Developing your budget … And introduction to the cost principles and allowable costs and ….. OSP awareness December 17, 2015

Cost Principles (Standards) Premise: Project costs = Allowable direct costs (DC) + allowable indirect costs (IDC (or F&A)) These provide the general framework from which budgets are built Guiding Principles – Costs must be: Reasonable, Allowable, Allocable, and Consistently treated

What’s Reasonable? When you bought the item at price X and quantity Y You acted prudently – others would have made similar decision given facts and circumstances at the time. necessary to fulfill project objectives; followed good business practices and applicable laws and regulations, and sponsored agreement terms and conditions; followed institutional policies If your purchase were posted on a newspaper headline how would folks react?

What’s Allowable? Must be necessary and reasonable for the performance of the work; Allocable to sponsored agreements; Consistently treated; and Conform sponsored agreement. Sponsored agreement trumps all principles.

What’s Allocable? Item can be assigned (allocated) to an award/project, or function In proportion to benefit received Direct costs – exclusive benefit to project or can be reasonably assigned to multiple projects Indirect costs – benefit many projects or activities, can’t be reasonably assigned

What’s Consistency? All costs incurred for the same purpose in like circumstances are treated the same If in F&A pool, there it stays, UNLESS cost is not for same purpose… Once a cost is allocated to one award, ordinarily can’t shift to another award (i.e. cost transfers) If charge to one award, can’t shift to another just because there’s $ left ‘on the table’.

Federal government’s concern Bear its fair share of sponsored project costs, (but not more than its fair share!) Why is this important? Protect public’s interests (taxpayer $$) Protect public’s trust

What is a budget? Financial expression of your work plan (aka statement of work) Personnel costs Other than personnel costs Best estimate of financial resources needed to perform the work proposed Accurate Costs should pull from actual sources Scope of the project and the project budget should be consistent with the costs available under the program

Who is responsible for budget preparation? The responsibility varies across campus - department budget managers, center staff, school/college grants development staff, or OSP research administrators Some PIs prefer to be ‘do it yourselfers’ Check within your school/college for available support, or ask OSP Some departments do not have available support for budget development; OSP fills in that role OSP is here to help, so budget questions, no matter how small can be asked throughout the process!

Read sponsor guidance for budget preparation Check for unallowable costs Some costs may be required (e.g.- PI meetings) Some cost items may have limitations or thresholds (e.g.- F&A) Budget category terminology may differ among sponsors Placement of cost items on sponsors forms may differ

Personnel Costs (a direct cost) SU folks whose effort will allow project objectives to be accomplished Key or senior personnel Folks responsible for project – ordinarily faculty Others Technicians Project managers Postdocs, grad students, undergraduates (remember to account for graduate tuition!) Admin/clerical (in rare circumstances)

Personnel Costs Salaries and wages How much? Proportion time allocated to grant Represented in person months or % effort Fringe benefits Federally negotiated rates ates,%20DUNS%20and%20Face%20Page%20Information.html ates,%20DUNS%20and%20Face%20Page%20Information.html Annually updated Five employee classifications 1) Reg staff/AY faculty; 2) summer faculty; 3) Grad Res Asst; 4) Part time Hourly/ Extra Service / Overload; and 5) Adjunct

Administrative / Clerical support costs, allowable? May be allowable when all of the following requirements are met: The necessity of admin support explicitly included in the budget Individuals work is directly linked with and integral to the project The work performed is not for standard admin duties routinely performed by SU personnel Cost cannot also be recovered as F&A OSP will review admin/clerical in budgets on a case- by-case basis for appropriate application - took effect for new federal awards or award increments that occur on or after 12/26/14

Other than Personnel Costs Everything else… Travel Equipment (>$5,000) Materials & Supplies (includes computers) Non-SU people Subawards, consultants Participants Tuition Estimate should reflect the actual needs of the student, if known Publications Purchased Services Conference Hosting Costs Computer Services

What about computers? Computing devices are considered materials and supplies Computing devices are allowable when: Predominantly used in support of the sponsored project. If not predominantly used to support the project, reasonable proportion of cost relative to how much it is used on the sponsored project is allowable. Computers dedicated solely to lab or field use are allowable In all cases, computers should be clearly justified in the budget narrative, including whether the entire cost is budgeted (e.g.- predominant use), or a reasonable proportion. Except in extenuating circumstances, computers are not allowed for purchase at the end of an award.

What about that ‘overhead’ SU charges? Also called “indirect costs” Or Facilities & Administrative costs Negotiated with federal government (FY16 – FY17) Research – on campus (50%) Instruction – on campus (34%) Other – on campus (35%) Off-campus Research, Instruction and Other (26%) Percent of what? Modified total direct costs (MTDC) (most commonly used F&A base) Direct costs less tuition, equipment, subcontract > 25k, rent, scholarships & fellowships Sometimes sponsors formulas will apply (e.g. – 15% of Salary + Fringe; 20% of Total Cost, etc…….)

Estimating direct costs Check out osp.syr.edu development/Conceptualizing%20your%20Budget/Personnel.html development/Conceptualizing%20your%20Budget/Personnel.html Historical experience, vendor quotes, or actual published rates should be used Budget figures are not pulled from thin air Talk to those with more experience What can you get done for the money? What do sponsor’s expect when budgeting and expending money…. Cost principles (2 CFR Part 200, Section 4xx)

So, In Summary … to be Allowable as Direct Cost… Must be essential to support project Cost to sponsor is in proportion to benefit received If sponsor pays the whole cost, they are the sole beneficiary In the case of computing devices, the use must be predominantly for the project charged, or a reasonable allocation. Must adhere to sponsor policy/ guidelines as well as University policies

Allowable in F&A (not DC) Needed to support many projects Not ordinarily reasonable to assign proportion of benefit, including but not limited to Sect’y/clerical (cost of doing business) Office supplies (cost of doing business) Local phone calls (cost of doing business) These are all administrative costs… (the “A” in F&A (“F” = facilities)

And other areas like: Food…. That’s entertainment!! ( ) Unless conference or meeting ( ) PURPOSE – disseminate sponsor’s results (Remember: How does expenditure allow you to achieve project’s objectives?) Characteristics of meeting: Formally announced; Agenda; List of attendees; Minutes, Not This!! Proceedings etc. This!

Core questions when developing budget AND spending $$.. How does purchase/expenditure (as Direct Cost) help accomplish the project’s goals and objectives? If cost in generally in F&A, how is situation non- routine, unlike? Is purchase/expenditure allowed in sponsor solicitation or agreement? Is prior approval necessary? If yes, and not obtained, not allowed. Prior really does mean prior. Is this a Reasonable purchase?

Importance of a well crafted Budget Narrative Start with OSP’s Budget Narrative Templates and adapt for your purposes Give OSP enough time, and we can start your 1 st draft Clearly articulate, following the same order in detail budget: the Personnel costs required, specific roles, and level of effort your travel needs and itemization of required materials & supplies, equipment, & Other costs items that would typically be unallowable, but have sufficient rationale to include; now is the time to justify the cost Work with OSP on this language as we may have seen your scenario before and have creative suggestions DOCUMENT in budget justification when and how purchases advance project’s objectives. TELL THE STORY!!

The OSP Budget Template It doesn’t do everything, but comes pretty close! OSP Budget Template QUESTIONS?