Instructions for Building a Budget
Many sponsors utilize prescribed formats for budgets submitted as part of a proposal submission. For proposals to sponsors that do not offer such guidance though, it becomes necessary to "build" a budget using generally accepted form and content. The instructions below will assist in this process for those investigators who wish to create their own budgets prior to review by the Office of Research Administration (ORA).
Standard Elements of Cost
Generally, one or more of the following categorical items of costs may be included in budgets that are not restricted as to content and/or type of costs that may be proposed:
- Salaries & Wages
- Fringe Benefits
- Materials & Supplies
- Equipment
- Travel
- Consultants
- Subcontracts
- Other Direct Costs (e.g., tuition, graphic services, publications, etc.)
- Indirect Costs
Getting Started
Before building a reasonable and sufficient budget, careful consideration must be given to the types and amounts of costs needed for the project being proposed. Casual inclusion of costs that cannot be appropriately justified as necessary to completing project objectives can often mean the downfall of an otherwise effective proposal. Conversely, cutting costs below what is reasonable in relation to the work to be performed can result in unnecessary departmental or personal cost sharing.
Begin by thinking in terms of how long the project will last, if funded, and by making an attempt to envision what specific activities will take place at different stages during the proposed period. For example, if the project is to utilize the services of a research assistant, typical costs associated with this individual (stipend and tuition) cover the academic year, but will additional work need to be completed by this student during the summer? A consultant, on the other hand, may be required, but only at certain critical stages of the study. If the project requires a new piece of equipment, determine when will the purchase of this item be required and how much will it cost (the amount indicated in the budget should be based on a quote from the manufacturer or supplier). If the project includes presenting findings at a conference, when and where is this meeting mostly likely to be held? If research-related supplies are needed, what will these be and when will they be used? Breaking down the project into primary events will help to hone in on specific types of costs associated with getting the job done. An example of what a typical one-year budget might look like is shown at the end of this document.
Salaries & Wages
Normally, the first priority will be to reasonably estimate the project's human resource needs. As the principal investigator, think about how much effort will need to be devoted and when. For obvious reasons, many faculty on appointments of less than 12 months request reimbursement of salary during the summer, when there are no or fewer teaching, advising or committee responsibilities. Is it reasonable to expect that you will devote most or all of your project effort during this time? If your project requires the services of a research assistant, chances are that you will be devoting at least some effort during the academic year to train, supervise and evaluate the results obtained by this person as well.
Given your current annual salary and type of appointment (9, 10 or 12 months), determine the current monthly rate by dividing the annual total by the number of months in your appointment (for faculty, this is normally 9 months while, for staff, it is always 12 months). Then estimate how much effort will be devoted (e.g., 1 month, 5% of academic year time, etc.). Finally, determine when this effort will be devoted, keeping in mind that, each year as of July 1st, you expect to receive a salary increase that will need to be included. Currently, the University estimates annual salary increases at between 2.5% and 4%.
For effort to be devoted during the academic year, the calculation becomes a bit more interesting. Your effort can be expressed in terms of months, as in the above example for summer salary or as a simple percentage of a typical 9-month academic year appointment. If the devotion of academic year effort means that you need to be released from a teaching assignment, then speak with your department head to obtain approval and plan for who will replace you in the classroom (i.e., another faculty member or hiring an adjunct). Approval is needed because your release from a teaching assignment may mean an additional department expense, for which reimbursement from the sponsor may or may not be requested. If it is not requested, the result is cost sharing by your department and/or the University.
Assuming an annual salary of $58,500 and a 9-month appointment, the calculation of how much salary you are requesting for your effort as principal investigator should be expressed in the budget, as follows:
J. Smith, Principal Investigator (1 summer month) $6,500
or
J. Smith, Principal Investigator (10% academic year effort) $5,850
Calculations should now be performed for each additional University employee and/or student working on the project. For other faculty or staff, this calculation will be similar to the example(s) above.
For graduate students, estimate the number of months each will work (normally, 9 months or 12 months) and multiply this number times the monthly stipend rate appropriate for either Master's or Ph.D. students. The rate used must be selected from the current University-approved ranges, which are based on an average of 20 hours per week), and be consistent with stipends provided to other research assistants in your department. Check with your department head if you are unsure.
Occasionally, certain graduate students will work full-time (40 hours per week) on a project during the summer. If such is the case with your project, then multiply the selected rate for a 20-hour per week stipend times 15 "months" rather than 9 or 12 months. Using 15 months effectively equates to having the student work 20 hours per week for 9 months and 40 hours per week for 3 months.
A budget line item for a postdoctoral research associate earning $45,000 per year over 12 months would look like this:
Postdoctoral Research Associate (12 months @ 100% effort) $45,000
Similarly, a budget line item for a graduate research assistant to be paid $1,400 per month (based on an average of 20 hours per week during the academic year) might look like one of the following examples:
Research Assistant (9 months @ $1,800 per month) $16,200
or
Research Assistant (12 months @ $1,800 per month) $21,600
or
Research Assistant (9 months @ $1,800 and 3 months @ $3,600) $27,000
On Federal proposal submissions, it is normally not appropriate to include a request for secretarial and/or administrative support in your budget. The government has determined that such an expense is an indirect cost for the majority of projects because of the difficulty in tracking and apportioning relatively small percentages of effort. Exceptions may be made only on significantly large projects and/or projects that involve secretarial and/or administrative activities that are "over and above" what the normal duties for such a support person would be. Always check with ORA before including this type of expense in budgets to be sent to a Federal sponsor.
Fringe Benefits
For each non-student who will be working on the project, an appropriate amount must be requested to cover fringe benefits at the current rate approved by the Federal government. Such is the case regardless of when WPI-employee effort is to be devoted (academic year or summer).
The budget line item for fringe benefits typically looks something like this:
Fringe Benefits (26.2% of non-student salaries) $1,703
After listing all personnel and fringe benefits, a subtotal entitled "Total Personnel Costs" should be provided in the budget.
Materials & Supplies
Many proposed projects require the purchase of certain materials and/or supplies of a technical nature (e.g., chemicals, pipettes, etc.). If your department already has an inventory of the necessary supplies, they should still be requested from the sponsor in order to cover the associated costs of replacement. The level of detail to be shown in your budget will depend on the types and quantities of the materials and supplies needed to complete the project. Most often, budgets will include a single line item supported by a breakdown in an attached Budget Justification page. If, though, there are only one or two types of materials and/or supplies required, they may be listed in the budget itself.
Similar to secretarial and administrative costs mentioned earlier, the Federal government has determined that general office supplies (e.g., reams of paper, pencils, diskettes, CDs) should be indirect costs, which are reimbursed as part of the indirect cost rate. Only under certain circumstances may this type of expense be reimbursable as a direct cost. Always check with ORA if you wish to include general office supplies in a budget to be submitted to a Federal sponsor.
Equipment
In most normal research and other proposals, it is not uncommon to include a budget line item for equipment that is needed to accomplish the work. There is a general expectation though, that the University already possesses the necessary facilities and equipment to accomplished the scope of work being proposed, and that the purpose of any equipment request should be to augment or custom-tailor already existing equipment. There are specific funding opportunities available from a variety of sources under which major purchases of equipment may be proposed - as a rule of thumb, save any larger equipment requests for these types of opportunities rather than "bulking up" on equipment in research proposals.
Another faux pas in submitting standard research and other proposals is to include general purpose equipment (e.g., PCs, printers, office furniture, refrigerators, etc.). The reason for this is that most sponsors recognize that such generic equipment can and will be used for a variety of purposes and the University should already make this equipment available for its normal operations. For this reason, quantities and amounts of general-purpose equipment should normally be limited in research proposals.
Any equipment requested should be listed in the budget itself (up to a few items) or summarized in the budget and detailed in the justification. The purpose and need for the equipment should always be justified programmatically.
Travel
Many times, investigators need to travel, such as to conferences to present findings or to attend meetings with the sponsor or collaborators. Such expenses are expected and should be included, as appropriate, on all proposals. When estimating travel costs, consideration should be given to all of the component expenses for each anticipated trip. This can include airfare, hotel accommodations, meals and incidental expenses, conference registration, auto mileage or car rentals, and so forth.
Airfare should be book at coach or economy class rates. For all foreign travel expected to be undertaken with Federal funds, U.S. certificated air carriers must be utilized to the extent available. Check with your travel agent and specify that you must use a U.S. carrier. For questions about using U.S. carriers, see the FAQs document available on the ORA web site.
Estimated amounts for hotel, meals and incidental expenses (per diems) included in proposals to Federal sponsors should be no greater than the currently approved per diem rates for the expected destination. Information about current Federal per diem rates is available at http://www.wpi.edu/Admin/Research and clicking on Sponsored Projects Administration and then Federal Regulations, Guidelines and Information. If the ultimate destination of a conference city, for example, is not known because the sponsoring organization has not determined yet where its annual conference will be held, attempt to determine reasonable amounts that will not create a hardship for the department.
Expected auto rental expense should provide for no more than an economy class vehicle for the minimum number of days and at the lowest available rate.
The cost of any memberships or dues associated with attendance at a conference is not allowable as a direct charge to Federal grants and contracts. The expense should not be budgeted or charged to Federal awards because the government considered them to be indirect costs.
Consultants
The use of consultants (a.k.a., independent contractors) is common on sponsored programs when the expertise or additional knowledge to be provided by these individuals is necessary to further programmatic objectives. Consultants are not employees of WPI and should not be included in the personnel section of the budget. Further, a consultant is holding herself/himself out to be "independent," meaning that another institution or organization's facilities should not be used in the performance of the work. In situations like this, a subaward to the institution or organization may be more appropriate, especially if the work involves a significant portion of the overall scope of work for the project. If a consulting engagement is needed, include a line item in the budget and provide an explanation in the proposal text and/or budget justification. A letter of intent from the consultant should also be included with the proposal. This letter should specify the project title, consultant rate, and a brief description of the work to be performed.
For Federal programs, the daily rate for consultants is sometimes limited within the sponsor guidelines. This rate represents the maximum daily fee that may be paid to the consultant, exclusive of other valid expenses such as travel, accommodations, meals, etc. For those sponsors that do not provide such a limit, the current rate for Federal sponsors that do limit daily reimbursement amounts is used as a test of reasonableness.
Determine the number of days that a consultant will be needed and multiply this number times the rate to be charged to calculate the "fee" portion of consulting expense for each consultant. To this amount, add the estimated total of other allowable and reimbursable expenses to arrive at the total cost for each consultant.
Subcontracts
As is the case with consultants, sometimes certain parts of a scope of work must be performed by an organization that is either more qualified or has the necessary facilities. In situations such as this and when the level of performance is considered material to the overall project scope, a subaward may be appropriate.
When it is necessary to involve another institution or organization, include a line item for this in the budget. In support of this line item, a letter of intent must be provided by the participating organization. This letter must indicate the title of the project, the amount to be charged, and a brief statement of what work will be performed. Finally, the letter of intent should be signed by both the principal investigator and an institutional official of the subawardee organization. Attached to the letter of intent should be a detailed budget, a scope of work, and, for budgets that include subcontractor indirect costs, a copy of their current negotiated indirect cost rate agreement.
The involvement of any subcontractors should be justified in the proposal text because of the materiality of their participation. In addition, the total amount of subcontractor expense should be explained in the budget justification. More information about the use of subcontractors is available on the ORA web site under Policies and Procedures.
Please note that the inclusion of one or more subcontractors on a federal proposal adds an additional monitoring requirement in the event of an award. Please see the WPI Subcontracting Procedure at http://www.wpi.edu/Admin/OSP/Handbook/subcontracting.html for more specific information.
Other Direct Costs
This category of expense contains any other costs not included in the individual line item information above. For proposals involving graduate research assistants, most of this expense will be for tuition associated with their involvement in the project.
Tuition for graduate research assistants should be calculated using the currently approved University tuition rates, adjusted for anticipated increases in the year(s) to be charged. Typically, graduate research assistants are required to take 18 credit hours per year, but this number may increase to 20 or 21 credit hours per year, depending on whether there will be any coursework during the summer. To calculate the total annual expense for tuition per student, multiply the number of credit hours times the current (or adjusted) tuition rate.
Other types of costs that should normally be included in the Other Direct Costs category include graphic services, publications, copying and mailing, telephone, and service center and specialized service facilities costs (e.g., charges for electron microscope, NMR mass spectrometer, machine shop, etc.). Although usually not significant in amount, these expenses should be clearly explained in the budget justification as to why they are necessary to accomplish program objectives.
Total Direct Costs
A subtotal should be shown on budget that reflects the total amount of direct costs before calculating indirect costs.
Indirect Costs (Facilities and Administrative Costs)
For all proposals on which there is no sponsor limitation on the amount of allowable reimbursement, indirect costs at the University's currently approved rate must be included. This expense is not a tax or a surcharge but, rather, represents only a partial reimbursement of those expenses that are not directly attributable or allocable as a separate direct cost line item (e.g., lights, heat, snow removal, administrative services).
The amount to be included for indirect costs at WPI is calculated using a Modified Total Direct Cost (MTDC) base. To determine the total amount to include in a budget, multiply the currently approved indirect cost rate times total direct costs less tuition, equipment, scholarships, fellowships, rental costs, and the excess of the first $25,000 on each subcontract (the current indirect cost rate is available on the ORA web site by clicking on Proposal Preparation Reference Sheet).
Total Costs
The total of all direct and indirect costs should be shown at the bottom of the budget.
Other Budgeting Tips
• Include a sufficient amount of salary funds to reimburse you and/or the University for the expected level of effort to be devoted, remembering that effort must be devoted during the actual time period for which funds are requested (i.e., requesting a month of summer salary requires that this effort be devoted during the summer) and that your actual effort devoted will have to be certified.
• Current costs will normally increase over time. Allow for these expected increases when calculating future budgets that involve subsequent fiscal years.
• When reviewed by a sponsor, a budget is measured against the work to be performed to determine that it is reasonable. Budgets that are excessive or that do not provide for necessary and appropriate expenses can hurt the chances that a proposal will be reviewed in the most positive light (i.e., the idea that a budget has to be competitive only goes so far before it becomes unrealistic).
• As a practical matter, cost sharing should not be volunteered on proposals, either in the text or the budget. In addition to observing the University's policy on cost sharing, the reasons for this include not wanting to set a precedent for future proposals to the same sponsor and the fact that the University already provides cost sharing of a sort on virtually all proposals that receive funding. This happens mostly on sponsored programs that include a graduate research assistant, but which only provide for summer salary for the principal investigator. During the academic year, the University pays the investigator to work on a project for an external sponsor and this cost is not recoverable. When cost sharing is required, an analysis of the total of all project costs should be performed first before attempting to determine whether any additional cost sharing needs to be approved by the University. The subject of cost sharing is addressed on its own merit on the ORA web site in the section on Policies and Procedures under Sponsored Projects Administration.
Budget Example
Drawing from some of the examples above, a simple one-year budget might look something like the following:
PROPOSAL BUDGET
FOR THE PERIOD 7/1/XX TO 6/30/XX
Salaries & Wages
J. Smith, Principal Investigator (1 summer month) $ 6,500
Research Assistant (9 months @ $1,800 per month) 16,200
Subtotal - Salaries & Wages $22,700
Fringe Benefits (26.2% of non-student salaries) 1,703
Total Personnel Costs $24,403
Equipment (High-Powered Gizmo) 5,000
Travel to Annual Conference in Provo, Utah 2,000
Other Direct Costs
Materials & Supplies (reagents, chemicals) $1,000
Electron Microscope Usage 500
Copying and Mailing 200
Publications 500
Research Assistant Tuition (18 credits @ 1,094 per credit) 19,692
Total Other Direct Costs 21,892
Total Direct Costs $53,295
Indirect Costs (52.2% of MTDC Base of $28,603) 14,931
Total Project Costs $68,226
Last modified: October 27, 2009 16:26:36