Research Administration Business Office

Budget Development
General

1. Is prepared according to the applicant agency's guidelines, using their forms if required.
2. Is at a level consistent with the sponsor's giving patterns.
3. Corresponds to the narrative: all major elements detailed in the budget are described in the narrative and vice versa.
4. Is sufficient to perform the tasks described in the narrative.
5. Only includes elements permitted by the applicant agency.
6. Is easy to follow.
7. Each cost category is itemized.
8. Clearly arrives at totals for each category and/or is supported with a budget justification to clarify rationale and totals.
9. Is spared of excess "padding".
10. Allows for reasonable inflation of costs over time.
11. Is accurate so that all of the budget calculations "add up".
12. Presents all sources of funding for the proposed project.
13. Identifies future funding for the project as appropriate.

Typical budget items

Personnel
Communication and shipping
Fringe Benefits
Printing (final report, brochure, etc.)
Consultants
Dissemination Costs (page charges, reprints, etc.)
Travel
Miscellaneous Items
Equipment
Project Income (possibly)
Supplies and Materials
Indirect Costs (F & A)

Personnel Costs

Accounts for the salaries and wages of all project personnel.
Provides sufficient detail (base salary, percent effort, duration of effort) to demonstrate how the requested amount for each person has been calculated.
Allows for salary increases (usually 3%) if project extends over two or more fiscal years for the organization.
Includes appropriate cost sharing of salaries and fringe benefits, calculated on the same basis as the requested salaries. Cost sharing of salaries should be clearly identified on the blue sheet and approved by the management center.

Compensation for personnel covers all amounts currently paid or accrued by the institution for employee services rendered during the project period. The budget should reflect the estimated percentage of effort (versus hours or months) for professional staff and faculty who will work on the project. Future years should reflect anticipated increases of 3%. New positions should be budgeted in accordance with the compensation levels and job classifications published by the Office of Human Resource.

Administrative/Clerical Staff
Staff responsible for providing coordination and support in the areas of administration, secretarial, personnel, business and/or facilities of an office, department, program, or unit is considered administrative/clerical staff. Direct charging of administrative/clerical salaries on federally supported sponsored agreements is generally restricted by OMB Circulars A-21, A122, and A133.

A-21 states that the salaries of administrative/clerical staff "should normally be treated as F&A costs," and that the "direct charging of these costs may be appropriate where a major project or activity explicitly budgets for administrative or clerical services and the individuals involved can be specifically identified with the project or activity."

If a principal investigator (PI) budgets administrative/clerical salaries, they must be separately itemized with a justification detailing the job duties so they are easily identifiable and assignable to the project with a high degree of accuracy. These positions should be budgeted at current salary levels plus reasonable annual increases. Budget figures should be based on a percentage of estimated effort.

Graduate Students
Graduate students may be hired on research grants as full-time or part-time graduate assistants. The compensation of graduate students on a research project must reflect an employer-employee relationship. Consequently, all payments are considered wages and are taxable income. Tuition and fees can be included in total compensation, but may not appear as separate line items on a research project.

NIH has issued guidelines, which restrict payments to graduate students to a maximum of $26,000, provided that this compensation does not exceed the amount paid to a first-year postdoctoral employee at the same institution performing comparable work. Wages paid to Graduate Assistants are excluded from the fringe benefits calculation.

Student Wages (CWRU)
Undergraduate students are budgeted at an hourly rate based on their level of expertise and prior experience. These wages are established by Student Employment and are excluded from the fringe benefits calculation. Temporary Personnel A temporary appointment is a term of employment of at least 20 hours per week and less than six consecutive months.

Temporary Personnel
are budgeted by hourly rates that are consistent with the minimum salary levels established by the Office of Human Resources and appropriate to the required level of work and experience.

Fringe Benefits
Employee benefits are part of real employment costs and must be included in a budget. The current MHMC rate is approximately 22%. This must be prorated based on the percent effort being charged to the project. CWRU fringe rate is 22% for federal applications and 24% for non-federal applications. On 7/3/02, CWRU fringe rate will increase to 24% for federal applications and 26% for non-federal applications.

Equipment

1. Only includes equipment that is essential to the project, clearly justified, and not currently available to the organization.
2. Includes an itemized listing of equipment with prices derived from vendor quotes rather than "guess-estimates".
3. Represents equipment costs inclusive of costs of delivery and installation as appropriate.

Per MHMC's Indirect Cost Rate Agreement, equipment is defined as all items of equipment with a useful life of one year and a unit cost of $500 or more. Per CWRU's Indirect Cost Rate Agreement, equipment is defined as all items of equipment with a useful life of two years and a unit cost of $5,000 or more.

Travel

1. Follows appropriate organization and applicant agency regulations for allowable rates for travel and per diem expenses.
2. Consists of all types of travel expenses, including transportation, registration, per diem, and local travel.
3. Provides sufficient detail (destination, purpose, per diem rates) to demonstrate how the requested amount has been calculated.

Travel costs are classified as those expenses for transportation, lodging, subsistence and related items incurred by employees who are traveling on official business for the institution. Unless otherwise stated by the sponsor, domestic travel is considered to be travel among any of the 50 United States, its possessions and territories, and Canada. Foreign travel is classified as travel outside these areas. During budget preparation, consideration should be given to expenses for attending professional meetings, field work travel and living allowances, consultation with experts, and meetings required by the sponsor. Travel expenses and requests should be clearly justified and reasonable. The budget should be based on historical data, Institutional travel policies, airline quotes from the Travel Office or other travel agency, and sponsor guidelines.

Travel in excess of commercial coach airfare is normally non-recoverable. When foreign travel costs are charged to a federally sponsored agreement the use of U.S. flag carriers is required.

The budget justification page should include the number of trips, the purpose and relationship to the project, and the estimated costs for each trip. For foreign travel the countries to be visited and the visit dates must also be included.

Other Direct Costs
As appropriate, include itemized costs for

Animal care costs
Human subject costs
Participant costs and fees
Publication costs for research results
Communication costs (long-distance phone and postage)
Leases and rentals
Repair and maintenance
Consultant fees, transportation, and per diem
Space, materials, and/or equipment rental
Subcontracts

Remember to provide sufficient detail for each category to demonstrate how the requested amount has been arrived at.

Supplies and Materials
Supplies and materials are categorized as items actually used in the performance of the work, and all tangible property other than equipment. Reasonable amounts should be budgeted, and projects that anticipate using large amounts or expensive items should specify such items and justify their necessity. Budgeting should be based on actual experience with an inflation factor built in for future years. Assistance in matters of price, quality, and delivery can be obtained from Purchasing.

On federally funded projects routine office supplies should normally be treated as F&A costs. Office supplies are only appropriate as a direct cost item if the purpose is for the sole direct benefit of the project. These direct costs must be explicitly budgeted, specifically identified to the project, justified and approved by the sponsor. Laboratory supplies (chemicals, glassware, disposables), animals (purchase, shipping, housing, maintenance), research supplies and training materials (questionnaires, surveys) are considered direct costs. Care should be taken to explicitly describe all consumables included in a proposal budget.

The budget justification page should include a list of the supplies and the estimated costs for each. The breakdown should be more detailed when the total supplies cost is substantial.

Communication and Shipping
Communication costs include telephone services, local and long distance telephone calls, postage (including services such as United Postal Service and Federal Express), and facsimiles. Large mailings of surveys or questionnaires must be identified and justified. These costs should be based on actual experience with an inflation factor built in for future years. On federally funded projects, postage for routine correspondence and local telephone costs (equipment, installation, maintenance, line charges, facsimile lines) are treated as F&A costs and are appropriate to budget as direct costs only if the purpose of such is for the sole direct benefit of the project. Such costs must be explicitly budgeted, identified to the project, and justified. Shipment of project materials and deliverables are direct costs if incurred for the sole benefit of the project. Project-associated long distance telephone charges are considered direct costs.

The budget justification page should include a listing of the items and a justification and estimated cost for each. Lease and Rental Lease and rental expenses for computers and peripheral equipment, general equipment, vehicles, land, buildings, offices and storage areas are included in this category. Budgeting for lease and rental should be based on actual experience with an inflation factor built in for future years, or on actual lease agreements. The budget justification should specifically identify the sole benefit to the project. The budget justification page should list the lease or rental item(s) and the estimated cost(s).

Repair and Maintenance
Repair and maintenance are categorized as costs incurred for the necessary maintenance, repair, or upkeep of property which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in efficient operating condition. Budgeting should be based on actual experience with an inflation factor built in for future years, or from the actual maintenance agreement(s).

The budget justification page should include a list of the equipment to be maintained and the estimated costs.To qualify as a direct cost, maintenance costs must be for the sole benefit of the sponsored agreement.

Services
Under this category professional services rendered by interdepartmental services (e.g., Medical Illustration, Cell Sorting) outside firms, companies, or individuals should be listed. For interdepartmental services, budgets should reflect actual quotes based on current fee structures or anticipated use. Budgeting for external use of services should be based on actual quotes. Assistance in matters of price, quality, and delivery for external sources can be obtained from Purchasing.

The budget justification page should include a list of the type of service(s), and the total estimated costs.

Consultants
Services of a consultant may be budgeted when the services are sufficiently special, temporary, or technical in nature and cannot be performed satisfactorily by existing personnel during the course of their assigned responsibilities. Consultants are independent contractors, not employees, therefore benefits cannot be charged. Travel and incidental expenses are included in the total consultant estimate and budgeted under this category. The department should maintain curriculum vitas and other specific information related to the consultant(s). Designation of independent contractor status is governed by the Internal Revenue's Code of Common Law. The institution may be subjected to significant institutional tax penalties should the individual be incorrectly classified as an independent contractor. Costs should be based on quotes from the consultant. MHMC and CWRU have consultant policies that must ba adhered to when hiring a consultant.

The budget justification page should include the justification, name, expertise, compensation rate, number of days of expected service, related travel expenses, and the estimated costs.

Note: Some sponsors may not permit the use of consultants, or may restrict the daily reimbursement rate. Check the sponsor's guidelines for restrictions.

Subcontracts
Subcontracts are budgeted when a portion of the required effort needs to be provided by one or more other entities (third parties) which are made responsible for a discrete part of the project. When the portion of effort being performed by a third party constitutes a significant component of the sponsored project, then the third party will be required to provide the resources necessary to conduct that portion of the effort as an independent contractor. The cost(s) normally associated with third party effort could include any or all of the following: labor, employee benefits, materials and supplies, travel, equipment and other direct costs, and F&A costs.

The budget justification page should include a line itemization at the same level of detail as requested from the sponsor. F&A costs should be included and calculated using the subcontractor's current rate. A copy of the subcontractor's negotiated rate agreement, a statement of intent to participate signed by the subcontracting institution, and a statement of work should be submitted along with the proposal budget. The reasons for selecting a particular subcontractor should be explained in the proposal.

The subcontractor's costs are incorporated into the main budget as a direct cost. When calculating the F&A costs the amount that exceeds $25,000 should be excluded from the base for federal projects. The first $25,000 of each subcontract, regardless of the length of performance, is calculated at the appropriate rate based on the performance site of the main project.

Publications
Publication costs consist of the documenting, preparing, publishing, disseminating, and sharing of project findings and supporting material. Budgeting should be based on actual experience with an inflation factor built in for future years. Assistance may be obtained from Purchasing or by contacting a publisher.

The budget justification page should include the page charges, number of pages, and the estimated cost.

Facilities and Administrative Costs (formerly Indirect Costs)
In addition to direct costs, sponsored projects are also charged facilities and administrative costs. Facilities and administrative costs are charged to a project by applying a percentage (the facilities and administrative cost rate) to the total direct costs of the project minus certain exclusions, known as modified total direct costs or MTDC.

The MTDC base consists of total direct costs excluding capital expenditures (buildings, individual items of equipment; alterations and renovations), that portion of each subcontract in excess of $25,000; hospitalization and other fees associated with patient care whether the services are obtained from an owned, related or third party hospital or other medical facility; rental/maintenance of offsite activities; student tuition remission and student support costs (e.g., student aid, stipends, dependency allowances, scholarships, fellowships).

EXPENSES NOT CHARGEABLE TO THE FEDERAL GOVERNMENT

ADVERTISTING AND PUBLIC RELATIONS; unallowable unless required for performance of obligations under sponsored agreement.
ALCHOLIC BEVERAGES
ALUMNI ACTIVITIES
BAD DEBTS
CIVIL DEFENSE; Capital expenditures for any civil defense project, and Operating expenses for projects not located on campus are unallowable.
COMMENCEMENT AND CONVOCATION
CONTINGENCY PROVISION; contributions to a contingency reserve are unallowable.
DEFENSE AND PROSECUTION OF CRIMINAL AND CIVIL PROCEEDINGS, CLAIMS, AND APPEALS
DONATIONS AND CONTRIBUTIONS; all donation and contributions are unallowable except those donated to meet cost share or matching requirements. Note that depreciation or use allowance on-donated services and property is allowable.
ENTERTAINMENT COSTS; unallowable, including food for staff meetings.
FINES AND PENALTIES; unallowable unless incurred as a result of compliance with the provisions of a sponsored agreement or with written instructions from the sponsoring agency.
FUND RAISING
GOODS AND SERVICES FOR PERSONAL USE
HOUSING AND PERSONAL LIVING EXPENSES
INSTITUTION FURNISHED AUTOMOBILES; personal use of vehicle including travel to and from work is also unallowable.
INSURANCE AND INDEMNIFICATION; costs of insurance covering government property are not allowable unless required or approved. Actual losses which could have been covered, but were not, are also unallowable. In addition, costs to insure against defects in the institution's materials or workmanship are unallowable.
INTEREST
INVESTMENT MANAGEMENT
LOBBYING
MEMBERSHIP COSTS; costs of membership or publications of civic community or social organizations, including professional scientific groups are unallowable.
PATENT INFRINGEMENT; unless allowed by special agreement, the costs of proceedings initiated by any government, related to the violation of regulations, where the result is conviction or institutional liability is unallowable. Costs of all other types of litigation, related costs and payment of claims are unallowable unless specific provision is made in the sponsored agreement.
PENSION COSTS; increases in costs due to funding delays, late payments on termination insurance, excise taxes on accumulated -deficiencies, and prohibited transactions are unallowable. ·
PREAGREEMENT COSTS; unallowable unless approved by the sponsoring agency.
RECRUITING COSTS; unreasonable or excessive advertising costs which exceed standard recruiting practices are unallowable. Relocation costs must be refunded if the employee resigns for reasons within his/her control within one year.
SELLING AND MARKETING
SEVERANCE PAY; anything above and beyond standard institutional policy.
STUDENT ACTIVITY COSTS; unallowable unless specifically provided for in the sponsored agreement.
TRAVEL COSTS; airfare in excess of lowest available rate except in cases of non-availability or lack of a reasonable alternative is unallowable.

SPECIAL CIRCUMSTANCES AND CONSIDERATIONS

Sub-Contracts
A subcontract arrangement exists when two or more organizations agree to participate in a collaborative project. One participant will be designated as the lead institution at the time of proposal submission and accepts full funding and responsibility from the sponsor. Subcontracts are then used to transfer part of the work and appropriate funds to the other participant(s). All conditions imposed by the sponsor on MHMC or CWRU are also imposed on the subcontractor(s).

When MHMC is the lead institution, a "Statement of Intent to enter into a Consortium Agreement" is required from each participating organization that includes a full cost budget and scope of work, and is signed by an authorized representative for each institution. A copy of the organization's most current Facilities and Administrative (F & A) cost agreement must be obtained to verify the budget request.

The government requires federal funds recipients to use full and open competition whenever possible. Faculty should be advised that any subcontractor chosen to perform work on a prime agreement must be justified. The Project Director must document why a proposed subcontractor is the best one to complete the project and describe how they are unique. Most government agencies do not require prior approval of subcontracts when full documentation is provided in the main proposal. Some agencies and private entities do require prior approval and review of a subcontract before it can be fully executed. Refer to the Budget Development Section for how to include subcontracts in the application.

Statement of Intent to Establish a Sub-Contract

Sub-Accounts (CWRU only)
When an application submitted identifies resources to be used at more than one CWRU campus/affiliate, sub-accounts must be established. Sub-accounts specify which portion of the project, related funds, and associated F&A costs are to be directed to each affiliate. For instance, an application may state that 75% of the work will be done at MHMC and 25% of the work will be done at University Hospitals (UH). CWRU will set up a parent account for the entire grant budget, one sub-account for MHMC and one sub-account for UH. CWRU will then transfer funds from the parent into the sub-accounts.