Intro to Budgeting

1. Intro to Budgeting Lori Schultz, Sponsored Projects Services Sept 2014

2. Today’s Agenda • Where do we start? • Basic framework for budgeting in sponsored research • OMB Circular A-21 General Costing Principles • The rules • Mechanics of building a budget • Categories of costs • Common Issues • Preparing the budget

3. Where do we start? • Program/Sponsor restrictions • Total dollar limits • Unallowed items of cost • Required items of cost • Cost sharing • F&A • Who else is involved? Other units/PIs? • Deadline • Sponsor Format • Relative difficulty (have we done thisbefore?)

4. Mechanics of Building a Budget • What can I charge? • Budget & Justification should make sense when read along with the science • Rules for federal awards • The specific RFP may prohibit or require certain classes of expenses

5. OMB Circular A-21 (Federal Rules) • What is/was it? • OMB: Office of Management and Budget • Cost principles for federally sponsored projects • Guidance for determining direct vs. indirect costs • Replaced by OMB “Omni Circular” (2 CFR 200) on Dec. 26, 2013 • No substantial change in cost principles

6. Cost Principles • Reasonable – • OMB A.21, C.2(a) • Allocable – • OMB A.21, C.2(b) • Consistent – • OMB A.21, C.2(c) • Allowable – • OMB A.21, C.2(d)

7. Direct vs. Indirect Costs • Direct Costs • Can be identified specifically with a particular sponsored project (OMB A-21 D.1.) • Indirect Costs • Facilities & Administrative Costs [F&A], Overhead (OMB A-21 E.1.) • Incurred for common or joint objectives - cannot be identified readily and specifically with a particular sponsored project • Administrative expenses (staff, supplies) • Utilities • Building renovations, maintenance • Depreciation, debt service, central administration

8. Direct vs. Indirect Costs • Costs must be treated consistently - either as a direct or an F&A cost • ‘Like costs treated in like manner’ • Institution’s DS-2 often details which costs will be viewed as direct vs. indirect • UA Direct/Indirect Cost policy: http://rgw.arizona.edu/sites/researchgateway/files/direct_and_indirect_costs_of_sponsored_agreements_1.pdf

9. Common direct cost questions • Can I charge a computer/mobile device to my project? • Yes – if being used in a programmatic way • Connected to a scientific piece of equipment for data collection; Needed to run simulations, analyze data, etc. • No – if being used in a general way • Check email, browse internet, word processing, etc. • Updated guidance is more flexible • Not required to be dedicated to a single project • ALWAYS ensure it is well-described in the justification

10. Common direct cost questions • Can I charge office supplies to my project? • Typically no, due to lack of allocability • However, they are allowable when in unlike circumstances • Used in a programmatic way: conference materials, pamphlets, surveys, etc.

11. Common direct cost questions • Can I charge my administrative assistant to my project? • Typically no, due to lack of allocability • However is appropriate on a ‘major project’ • Outside of general job duties • Coordinating large numbers of collaborators or participants • New guidance is more flexible here • “Major projects” language removed, but requirement for allocability still exists

12. Cost Sharing • Matching funds / in-kind contributions • Anything necessary for the completion of the project that is not paid for by the sponsor • College/dept/central funds to pay for salaries, portion of equipment, F&A restrictions, etc. • Cash or in-kind • Cash: cost of cost-shared effort • In-Kind: reduced indirect cost rate • 3rd party contributions

13. Cost Sharing • The general rule: DO NOT include cost sharing unless it is required by the program. • When required, be sure it is clearly stated in budget & justifications • Two categories: • Committed – must be tracked • Required by sponsor (committed in proposal) • Not required, but committed in the proposal  • Uncommitted – does not need to be tracked • ‘Volunteering’ of institution resources without mention of a specific dollar amount 

14. Cost Sharing & Allowability • Remember reasonable, allocable, consistent, allowable? • All of those apply! • In general cost-shared expenses are subject to the SAME rules as direct expenses on the award: • Allowable costs, allocable items • Consistent & reasonable treatment • Within project start/end dates • Not otherwise prohibited by sponsor or program

15. Cost Sharing & Allowability • Sponsor F&A limitations: • Is this cost share? • Yes, but: • Am I allowed to include it in my cost sharing total? • Maybe, maybe not • I have two related federal projects. Can I use my NSF funds as cost share for my USDA project? • NO. • Federal sources are almost never allowed as a cost share source.

16. Getting started • Usually best to start with a common format, even when the sponsor has forms: • Review at multiple levels is easier • Changes are easier • Many sponsor formats don’t calculate except simple addition • We’ll illustrate with the CALS format

17. Direct Costs • Salaries • Fringe benefits / Employee Related Expenses (ERE) • Travel • Supplies • Contractual/Services/Subcontracts • Equipment

18. Budget Basics - Categories • Personnel • Name/(TBD) and effort devoted to project • % effort or person months (PM) • PM = % effort X appointment, so: 10% effort for AY = 10% X 9mos = .9 person months • Grad Students or Student workers : salary/stipend or hourly rate • Salaries/hourly wages • Current faculty/staff: Ask department • To-be-hired: http://www.hr.arizona.edu/compensation_and_pay • ERE rates http://rgw.arizona.edu/administration/institutional-information

19. Budget Basics - Categories • Personnel costs are the biggest portion of most budgets • Most likely to be restricted: • NIH Salary cap: $181,500 IBS (translates to full FY salary) • http://grants.nih.gov/grants/policy/salcap_summary.htm • NIH graduate compensation limit • http://grants.nih.gov/grants/guide/notice-files/NOT-OD-02-017.html • NSF 2-months salary • http://www.nsf.gov/pubs/policydocs/pappguide/nsf14001/gpg_2.jsp#IIC2g • Other sponsor restrictions

20. Budget Basics – Categories • Travel • For budgeted project personnel • Project-related conferences, required grant meetings, subrecipient site visits, field work, etc. • Transportation, lodging, per diem, etc. • Costs based on: • Searching fares for providers (airline, etc) • Historical costs for conferences (fees / hotel) • Limits on lodging/per diem by location (http://policy.fso.arizona.edu/fsm/1400/1471)

21. Budget Basics – Categories • Equipment • Defined by our rate agreement: • http://rgw.arizona.edu/administration/institutional-information • Tangible, non-expendable, useful life >1 year • Acquisition cost of $5,000+/unit • Depending on the program & cost of equipment • Formal quotes • Informal quotes • Acquisition cost includes tax, shipping, & installation

22. Budget Basics - Categories • Materials and Supplies • Items to be used for the project • Ex: chemicals to be used for experimentation • Ex: printer paper for a research survey • Ex: computer to run a piece of lab equipment • Contractual • Services to be performed by another entity for the project • Ex: 3rd party vendor to perform DNA sequencing • Ex: evaluator to assess effectiveness of education program • Subaward

23. Budget Basics - Categories • Collaborator from another institution? • Subaward (subcontract) • Distinguished from a vendor by the intellectual contribution to the project outcome • Provide SOW, budget, and budget justification prior to submission • A single line item on your budget • Subaward budget must comply with sponsor guidelines, subrecipient institution policies, and all federal regulations • F&A only charged on first $25,000 of each subaward

24. Indirect Costs (F&A) • Applied to costs specified in federally negotiated rate agreement • Modified Total Direct Cost (MTDC) • All costs excluding tuition, equipment, patient care, off-site rentals, scholarships, fellowships, and all subaward costs exceeding $25,000 • We are a DHHS institution • Sponsor stipulations & F&A Waivers • http://rgw.arizona.edu/administration/build-budget/F-A-Costs

25. Working out a budget…

26. The Parameters • Sponsor: NIH • Total direct cost limit/yr: $250,000 (modular) • Cost sharing: Mandated by cap • On-Campus Research project for F&A • The PI is Dr. Lecter, in SWES. He makes $300,000 total IBS and is an academic employee. He plans to spend 15% effort in the summer.

27. And another one… • Sponsor: NSF • Total direct cost limit/yr: Not specified • Cost sharing: prohibited • On-Campus Research project for F&A • Subcontract to Whatsamatta U. • The PI is Dr. Lecter, in SWES. He makes $300,000 total IBS and is an academic employee. He plans to work the entire summer.

28. You WILL use algebra again… • A sponsor limits the project budget total to $150,000 and will pay full F&A rate of 53% MTDC. • The project budgets nothing that would be excluded for F&A purposes (tuition, equipment). • How much money is available in direct costs? • Total / 1+ F&A Rate = Direct Cost • $150,000/1.53 = $98,039 • $98,039 * .53 = $51,961 • $98,039 + $51,961 = $150,000

29. Questions?