Section 7: Estimating Budget Categories

Preparing a budget that accurately reflects the costs of completing the proposed research is very important. In the 2007 version of The Grant Application Writer's Workbook: Successful Proposals to Any Agency, David C. Morrison and Stephen W. Russell state:

"You must remember that you can very quickly lose credibility by asking for either too much or too little, and that once any figure becomes suspect, all your budgetary line items will be scrutinized more closely. What you will be striving for is a budget that is so well justified that your reviewers will readily accept it."

You can assist your PI's efforts in developing a credible budget and budget justification by assessing the project needs, understanding budget (or cost) categories and by preparing the budget and justification in accordance with sponsor guidelines. Generally, sponsors want a justification for direct costs such as salaries, wages, fringe benefits, capital equipment, consultants, subcontracts, publications, and all other expenses mentioned in the research plan.

Remember, some budget categories are exempt from F&A costs. For example, capital equipment, graduate student tuition and required fees, stipends, and a few other items can not be included in the calculation of F&A costs (indirect). Understanding the complexity and the importance of accuracy in estimating the budget will be extremely helpful to your PI and can streamline this part of the proposal application process.

You will need to be able to access salary and other budgetary information quickly in order to complete your proposal budgets. If you have *DEFINE and UT Austin Pay Plan access, you will be able to access salary figures for each employee yourself. If your department restricts *DEFINE access and UT Austin Pay Plan access so that you do not have authorization to use this system, work with your department or college to determine a process that will allow you to get this information promptly when you need it. Remember, you will be working with a looming deadline, so be sure to have some redundancy built into your process for getting financial information, i.e., more than one contact to provide this information.

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7.1 Calculating Direct Costs

7.1.1 Salaries and Wages

Include salary estimates based on the amount of effort committed to the project and on the actual salary figures for your PI and other personnel mentioned in the proposal. If personnel are included in the budget on a "to be determined" basis, (not actually employed at the university when the proposal is submitted), be sure they are included and justified in the research plan, and use accurate salary information based on the titles in the UT Austin Pay Plan. Read the RFP to determine the percentage allowed for salary increases from year to year. This is usually 2% to 4%, but you must verify this figure for each proposal being submitted.

To calculate 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 person-months and/or as a percent of Full-Time Effort (FTE) and be broken out for faculty as summer and academic year, or in calendar year months.

Some funding agencies require that salary information be calculated in the form of "person months," which is the actual number of months an individual will be involved in a project. For more information visit the NIH Person Months FAQs.

Because not all of the proposals submitted by a PI are likely to be funded at the same time, effort commitments in excess of 100% may be allowed at submission. However, at the time of award, the PI should verify that the amount of his effort committed in the proposal is actually available for the project, considering all other assigned responsibilities including research, teaching and service.

No employee may commit effort exceeding 100% in any given month. And, sponsored activities may not result in any employees receiving compensation at a rate in excess of their authorized salary or academic rate. For multi-year projects, the budget should take into consideration any possible salary increases.

OMB Circular A-21 restricts the charging of secretarial and other clerical support to federal grants and cooperative agreements, EXCEPT when justified for large centers where such support can be directly allocable to the project. In those instances when clerical and administrative support is included, the PI must justify the need for administrative support to perform the project, and it is the Investigator's judgment that this is the best way to spend the funds. For more information, see the OSP Handbook and UT Austin's Administrative Costs Policy.

7.1.2 Salary Caps

Federal agencies may impose limits on the amount of salary an individual can receive under a grant, i.e., "salary cap." Check your agencies guidelines to make sure that your are not restricted by a salary cap. For NIH specifically, the amount of the cap is adjusted annually. NIH Salary cap information   For more information please contact Tania Tost in OSP- Sponsored Projects Award Administration (SPAA).

7.1.3 Student Salary Ranges

Salary ranges for students are set by UT Austin's Human Resources (HR) department.

7.1.4 Graduate Research Assistant (GRA) Salary Rates

Regardless of the salary range posted by UT Austin Human Resources for students, College Deans have the authority to set GRA annual salary rates within the minimum and maximum rates posted by the Office of Human Resources. The ranges differ from college to college. Contact your Dean's Office to get the annual rate your college has set for graduate research assistants.

7.1.5 Fellowship Stipends

OMB Circular A-21, section J.45 states "Costs of scholarships, fellowships, and other programs of student aid are allowable only when the purpose of the sponsored agreement is to provide training to selected participants and the charge is approved by the sponsoring agency." Fellowships are normally paid as stipends (not salaries) but sponsor's may allot a separate and limited amount for salary and fringe benefits. Check the solicitation, or award, or the sponsoring agency's Web site and be sure you understand what other costs, if any, in addition to the stipend are allowable in your proposal budget.

7.1.6 Tuition Remission

Tuition remission refers to a departmental (or other source) payment of all (or a portion) of a student's fee bill. The student does not receive any funds directly, but provides services in exchange for the award. Unless limitations are imposed by the sponsor, UT-Austin tuition remission policy requires the amount to be included in all sponsored project proposal application budgets.

Tuition remission amounts budgeted for federal grant accounts are subject to institutional policy and to the provisions outlined in OMB Circular A-21. After allowability has been established, a Project Director may authorize tuition remission for a student for work performed that benefits a research project provided that the following conditions exist: 1. The student is performing research services that are necessary for the completion of the project being funded, (Clerical staff services do not qualify as allowable charges.) and 2. The total amount of compensation, including tuition, paid to or for the student is reasonable for the services performed.

Although tuition is exempt from F&A costs, per UT-Austin tuition remission policy, sponsored research projects which involve paid graduate students in their budgets must include tuition remission and allowable fees for these graduate students.

As a DRA, be sure to check UT-Austin tuition rates for students at the beginning of every semester, as rates tend to increase on an annual basis. Tuition information is available from the Office of Accounting.

Please Note: Scholarship payments are not allowable expenditures on most federal research projects because the purpose of the award is research, not instruction. Tuition remission is not a scholarship. Tuition remission awards on federal grants are treated as student wages for IRS tax purposes.

7.1.7 Fringe Benefits

From the OSP Handbook, Preparing the Budget "Fringe benefits are considered to be a direct cost to a sponsored project. Grant or contract awards are responsible for the applicable fringe benefits incurred by each employee. Fringe benefits costs should be estimated based on historical data. Actual costs for fringe benefits are charged (billed) to the sponsored project at the time the cost is incurred, and is based on salary, the selected benefits package and other variables applicable to the individual employee".

Fringe benefits are difficult to estimate, and will vary depending on the position title and insurance packages of each employee. See the fringe benefit section of the OSP memo on Facilities and Administrative Cost Rates, 2008 for guidance in calculating fringe rates using the suggested range of 25-35%. If a professor or research scientist plans to charge his/her summer salary to a grant, it is better to calculate fringes at a higher rate. The fringe benefit rates for these titles can exceed 34%.

NOTE: A sponsor will only pay fringe benefits for an employee — not an employee and his or her family.

Fringe benefit rate information can be found at UT Austin Payroll if you scroll down the page to "Payment Processing Information" and open the PDF document that lists fringe benefit rates for the current fiscal year.

7.1.8 Consultants

Consultants are individuals or companies who provide services related to the proposed research. If payment is to be made to a consultant on your project, be sure to include funds for consultants in the budget. Consultant fees are subject to F&A costs, and proposal applications require letters of commitment.

Normally, consultants are paid a consulting fee plus travel expenses. Some sponsors do not permit any payments to consultants, and some sponsors restrict or limit daily rates. If in doubt as to the allowability of consultants or the rates paid to consultants, refer to the sponsor's program literature or contact OSP. Whenever possible, identify the proposed consultant by name, indicate the number of days of work, daily rate, and provide the curriculum vitae or resume for the consultant in the proposal application. The participation of paid consultants in a sponsored project for periods longer than two weeks should be discussed with OSP prior to submission of the proposal application for review. UT Austin employees may be used as consultants on a project if the consultant is from a different department than the PI. Institutional policies related to consulting are contained in the Handbook of Operating Procedures.

7.1.9 Non-Expendable Equipment (Capital and/or Fabricated)

Capital equipment refers to an article of nonexpendable, tangible personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per item. It is important to get several vendor quotes if purchasing equipment costing $5,000 or more per item. In general, capital equipment is not subject to (i.e., is exempt from) F&A cost recovery (from the OSP Handbook ).

Capital equipment built for a research project which uses on-campus machine-shop labor is referred to as fabricated equipment. Fabricated equipment must be described in the statement of work and the components used to fabricate the item, other than the on-campus machine-shop labor, may also be considered as capital equipment for budgeting purposes. Capital equipment should also be identified for inventory purposes." For more information on inventory control please see the Handbook of Business Procedures, Part 16. Inventory Control and Property Management.

Please note: The on-campus machine-shop labor component of fabricated equipment is subject to facilities and administrative costs. And, a separate subaccount is required for each capital equipment item being fabricated.

See also NIH Equipment FAQs.

7.1.10 Expendable Equipment and Supplies

Normally, a research project will consume expendable supplies such as laboratory items, teaching aids, computer software, and office supplies necessary to conduct the day-to-day operation of the project. These items generally cost less than $5000 per unit and reasonable care should be taken to budget appropriately for these items. Faculty who anticipate the use of a particularly large number of research animals or animals requiring special care should consult with the Animal Resources Center staff to see whether the funds estimated in the budget will be adequate and whether the Animal Resource Center has adequate facilities to accommodate the animals (from the OSP Handbook).

UT Austin has many on-campus resources where supplies can be purchased, as well as some facilities that provide access to specialized equipment. Charges for these (recharge or service center) services are billed on a unit or hourly basis, i.e., a pre-determined method to calculate the cost of use. Some facilities provide supplies and service to the colleges, schools, and departments where they reside, and others provide service to the entire university community. Check the Web sites or call the facility for pricing information. The list below is by no means inclusive of all the UT Austin facilities available in various colleges.

7.1.11 Publication Costs

If the sponsor will pay for publication costs, you may include this item. Use good judgment. For example, do not include publication costs in year one of the project because your PI will not have data to publish during the start up phase. Get price estimates from publishers your PI recommends for any publishing which might result from the projects. "Page charges may vary from journal to journal. Consider both page charges and reprint costs" (OSP Handbook).

See also UT Press.

7.1.12 Travel

Provide cost estimates for all domestic and foreign travel that is mentioned in the proposal application. If foreign travel is anticipated it must be specified. “Travel costs expected to exceed institutional guidelines must be specified. Federal funds cannot be used to make trips to secure new or additional research support or funds.” SPECIAL NOTE: Submission of a proposal that proposes travel to a country that may have UT Austin/System imposed travel restrictions does not constitute university approval of that travel. Authorization in accordance with the UT international travel policy to restricted regions is still required. (from the OSP Handbook).

7.1.13 Computer Time

"Computer time costs should be included as a budget item, if appropriate. If non-sponsor funded computer time is needed, arrangements must be made in advance with your academic department or research unit. F&A costs apply to all types of computer time, and to all computer supply budgets" (from the OSP Handbook).

7.1.14 Subagreement Budgets

This section is still in development so check back. For immediate assistance regarding subagreements, please contact OSP

Suggested References:

7.1.15 Direct Costs: Other

"Consider, as appropriate, costs for copying, long-distance telephone calls, postage, reference books and materials, tuition and required fees for participating graduate students, equipment maintenance, and contracted services directly allocable to the project. Revisions to OMB Circular A-21 relevant to office supplies, postage, local telephone costs, and memberships indicate: The PI needs to justify the need for these items in relation to the project, and it is the PI's judgment that this is the best way to spend the funds." (from the OSP Handbook).

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7.2 Estimating F&A Costs for your Project

Step One:

Step Two:

If the full F&A rate is applicable to your project, calculate the F&A costs by doing the following:

When a sponsor limits the recovery of F&A costs, the basis for calculating the F&A costs is Total Direct Costs, unless otherwise specified. See the OSP memo on F&A Rate Agreement for more information.

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7.3 Other Budget Preparation Resources

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