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Budget Development

The proposal's budget section has two components: budget and budget justification. The budget presents each line item, the justification explains why each item is necessary for the project. This section only provides general guidelines for costs which can be budgeted and charged to a sponsored project.

A budget is a careful calculation and documentation of total funds needed to conduct the project:

  • It should flow logically from the proposal's research and methodology plans with a breakdown of costs per year.
  • It must accurately fit the work to be conducted; an unrealistically lean or unduly inflated budget can count heavily against a favorable review.
  • It is both an estimate and a firm offer on the part of the University. After an award has been made, renegotiation is difficult.
  • Some sponsors have established dollar limits for first-year direct costs, with maximum increases for following years. It must comply with the limits because applications that exceed them may be rejected.
  • It must comply with the sponsor's guidelines. Certain items may be disallowed. For example, some sponsors will not allow office equipment purchases and others may limit such costs as travel or publication support.
  • All anticipated costs should be covered. Review the sample budget and proposal budget items provided later in this chapter.
  • Current rates must be used. Check link to our current rate for current rates.

Budget Justification
Most federal agencies require applicants to justify the need for each budget line item. Read the application instructions carefully to identify which items must be justified and what information to include.

Generally, the following items need justification:

  • Personnel (who, effort)
  • Fringe Benefits (list rates used)
  • Travel (destinations, durations)
  • Equipment
  • Subcontracts
  • F&A (indirect) Cost Rates and Base

Budgets should be categorized according to the sponsor's instructions if different.

Budget Detail - Salaries and Wages

Salaries are budgeted in proportion to the time each person expects to spend on the project.

Include in the salary information:

  • The individual's name and University payroll title (where possible).
  • Percentage of time that will be spent on the project.
  • Present (or anticipated) salary.
  • The amount to be charged to the grant.

Salary requested cannot exceed percent effort spent on the project.

All employees, even those fully supported by sponsored funds, must be treated the same.

For employees on a nine-month contract, summer salaries can be requested at an appropriate percentage for the time. Some sponsors, such as the NSF, may limit the summer to two rather than three months.

Sponsored funds may not be used to add to the total salary or rate of salary of any University personnel.

The creation of all new positions requires compliance with normal University appointment processes and with the equal opportunity and affirmative action policies.

For NIH Applications: Salary Caps
The NIH has a salary cap and will not reimburse the University for an individual's salary at a rate exceeding the cap. This applies to subcontractors as well.
Costs above the cap are considered cost sharing.
The cap level depends on which federal fiscal year the funds are awarded. See the NIH website.

For NSF Applications: Person Months
For senior personnel, postdoctoral associates, and other professional personnel, the NSF requires time spent on a project to be described in terms of "person months" rather than "effort." To get "person month," multiply effort by the number of months involved.

University Personnel as Consultants:
Because of federal tax laws, University personnel acting as consultants must be paid through payroll rather than as outside contractors. For this reason, list these individuals in the "Salary" and "Fringe Benefits" section, rather than under consultant costs.

The consulting must be allowed by, and is subject to, any conditions of the sponsor.

The consultant may be eligible for Overload. Overload is explained in OMB Circular A-21 that states that intra-University consulting is assumed to be part of the person's University obligations requiring no compensation in addition to base salary. It is allowed in unusual cases where the consulting is done across departmental lines, involves a separate or remote operation, and is in addition to the person's regular work load. The fee cannot exceed the consultant's current daily rate of pay.

Fringe Benefits
Rates to be used in proposals are available from the link to our rate agreement. The fringe rate will differ according to type of employee.

Equipment
The University defines capital equipment as moveable items with useful lives of more than one year and costs of $5,000 or more per unit (items not meeting this definition should be listed as "supplies" in the budget).

Budget for needed items only when they are unavailable at the University. Sponsors assume that where equipment is available within an institution it will be available at no cost to them.

Where equipment is not used 100% on the project, prorate it for the time it will be used.

There are two types of equipment:

  • "General purpose equipment" refers to items not limited to scientific or other technical use. Examples of this type include office equipment, office furnishings, computers, etc. General purpose equipment typically is used for multiple activities so it is inappropriate to charge its entire cost to a single project. If it is determined this type of equipment is required, the need should be fully explained in the budget justification.
     
  • "Specialized equipment" can be used only for specialized scientific or technical purposes and is allowable if it is needed to conduct the project. The need should be fully explained in the budget justification.

The budget should list the specific equipment items and their estimated purchase or lease costs.

Contact the vendor or Purchasing Services to determine if an item should be leased rather than purchased.

Shipping and installation should be budgeted. If installation involves substantial structural changes, these costs should be budgeted as renovations and alterations.

Fabricated equipment: In the budget section, indicate the item to be fabricated and its total cost. In the budget justification, list the specific cost of each material or supply needed to fabricate the equipment.

Materials and Supplies
Materials and supplies: consumable or disposable items that cost less than $5,000 per unit.

If substantial funds are requested, justify them and provide a breakdown of these items by general classification.

Travel
Travel is usually allowed if it directly benefits the project. For example, travel to research sites, sponsor meetings, or conferences.

Sponsors generally allow the grantees' travel policies to govern what can be reimbursed. Check the sponsor's guidelines or consult the appropriate ORSP program administrator.

  • List the trip purpose, destination, and number of travelers as well as airfare, transportation, meals, lodging, and registration fees.
     
  • Foreign travel:
    • Include countries to be visited along with considerable justification of the trip.
    • Costs of meals, lodging, and miscellaneous expenses while on foreign travel should be budgeted according to sponsor guidelines.

Consultant Costs
All external consultants should be listed, even if they are not charging fees or costs.

Consultants or lecturers, along with their fees and travel costs, may be included in the budget.

The consultant's services to the proposed project must be professional, short-term or intermittent, and must be solely advisory to the project.

Subcontracts, Contractual and Consortium Costs
Subcontract and consortium costs: part of the project that may be conducted by an organization outside of the University.

List the subcontractor or contractor name(s) and total cost. If the subcontractor is a college or university, it might charge F&A (indirect) costs as well as direct expenses. Include these F&A (indirect) costs as a direct cost, if applicable.

The University will charge F&A (indirect) costs on the first $25,000 of each subcontract per project period.

Justify use of the subcontractor or contractor in the "research plan" or "project description."

Proposals arriving at ORSP that have subcontracts in the budget must have:

  • The proposal must have a detailed budget that reflects institutional endorsement from the subcontractor.
  • The proposal must have a statement of intent signed by subcontract's, principal investigator / institution.
  • The need for the subcontract must be justified in the budget justification.
  • The totals from the subcontract budget must match the totals in the University of Denver’s composite budget.
  • The subcontract budget must conform to the proposed sponsor's rules and regulations (e.g., for most sponsors, alcohol cannot be in the budget).
  • The proposal budget should include F&A (indirect) costs from the subcontract. Note: if the sponsor requires F&A (indirect) costs and it is not included in the proposal budget, F&A (indirect) costs will come out of the project's direct costs.

Tuition
DU contributes 70% of the tuition costs for GRA's; 30% of the cost will be charged to grants and contracts. For current tuition costs click here.

Renovations and Alterations
Normally renovations and alterations are authorized only for a project's specialized facility requirements and not for general purpose space such as administrative offices. Facilities Management must be consulted for cost estimates prior to submission of the budget.

Other Direct Costs

Animal Care:
There are standard rates for charging animal care costs. This information is available as a link on the ORSP Rates page.

Equipment Maintenance Costs and Service Contracts:
Costs for repair and maintenance of project equipment that is necessary to keep it operating efficiently, yet does not appreciably add to its "permanent value or prolong its intended life," are allowable and should be budgeted (OMB Circular A-21).

Costs associated with the general maintenance and upkeep of a building used for research are generally considered as F&A (indirect) costs and therefore cannot be charged as direct costs. Costs of this nature include repair of light fixtures, custodial costs, unclogging drains, and other maintenance costs that cannot be directly related to a particular grant or contract.

Participant Travel and Any Other Direct Payments to Participants:
Direct payments to participants, including patients, donors, subjects, and volunteers should be listed in this category.

Photocopying:
Costs are allowable only if they relate directly to the project.

Estimated Percentage Increase
For multi-year proposals, sponsors generally allow applicants to determine the budget for the entire proposed period of support by multiplying the previous year's costs by a standard percentage.

Any significant increases or decreases, and budgets with increases above the standard rate must be justified.

Facilities and Administrative (Indirect) Costs
Costs involved in conducting projects can be categorized in two ways: as direct costs, or as indirect costs, which are referred to as facilities and administrative (F&A) costs.

Direct costs are defined as "those costs that can be identified specifically with a particular sponsored project relatively easily with a high degree of accuracy." For example, the purchase of a chemical reagent for a specific experiment is a direct cost to the project. Direct costs must be reasonable - what a prudent person would spend; allocable - limited to that portion of expenses directly benefiting the project; and consistently treated by the University as direct charges.

By contrast, F&A costs are defined as "those that are incurred for common or joint objectives." In other words, F&A costs are costs that cannot be specifically attributed to an individual project. Examples of F&A costs include the services of the accounting staff, the cost of a roof or utilities for a building housing several research projects, office supplies, postage, local telephones, or salaries of personnel engaged in providing a broad range of departmental support activities.

Can You Budget for Administrative Costs?
In unusual circumstances costs ordinarily claimed as F&A might be considered direct "if":

  1. The cost can be specifically identified with the project with a high degree of accuracy.
  2. The project has characteristics that make it one of "different purpose and circumstance."
  3. The cost is identified in the budget and approved by the sponsor.

The mitigating circumstances relate to whether the project fits the federal definition of "major project," the level or number of expenses to be used, the nature of how they will be used on the project and how easily and accurately they can be identified with the project. For example, although administrative and clerical staff salaries are ordinarily defined as F&A costs, if the duties required for a project are of a highly technical nature, then those salaries might be considered direct costs to the project. Typical F&A costs, like postage, photocopying, office supplies, and local telephone service, might be considered a direct cost if justified by the nature of how they will be used for the project, e.g., mail or telephone surveys or supplies for participants. A major project is defined as one requiring an extensive amount of administrative support that is significantly greater than the routine level of such services provided by academic departments.

What Rate to Use: Determining On Versus Off-Campus Rate

This determination is important to meet the terms and conditions of external sponsor proposals and awards. Also, correct assignments permit the University to properly recover all facilities-type expenses incurred during the performance of sponsored agreements through the application of the correct F&A rate.

The official University policy provides the following criteria: “A project is considered off-campus if more than 50 percent of the direct salaries and wages of its personnel are incurred at a site neither owned nor leased by the University.”

Cost Sharing, Matching, In-Kind
The terms "cost sharing," "matching," and "in-kind" refer to that portion of the total project costs not borne by the sponsor.

Cost sharing should only be reflected if mandated by the sponsor or needed to accurately reflect the effort required to conduct the project.

All cost sharing and matching/in-kind commitments must be verifiable through documentation and must conform to University and federal policies regarding allowability, allocability, and reasonableness.

Any cost sharing or matching must be approved by the department head (or designee) and appropriate officials.

NIH MODULAR PROPOSALS

A modular grant application is a format required by the NIH for proposals requesting up to $250,000 direct costs per year. Instead of requesting funds in a detailed budget, the researcher requests monies in $25,000 modules. Other parts of the application are also simplified. The University still requires a detailed budget so that the award can be established in the financial system and so that F&A can be determined.

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