1. Budgets 101 Tina Cunningham, CRA
Assistant Director, Sponsored Programs Administration
Mississippi State University
Carly Cummings, PhD
Assistant to the Dean of Research
College of Arts & Sciences, Mississippi State University

2. The Plan Basic framework for budgeting in sponsored research
Topics include:
OMB Circular A-21 General Costing Principles
Direct vs. Indirect Costs
Mechanics of Building a Budget

3. OMB Circular A-21 What is it?
Allowability principles for the reimbursements of costs associated with federally sponsored projects
Guidance for determining direct and indirect costs

4. Basic Principles of Costing OMB A-21, C.2
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)

5. Reasonable Prudent person test Considerations :
Generally recognized as necessary
Complies with Federal and State laws and regulations
Did individuals involved act with due prudence?
The extent the actions taken are consistent with institutional policies and procedures

6. Allocable To be allocable, expenses. . . .
Are incurred solely for the project, OR
Benefit both project and other work in a proportion that can approximated, OR
Are necessary for the overall operation of the institution and is deemed assignable in part to a sponsored project

7. Consistent Costs must be given consistent treatment
Institution must estimate costs during proposal preparation consistent with its cost accounting standards
All costs incurred for the same purpose, in like circumstances, are either direct costs only or F&A costs only
Institution's Disclosure Statement (DS-2) will provide details on how costs will be budgeted and expensed

8. Allowable
The cost must conform to any requirements, limitations, etc. put forth by all of the following:
OMB Circulars
Sponsor guidelines
Award document
Institutional policies
Allowability applies to both direct and F&A costs
For ex.: Sponsored Programs expenses are not allowable as a direct cost, but are allowable as an F&A cost

9. Direct vs. Indirect Direct Costs (OMB A-21 D.1.)
Can be identified specifically with a particular sponsored project, OR
Can be directly assigned to projects relatively easily with a high degree of accuracy
Indirect Costs (aka Facilities & Administrative Costs, Overhead) (OMB A-21 E.1.)
Incurred for common or joint objectives - cannot be identified readily and specifically with a particular sponsored project

10. Direct Costs Examples: Salaries Fringe (sometimes) Travel
Supplies/Commodities
Services/Contractuals/Subcontracts
Equipment

11. Indirect Costs (F & A Costs)
Facilities
Depreciation and use allowances
Interest of debt associated with certain buildings
Equipment and capital improvements
Operation and maintenance expenses
Library expenses
Administrative
General Administrative and general expenses
Departmental administration
Sponsored programs administration
Student administration and services

12. Direct Costs vs. Indirects (cont.)
Costs must be treated consistently - either a direct or an F&A cost
‘like costs in like manner’
Institution’s DS-2 often details which costs will be viewed as direct vs. indirect

13. Disclosure Statement (DS-2)
Example:
Travel costs incurred while performing the function of general university activity, such as travel by executive officers meeting with the State Board of Trustees to discuss general university business, would be classified as indirect costs.
Travel by a university employee related to carrying out the functions of a specific contract or grant would be classified as a direct charge to that contract or grant.

14. Mechanics of Building a Budget
Basic Principles
All costs budgeted must be in accordance with the principles presented
Reasonable, Allocable, Consistent, Allowable
Properly budgeted as direct vs. indirect
All costs budgeted should be viewed in relation to the project and its needs

15. Mechanics of Building a Budget (cont’d)
Personnel
Principal Investigator, project team, students
Best to do this section first - many other expenses will be determined by this budget line
Calculations
Percentage of effort or person months
9-month vs. 12-month employees
Rates should be based on current salaries; escalations allowed for future budget periods
Check RFP, meet with PI/Research team.

16. Mechanics of Building a Budget (cont’d)
Fringe Benefits
Direct or Indirect – consult institution F&A agreement
Rate may/may not be negotiated
Different rates for different employee classes
Calculations
Rates are applied to budgeted salary amounts

17. Mechanics of Building a Budget (cont’d)
Travel
Project related conferences, project review meetings, data collection, etc.
For budgeted project personnel
Calculations
Based on federal (U.S. General Services Administration) or state/university rates, if lower
Per diem rates:
Mileage:

18. Mechanics of Building a Budget (cont’d)
Equipment
Institutional definition of equipment is found in your F&A rate agreement
Nonexpendable
Tangible
Useful life of > 1 year
Acquisition cost of $5,000 or more per unit
The federal threshold; your institutional threshold may be lower

19. Mechanics of Building a Budget (cont’d)
Materials and Supplies
Items to be used for the project
Molecular biology supplies (enzymes, reagents, tubes, etc.) to be used for DNA sequencing
Services/Contractuals
Services to be performed by another entity for the project
Third party vendor will perform DNA sequencing

20. Mechanics of Building a Budget (cont’d)
Subawards
Subaward is distinguished from a vendor by the intellectual contribution to the project outcome
Must receive SOW, budget, and budget justification from subrecipient
Subaward budget must comply with sponsor guidelines, subrecipient institution policies, and all federal regulations.

21. Mechanics of Building a Budget (cont’d)
Graduate Student Tuition
Rates vary between institutions
Calculation is based on student’s budgeted effort

22. Mechanics of Building a Budget (cont’d)
Participant Costs
Broadly defined: “Support provided when a sponsor funds a project or activity in connection with formal meetings, conferences, symposia, or training programs”
Specifically, participant support costs are those costs paid to (or on behalf of) participants in such events
Treatment of participant costs vary from agency to agency

23. Mechanics of Building a Budget (cont’d)
Facilities and Administrative Costs (F&A)
Applied to costs specified in 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
Salary and Wages
Salary, Wages, and Fringes
Sponsor may place further restrictions

24. Sponsor Budget Restrictions
USDA
Consultant limit – current $598/day ($74.75/hr)
F&A restriction – 30% Total federal funds awarded
NSF
No F&A on participant costs
NIH
Genomics restriction:
Salary cap ($179,700)
Modular budget for $250,000 total DIRECT costs
30%TFFA = % TDC
New GPG excludes all participant costs

25. Cost share
Anything necessary for the completion of the project that is not paid for by the sponsor
Irrelevant what the source of funds are:
Institution
Third party
Etc.
These are really important – lots of conversation about type of funds, etc. That is irrelevant.

26. Cost share (cont’d) Two categories Committed – must be tracked
Required by sponsor (committed in proposal)
Not required, but committed in the proposal
Not required, but implied through regulation
Uncommitted – does not need to be tracked
Typically after the fact
‘Volunteering’ of institution resources
Will explain implied in more detail in the next slide

27. Cost share (sort of!)
Does a PI have to charge their time to the project?
No, BUT their time will be cost share, and some portion of it must be committed cost share and tracked
See OMB Memo
Obviously we don’t encourage cost sharing
OMB memo says all projects must have some committed effort and thus must be tracked

28. Allowability of cost share expenses
Must be allowable as a direct cost
Other important criteria:
Expense must be incurred during the project period
Can only be used as cost share once
Cannot be being charged to the feds already (typically F&A costs)
If cost share is required – this is what you need to consider

30. Time for budget problems!!

31. Dr. Jones ($50,000 annual salary/9 month faculty/0
Dr. Jones ($50,000 annual salary/9 month faculty/0.62 FTE) plans a one year project. The project will require 10% of his time. Calculate the salary and fringe expenses.
What does 10% mean? 10% of a 12 month equivalent or 10% of his actual appointment?
Because of this uncertainty, the recommendation is to always use person months.

32. Dr. Jones ($45,000 annual salary/9 month faculty/0
Dr. Jones ($45,000 annual salary/9 month faculty/0.50 FTE) plans a one year project. The project will require two months of effort. Calculate the salary and fringe expenses (use 30% fringe rate).
First calculate total months in the appointment
Then calculate monthly salary
Then calculate project salary charges

33. Total months in appointment Monthly salary
Solution
Total months in appointment
9 month appointment x 0.50 FTE = 4.5 months
Monthly salary
$45,000 annual salary / 4.5 months = $10,000/month
Salary: 2 months x $10,000/month = $20,000
Fringe: $20,000 x 30% = $6,000

34. Dr. Smith ($120,000 annual salary; 12 month appointment) has a one year research project (7/1/14-6/30/15). This project will require 3 months of his time. In addition, he will need $2,000 for travel to collect samples for his experiments and $3,000 for chemical supplies to run the necessary tests. The sponsor will pay full facilities and administrative costs. What is the total budget amount?
Assume 30% fringe rate. Figure first at 50% MTDC – then at 60% SWF

35. Salary: $120,000/12 x 3 = $30,000
Fringes: $30,000 x 30% = $ 9,000
Travel: $ 2,000
Supplies: $ 3,000
TDC: Sum of all direct costs $44,000
F&A (MTDC): $44,000 x 50% = $22,000
Total Cost: Sum of TDC + F&A= $66,000

36. Salary: $120,000/12 x 3 = $30,000
Fringes: $30,000 x 30% = $ 9,000
Travel: $ 2,000
Supplies: $ 3,000
TDC: Sum of all direct costs $44,000
F&A (SWF): $39,000 x 60% = $23,400
Total Cost: Sum of TDC + F&A= $67,400

37. Dr. Smith is doing a one year research project (7/1/14-6/30/15)
Dr. Smith is doing a one year research project (7/1/14-6/30/15). He will work 2.0 summer months on the project (his 9-month salary is $90,000). He will need two full time graduate students who will make $20,000/yr. He will need a specialized piece of equipment for testing material strength and costs $25,000. It will also be necessary to pay a colleague at Arch Rival University (ARU) $40,000 to do part of the work. Sponsor will pay full F&A. What is the total budget amount?
Variables: fringe= 30% and 10%
Tuition = $7,500 per student
F&A = 50%

38. Tuition: $7,500 x 2 students = $15,000 Equipment: $25,000
Salaries: $60,000
PI: $90,000/9 x 2 = $20,000
GRA: $20,000 x 2 = $40,000
Fringes: $10,000
PI: $20,000 x 30% = $6,000
GRA: $40,000 x 10% = $4,000
Tuition: $7,500 x 2 students = $15,000
Equipment: $25,000
Subaward: $40,000
TDC: Sum of all direct costs $150,000
MTDC:
$150,000 – 15,000 – 25,000 – 40, ,000 = $95,000
F&A: $95,000 x 50% = $47,500
Total Cost: TDC + F&A $197,500

39. A sponsor limits the project budget total to $150,000 and will pay our full federally negotiated F&A rate of 50% MTDC. The project budgets nothing that would be excluded for F&A purposes (tuition, equipment, etc). How much money is available in direct costs?

40. Available Direct Costs: Calculation check: $100,000 x 50% = $50,000
$150,000/1.50 = $100,000 in direct costs
Calculation check:
$100,000 x 50% = $50,000
$100, ,000 = $150,000

41. Really just algebra!
D = Direct Costs
D + (D x 50%) = 150,000
1D D = 150,000
1.5D = 150,000
1.5𝐷 1.5 = 150,
D = 100,000 / 1.5

42. Starting with the available direct costs ($100,000) in the previous problem, assume we need $5,000 for travel and $5,000 for printing and the rest is for salary and fringe for faculty and professional staff. What would be allocated now to both salary and fringe?
Use 20% fringe rate

43. Available Direct Costs:
$100,000 −5,000 −5,000=$90,000 (for salary/fringe)
Salary (backwards budgeting again):
$90, =$75,000
Fringes will be the difference
$90,000 −$75,000=$15,000

44. Questions? Tina Cunningham Carly Cummings tcunningham@spa.msstate.edu