory and office space; utilities; administrative services (e.g., purchasing, accounting, research, personnel, security); custodial services; and building, ground, street and parking lot maintenance. 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 percentages are determined annually from actual cost records through a detailed cost accounting procedure and are audited and approved by the Federal Government. Although the rates may be revised where the sponsor administratively limits indirect cost recovery, they are not subject to arbitrary adjustment either by the University or the sponsor.

There are organizations which, by regulation, limit or do not allow facilities and administrative cost recovery. If the proposal is being submitted to such an agency, a copy of their policy must be submitted to the Office of Contracts and Grants with the proposal, if a copy is not already on file. In those instances where full recovery for Facilities and Administrative costs is not being proposed, authorization for a waiver must be obtained in advance. A request for waiver of Facilities and Administrative costs must be submitted to the Director of Contracts and Grants for approval by the Vice Chancellor for Business Affairs based upon the recommendation of the Provost.

E. Types of Awards

There are three standard awarding instruments: grants, contracts and special research support agreements. Proposal budgets are normally prepared anticipating these award types. Most proposals are prepared, and awards accepted, on a cost-reimbursable basis.

F. Modular Budgets

Please note that filing a MODULAR budget with a given agency does not eliminate UNCG’s requirement to prepare a detailed budget and budget narrative. For example, proposals including modular budgets to the National Institute of Health can be requested in modules of $25,000 for all years of support. A typical modular application will request the same number of modules for each year. However, if you are requesting $125,000 in year one and $62,500 for years two and three an explanation is required. Thereby, making a detailed budget an essential part of the proposal process. For example, purchase of major equipment in the first year may justify a higher overall budget in that year, but not necessarily in succeeding years.

G. Conclusion

Most university sponsored research and training effort is accomplished on a cost-reimbursement basis. Whether a contract instrument or grant instrument is used, UNCG is entitled to reimbursement only for costs allowable under provisions of Office of Management and Budget Circular A-21, Cost Principles for Educational Institutions, provided such costs are reasonable, clearly allocable and relevant, and have been accorded consistent accounting treatment. Research and training awards made to the University are subject to audit to confirm that expenditures were consistent with the purpose and time period for the award as well as other specified limitations. Failure to demonstrate compliance and provide sufficient documentation can result in audit disallowances. Award funds must be utilized solely for the purpose of the award and residual funds handled in accordance with sponsor requirements.

Once a proposal is submitted by the University to a sponsor, the only likely adjustment in funding requirements in subsequent negotiations is downward. Sponsoring agencies of all types, confronted with budgetary problems, consistently try to pare down the resources requested for research, training, or public service projects. If inflation, salary and wage increases, fringe benefits, travel costs, etc. are not adequately considered at the onset, there is little likelihood of additional funds being made available by the sponsor. This requires a reduction of effort in other areas and can be detrimental to the project.

For the aforementioned reasons it is important to seek guidance from The Office of Contract and Grants early in the proposal process.

The Office of Contracts and Grants can provide expert help in the preparation of a formal budget. Of course, only the principal investigator knows the specifics of what and who is needed and how he/she plans to proceed. Once the principal investigator has some broad, general knowledge or plan, Contracts and Grants will assist him/her in finalizing a budget and processing a proposal.