Budget Development

A budget should include all the Direct Costs and Facilities and Administrative (F&A) (or overhead) costs required to carry out the project objectives. Please see below for details on each budget category. The Olin Budget Template is here.

budget development

Direct costs are those costs that can be identified specifically with a particular sponsored project, an instructional activity, or any other institutional activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. 

For a cost to be allowable as a direct charge it must be:

  • Allowable: permitted as a charge per OMB Circular A-21
  • Necessary: to accomplish the approved goals and objectives of the project.
  • Reasonable the cost may be considered reasonable if the nature of the cost, and the price paid, reflects the action that a prudent person would have taken. 
  • Non-personal:  non-personal in nature and does not result in a benefit that the College does not normally provide for its employees.
  • Allocable:  expenses can be allocated based on the benefit derived.  This means cost can be allocated specifically with one research project or if the cost benefits more than one project it can be allocated based on proportional benefit or a reasonable basis.
  • Consistently Treated costs classified as direct or indirect must be consistently treated in like circumstances.
  • In Rare Circumstances: costs classified as indirect by College accounting practices may be charged as direct, with proper justification, if they qualify as an “unlike or unique circumstance”, as defined in the attached guideline. 

Salaries/Wages:   Salaries and wages for all Olin personnel who will be working on the project should be included.  The College manages and sets salaries and wages for individuals and positions. All salaries in grant budgets must comply with the approved institutional salary range or represent the actual salary of the individual to perform the work. The amount available in the budget of a sponsored project does not determine the compensation for any individual or position.  Therefore, external funding cannot be used to increase College-established salaries.  

Faculty:  External funds may be used to support summer salaries for 9-month faculty.  Charges for work performed by faculty members on sponsored program agreements during summer months or other periods not included in the base salary period must be calculated for each faculty member at a rate not in excess of the base academic year salary, divided by the period to which the base salary relates. In other words, the grant proposal budget cannot contain a summer salary that is higher per month than the faculty member’s monthly salary during the academic year. In no case can the total summer compensation from all sources paid by the College to a faculty member exceed the equivalent of 2.5 months of salary for the immediately completed academic year. Faculty members cannot be paid during the academic year in excess of their base salary.

Please note that the NSF has a set limit for senior personnel of no more than two months of their regular salary in any one year. This limit includes salary compensation received from all NSF-funded grants. 

“Person Months” for Academic Year (9-month appointment) faculty Some funding agencies (including the National Science Foundation) require budgets to reflect effort in terms of “person months” committed to the project.  Person months can be calculated in several ways, depending on the planned effort on the grant, the salary request, and the funding agency’s instructions for calculating person months. The simplest way to calculate person months is to follow the guidance provided by the National Science Foundation. 

Students:  Student assistants are paid hourly wages.  Pay Rate is determined by current academic year of student:     First-Year $12.00;    Sophomore $12.50;    Junior $13.00;    Senior $13.50

Student Awards:  A student award is a scholarship or fellowship allowance granted to a student that is provided as a fixed and regular payment. Awards are paid to individuals who are being trained or educated, and these support funds are not considered salary, as no personnel services are required from the recipient, only participation.

Allowance for appropriate annual increases should be made.  General rule of thumb is to budget a 3% inflationary increase.

PI/Investigator Effort:  In keeping with federal policy, it is Olin's policy that all PIs must have some minimal commitment to the sponsored project. NIH also requires that all key personnel have a measurable commitment to the project.  The only federal exception to this policy is for "programs for equipment and instrumentation, doctoral dissertations, and student augmentation" While many sponsors will allow key personnel other than the PI to have no measurable effort on a project, it is advisable to quantify the commitments of all key personnel.

Fringe Benefits:  Fringe benefits are calculated as a percentage of salaries and wages and include all benefits: retirement, health and life insurance, Social Security, etc. The fringe benefit rate is negotiated periodically with the Department of Health and Human Services (DHHS) and is subject to change. Current rates are included in the budget template.

Equipment:   The federal government defines permanent equipment as property with a purchase price of $5,000 or more and a useful life of a year or longer. Equipment purchased under a grant must be necessary to the research and not available or easily accessible. It is the PI's responsibility to determine the lack of availability or accessibility before including an equipment request in the budget.

Each item of equipment requested should be listed separately (with as much specific information about name, model number and manufacturer as possible) and justified in the budget justification. The costs of shipping, installation, and maintenance should also be included.

Ordinarily, the purchase of general purpose equipment (e.g. office furniture, data processing equipment, word processors, etc.) is not allowed.

Materials and supplies:  Materials and supplies include consumable items (e.g. chemicals, laboratory breakables, stationery, printer ribbons, etc.) required for the project.

Subawards/Subcontracts:  This term is used when Olin issues an award to another organization or entity to help carry out the technical and scientific aspects of a project awarded to the Institute. A subaward relationship is generally described at the time of proposal submission.  Each institution has its own PI; however, one of the collaborating institutions functions as the prime awardee and is the legal contact with the sponsor.

In general, a subcontractor is an organization that:

  • Has performance measured against whether the objectives of the project are met
  • Makes programmatic decisions
  • Assists with the preparation of reports to the sponsor
  • Must comply with applicable sponsor requirements and policies

A consultant is a company or an individual who:

  • Is considered an expert advisor
  • Is paid at a fixed daily or hourly rate of compensation
  • Sets own hours, uses own equipment/facilities, and chooses own work methods
  • Is not subject to sponsor requirements and policies

A vendor is an organization that:

  • Provides goods and services that are within the vendor's normal business operations
  • Provides such goods and services to many different purchasers
  • Operates in a competitive environment
  • Is not subject to sponsor requirements and policies

A subcontractor should be distinguished from a vendor or a consultant.  It is the nature of the relationship that determines whether or not an entity is a subrecipient or a vendor. The dollar amount of the purchase order or subcontract is not a determining factor.

Other:  Other allowable expenses include such items as publications, postage, long distance telephone, photocopying, printing, and subscriptions to periodicals that are directly related to the proposed project.

If your proposal includes funds for student salaries or student awards, please also include housing costs. Housing costs are calculated at $250 per week, per student.

Travel:  A current best estimate of cost of travel by project staff to meet the aims, objectives and/or performance requirements or to disseminate the results of the project should be included in the budget.  Each trip should be listed separately and include the destination, duration and purpose of the trip, the persons traveling, round trip coach airfare, surface transportation charges, per diem or actual hotel and meal costs as allowed by sponsor or Olin travel policy (posted on the Faculty page of the Portal under "Institutional Documentation"), and any other related expenses such as conference registration costs.

Domestic and foreign travel should be grouped separately. Most sponsors are reluctant to fund foreign travel and some have special approval procedures for foreign travel even if it is included in an awarded budget. Foreign travel must, therefore, be very well justified.  In addition, all foreign travel funded by federal agencies is subject to the Fly America Act.

Indirect costs:  Indirect costs, commonly called “Facilities and Administrative” or “Overhead” are expenses that are related to the conduct of research but that cannot be directly attributable to a particular project. The indirect cost rate used by Olin College is negotiated periodically with the Department of Health and Human Services (DHHS) in accordance with federal regulations.  Olin’s current rate is 50%.

All proposals to external sponsors must include F&A costs at the full, allowable rate. For non-federal sponsors, please consult their guidelines.  If there are no guidelines or if you have any questions about indirect costs, please contact Susan Mihailidis.

Cost Sharing:

Types of Cost Sharing

  • Mandatory – The sponsor requires cost sharing as a condition of the award.
  • Voluntary – The sponsor does not require cost sharing as a condition of the award, but Olin offers cost sharing in the proposed budget to be more competitive.

Cost sharing should be included only where absolutely required by the sponsor because auditors interpret this as effort related to sponsored research and the net impact of their interpretation is to increase the College’s share of F&A costs, thus making it difficult for Olin to negotiate a fair indirect cost rate with HHS. All matching and cost-sharing resources must meet the following general criteria:

  • They must be verifiable from the recipient's accounting records;
  • They may not be included as contributions for any other federally assisted project or program in either the current or any prior period;
  • They must be necessary and reasonable for proper and efficient accomplishment of project or program objectives;
  • They must be allowable under the applicable cost principles (OMB Circular A-21). This is true even if the asset is derived from a third party contribution. Therefore, a matching contribution must be for something for which the organization or institution could have spent federal funds;
  • They may not be paid by the federal government under another award except when authorized by federal statutes;
  • They must be provided for in the approved project budget.

Cost sharing may include effort of the PI or other personnel committed to the project at no cost to the sponsor. If cost sharing is other than the PI's effort explicitly stated in the proposal, the responsible College official must guarantee the cost sharing commitment in writing.  Proposals may not be signed on behalf of the College unless cost sharing documentation, with all guarantees completed, is on file. Cost sharing may be met from several sources; however, sponsor guidelines and policy will be controlling:

Other support for the same project, i.e., if the project is Federally-funded, the other support must come from a non-federal source;

A portion of the faculty member's effort for which no support funds are being requested. Such effort must be necessary and reasonable for the performance of the project and must be included in the faculty member's Effort Report;

Unrecovered indirect costs as part of the cost sharing and matching:  Olin College does not waive indirect cost to be used as cost sharing.  Any exception would need to have the approval of the Provost of the College. 

Once awarded, all cost sharing referenced in a proposal becomes mandatory and must be accounted for as a cost of the project. These costs must be separately identified and reported and, if in the form of effort, certified in the Faculty Effort Report. It is important to realize that once an award is made, all cost sharing commitments are considered to be mandatory and as such, represent binding obligations on the university.

Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards

This is the Federal government's guidance on Administrative Requirements, Cost Principles, and Audit Requirements for Federal awards 

 

Proposal Resources and Tutorials

- Olin Budget Template

- Advice on writing NSF proposals

- NIH Grant Tutorial 

- Proposal Writing Short Course

- Proposal Development Best Practices Download this file

- Guide for writing a funding proposal  from Learner Associates

- 5 Common Mistakes that could sink your proposal (attach file)