Grant Budgeting Basics Donna Marano Director of Finance & Administration Civil & Environmental Engineering Denise Murrin Macey Business Manager Engineering and Public Policy October 31, 2005 ©Sharon McCarl

Session Focus Theory-What is a good budget? Practical-What are the pieces and how do I put it together? Routing and Approvals

What is a good proposal? A good idea, well expressed, with a clear indication of methods for pursuing the idea, evaluating the findings, and making them known to all who need to know - NSF

What is a quality proposal? Manageable focus Plan of work Plan of resources needed

Point to Remember Throughout It All, Remember, Proposals Are Approved Based on the Science, Then Whether the Budget Is Justified. A Good Budget Requires Justification but It Is Not the Primary Factor in Evaluation.

Budgeting Defined “The Budget Plan is the Financial Expression of the Project or Program as Approved During the Award Process” (OMB Circular A-110, Subpart C, Section _.25). Business Side-What do I need to accomplish the goals of this project?

Budgeting Principles ALL costs (direct and F&A) that can be identified with a particular sponsored project should be identified and budgeted (somewhere) AT THE PROPOSAL STAGE ALL costs (direct and F&A) of a particular sponsored project should be borne by the sponsor (to the maximum extent possible)

Costing Defined The Process Used to Determine the Amount Required to Acquire the Goods and Services Necessary to Achieve Project Objectives

Pricing Defined The Process Used to Determine the Amount Requested from the Sponsor to Acquire the Goods and Services Necessary to Achieve Project Objectives

Guiding Regulations Office of Management and Budget (OMB) Circular A-21 http://www.whitehouse.gov/omb/circulars/a021/a021.html Cost Accounting Standards Board http://www.whitehouse.gov/omb/procurement/casb.html 22 Standards for Industry 4 Apply to Educational Institutions OMB Circular A110 http://www.whitehouse.gov/omb/circulars/a110/a110.html) Institutional Policies

Characteristics of Costs Reasonable Allocable Allowable Treated Consistently

Reasonableness Test - Is the expense reasonable? Logical? Reasonable person test Is it normal for this type and level of expense to be charged on projects of a similar nature? Market Value-Appropriate Bids

Allocable Was the cost incurred solely for the advancement of the project? Can the expense be clearly identified with the project? Assigning inappropriate expenses is FRAUD!

Allowable Reasonable and necessary A-21 section J In conformance with limitations/exclusions (example foreign travel, equipment)

Treated Consistently Cost Accounting Standards Must be able to defend cost estimates

Cost Accounting Standards 501-Estimating, Accumulating and Reporting costs 502-Consistency in Allocating Costs Incurred for the Same Purpose 505-Accounting for Unallowable Costs 506-Consistent use of Cost Accounting Period

OMB Circular A-110 Financial Management Standards Cost Sharing Rules for Accounting, Asset Management Cost Sharing

Cost Sharing “…that portion of project or program costs not borne by the Federal Government.” (OMB Circular A-110, Subpart A, Section _.2(i)) Know your department or college’s policy & procedures NSF Statement 10/19/04 (NSB-04-157)

Questions???

Consider the Source of Funding Sponsor Awarded Funding State or Federal Government Industry Foundations Institutionally Provided Funding Start-up Fund Seed Fund Faculty Development Cost Sharing

Assess Budget Needs Budget matches narrative Amounts Reasonable for scope of work Well justified In-line with program Allowable Includes adjustments for future years

Types of Costs Direct Costs Facility and Administrative Costs “…costs that can be identified specifically with a particular sponsored project…” (OMB Circular A-21, Sec.D.1) Facility and Administrative Costs “…costs incurred for common or joint objectives and [that] therefore cannot be identified readily and specifically with a sponsored project…” OMB Circular A-21, Sec.E.1

Types of Direct Costs Personnel Fringe Benefits Equipment Supplies Travel Subcontracts/Consultants Other

Personnel Individuals who are employees or students of Carnegie Mellon Vacant Positions (to be named) Generally no administrative positions Funding in proportion to project effort using base salary Include fringe benefits (full or part-time) Include salary increments Remember salary caps

Fringe Benefits Pooled or composite rate Rates proposed by Carnegie Mellon and approved by the Office of Naval Research Full-time  37.5 hours 29.50% Full-time  37.5 hours Federal 25.90% Issue: dependent tuition 3.60%

Fringe Benefits Part-time  17.5 and < 37.5 18.5% Part-time Mandatory < 17.5 10% Mandatory (FICA, unemployment, worker’s comp) Non-CMU students Additional Compensation 10%

Equipment Cost  $1,000 & Useful Life  2 Years Exclusive use by project Computers General purpose equipment

Equipment Itemize and Justify Competitive Pricing ( 3 bids > $2,500) Price Reasonableness Identify Sole Source Suppliers at the Proposal Stage

Supplies Must be specific to project (check A-21) Avoid general purpose items Itemize and justify Examples Chemicals, glassware, non-capital equipment Animal purchases, enzymes

Travel Itemize and justify Who, what, when, where, why and how Include business purpose and destination Separate domestic and foreign travel Do not include patient care or consultant travel

Other Animal housing Publication and page charges Subject incentive and travel reimbursement Rentals & maintenance contracts Equipment Usage (# hours and rate) Long distance

Subcontracts Itemized budget Statement of work Commitment to perform (w/signature) Justify need and selection criteria Include direct and F&A in your budget

Consultants Employee vs. Consultant (substantial fines) Justify contribution to project and budget Include name and affiliation Include all costs including travel & per diem Include biographical sketches

Flags Animal Research Radioactive/DNA Human Subjects Effort > 100% Employees ??? Subcontract > 50% Unallowable (get it in writing) Space or Cost Sharing

Facilities and Administrative Costs (a.k.a. Indirect Costs) “…costs incurred for common or joint objectives and [that] therefore cannot be identified readily and specifically with a sponsored project…” OMB Circular A-21, Sec.E.1 Two Components Facilities Administration

Facilities and Administrative Costs Federal rates set by our cognizant agency ONR in negotiation with Carnegie Mellon Applies to subcontracts with federal prime Modified Total Direct Cost Base Industrial Rate 56 % Federal Rate 45% (DOD Contracts 49%) Federal Rate Off-Campus 28.8%

Facilities Depreciation and Use Allowance Interest on Debt (specific buildings) Equipment & Capital Improvements Operation & Maintenance Expenses Library Expenses

Administration GA - General Administration Executive & Administrative, Central functions DA - Department Administration Administrative and Clerical Staff, office supplies, telephones, travel Sponsored Project Administration Student Administration & Services

Calculation Modified Total Direct Cost Base Carnegie Mellon example Total Direct Costs Less: Equipment 1/2 graduate student costs Portion of sub-awards in excess of $25,000 On-site vs. Off-site rate Check Sponsor Terms

Summary Preplanning Know regulations and sponsor requirements Know special requirements Animals, Human Subjects, Subcontracts, Cost Sharing Check Math

Questions???

Getting Started Sponsor Project Dates Federal, Non-federal (what rates and rules apply) Special Rules or Instructions (caps, F&A) Project Dates Subcontracts or Multi-departmental Budgets Special Approvals (animals, human subjects)

Personnel Who will work on this project? What will this person contribute? Where will this person work? What is this person’s status? Employee, graduate student, consultant??? Type of Appointment How much effort is required? Are there security issues?

Equipment What do you need? What is the importance of this item to the research? Does it qualify as capital equipment? Is it general purpose equipment? Is it available elsewhere? Borrow or share Cost analysis Lease vs. Purchase

Travel How does this trip enhance the goals of the proposed research? Who will travel? Where? Why?

Supplies and Other Expenses What do you need? What is the best way to estimate the cost? Do the numbers-avoid excessive guessing Check recharge rates, facility charges, historical expenses Match budget detail to accounting system Controlled Substances? Cost of an Audit

Proposal Routing Contact Business Manager SPEX Sponsored Projects Exchange Generates Proposal Routing and Sign-off Sheet Carnegie Mellon Proposal Number

Disclosure and Signatures Investigator(s) Disclosure and Assurances Must read and check appropriate box Conflicts must be resolved –Susan Burkett All proposals require approval prior to submission Signatures PI Department Head Dean Pre-award Office Associate Provost-Institutional Official

Routing Time Allow Adequate time for review Carnegie Mellon reserves the right to withdraw any proposal AND You need time to copy and collate before the express mail pick-up Electronic Submissions