Proposal Budget Basics
Proposals usually include a budget, a detailed breakdown of the financial support requested from the sponsoring agency. (For NIH Modular Budgets, see the Sample NIH Modular Budget Template.)
Note: Although SPO reviews project budgets in proposals for conformance with funding agency policy on allowable costs and the proper assignment of F&A costs, budgeting for project needs is the responsibility of the PI with the assistance of the BRS/Department Research Administrator (RA) assigned to his/her unit.
When a budget is required by the sponsor, the budget should reflect the best estimate of the costs requested to conduct the work outlined in other sections of the proposal. Because proposal budgets are only estimates of what the project will cost in the future, and rates and costs do vary over time, the principal investigator (PI) should be aware that future budget adjustments may be necessary during the life of the award, and such adjustments may require sponsor approval obtained through SPO.
This is particularly true for proposals being submitted to and awards funded by international sponsors. A long-term international agreement may present a challenge when it comes to dealing with the likely fluctuations in the currencies of the two partners. The value of any currency can shift dramatically over time due to a variety of reasons. Between the time that the negotiated agreement is signed and payments are exchanged, one side may be receiving less money, or paying more than they anticipated.
The PI therefore should build a budget that considers the likelihood of future changes budget categories, rates, and conditions. The PI should monitor project costs and make internal budget adjustments (with sponsor approval if required) to stay within the project budget approved by the sponsor. Note: If a funding deficit results from (a) international currency fluctuations or (b) project expenditures exceeding the amount of the award, the PI may wish to work through SPO to request additional funding from the sponsor. If the sponsor does not provide additional funding, any deficit that results will be cleared by the campus deficit reduction policy.
Most sponsors provide detailed instructions for budget preparation; many provide budget forms or require a specific format. In preparing a project budget, PIs also should be aware that the cost categories found in a sponsor’s budget template may not match the budget categories used by the University, and an adjustment between cost categories may be needed at the post award stage.
Always read the agency guidelines before preparing a proposal budget. Note: If the sponsor does not require a detailed budget at the proposal stage, the proposal may be submitted without a detailed budget. However, SPO will require an internal budget with enough detail to confirm that the F&A rate will be applied appropriately should the project be funded. Note: If the sponsor does not indicate which base (i.e., total direct cost, modified total direct cost, or total cost) should be used for the F&A calculation, a total cost base will be used. (See explanation below.)
It is very important to adhere sponsor instructions when preparing a budget because some sponsors place additional restrictions on what direct costs can be charged. For example, some sponsors have policies that prohibit the University from charging student tuition/fees, some or all of the University’s fringe benefit costs, and/or salary costs over a certain amount. It is the PI’s responsibility to discuss any such funding restrictions with his/her Chair/Director or Dean prior to preparing a project budget and submitting a proposal through SPO. When such funding restrictions exist, costs that exceed the amount allowed by the sponsor will become the responsibility of the PI’s department/unit if the proposal is funded.
Note: Budgets for federal contracts and grants are to be prepared in accordance with Title 2 of the Code of Federal Regulations (CFR). This “Uniform Guidance” combines and replaces eight federal circulars, three of which previously governed the cost principles (A-21), administrative requirements (A-110) and audit obligations (A-133) governing the University’s federal contract and grant activities.
Proposal budgets generally include two basic categories of costs: direct costs of the proposed project and facilities and administrative (F&A or indirect) costs. Both are real costs. Direct costs plus F&A costs equal total costs. Reminder: the sponsor’s cost categories may be different than those used by the University necessitating an adjustment between cost categories at the post award stage.
Direct costs are incurred in the performance of the project and must be directly attributable to the project and must be considered reasonable, allocable, and allowable. Direct costs include categories such as salaries, fringe benefits and vacation accrual, graduate student fees and tuition, consultant costs, equipment, supplies, travel, subagreements, alterations or renovations, and other costs. It is the responsibility of the PI, with the assistance of the BRS/Department RA to determine which of these categories is appropriate for each cost associated with the project.
Salaries and Wages
For each project participant, list the:
- Name (or “To Be Named” for an unfilled position)
- University payroll title
- Nature of the position (e.g., nine month or 12 month appointment)
- Current annual or monthly salary (summer salary for faculty with nine-month appointments should be listed as a separate line item)
- Number of months per year and/or percentage of effort
- Total salary requested
For multiple-year budgets, include:
- Projected cost of living increases, specifying the period to which they apply, with an explanation of the basis for calculating the rates
- Projected merit increases, specifying the period to which they apply, with an explanation of the basis for calculating the rates
Resources for Salaries and Wages
- Home department: title, step, anticipated merit or promotion
- Academic Personnel Office: Compensation (includes information on Salary Scales and Summer Compensation)
- UCB Guidance for Furlough Exchange Program (FEP) Charges to Grants and Contracts
- National Institutes of Health Salary Cap Summary (for NIH applications only)
- Human Resources: Salary and Pay
- Human Resources: Postdoctoral Scholar Unit (PX)
- Graduate Student Compensation on NIH Grants
- Graduate Division: Graduate Student Academic Appointments
- Human Resources: UC Berkeley HR Academic Student Employee Unit (UAW 2865 - BX): Current Rates
- SPO Salary and Benefits
1. Composite Fringe Benefit Rates
The University has negotiated composite fringe benefit rates with its cognizant federal agency (DHHS). For budgeting purposes, the PI should use the composite rates along with the projections provided for out years for planning purposes, only (e.g., multi-year budgeting, financial aid planning, contract and grant proposal submissions, etc.). Note rates projected are subject to change. If future approved composite fringe benefit rates are higher or lower than the projected rates budgeted at the proposal stage, PIs will need to re-budget accordingly
Resources for Composite Fringe Benefits
2. Graduate Student Fees and Tuition
For proposal budgeting purposes graduate student fees and tuition also may appear as a separate line under “Fringe Benefits.” It should clearly be labeled, and the cost should be explained in the budget justification. However, graduate student fees and tuition should not be combined with the composite fringes benefit rate. Note: Graduate student fees and tuition are not subject to indirect cost (F&A).
Note: Document Management fees are university fees separate from the actual tuition cost. As university fees, these fees should not be charged to federal grants. This is not an allowable cost as it is a one-time fee that is not related (allocable) to the effort of the GSR that is performing work during the semester.
Resources for Fees and Tuition
- Graduate Division: Fee Remissions
- Graduate Division: Graduate Student Academic Appointments
- Graduate Division: Appointments Policy: Fee Remissions
- Office of the Registrar: Graduate Fee Schedule
- Graduate Student Compensation on NIH Grants
- Graduate Division: Appointments Handbook
3. University of California Retirement Plan (UCRP)
This cost is charged as a fringe benefit cost to non-federal awards only. The UCRP Supplemental Allocation - Interest portion will be processed as a separate UCRP Supplemental Interest Assessment on all non-federal fund sources of covered payroll.
Note: Not all employees are covered by UCRP. Therefore, only UCRP-covered payroll should be included in the UCRP calculation. For information on eligibility for membership in UCRP, PIs/RAs should refer to the UCRP Summary Plan Description.
Resources for UCRP
Vacation Accrual Time on Grants and Contracts
All UC Berkeley staff employees accrue vacation time in accordance with relevant personnel policies and labor contract provisions, including UC Berkeley staff employees paid on grants and contracts. Departments and research units should encourage staff supported by sponsored projects to use vacation time in accordance with their personnel program, percentage of appointment, and service. Vacation accrual costs should not be included on sponsored project budgets.
Resources for Vacation Accrual
Consultant fees may generally be paid only to individuals not employed by the campus or other UC campuses or UC labs who can provide special knowledge or advice necessary for the project. For each individual, specify the name, daily rate of pay, and number of days each consultant will be paid. Documentation supporting the reasonableness of the pay rate should be provided. Any costs of travel and per diem should be specified. All consultant costs are subject to the applicable indirect cost rate associated with the sponsored agreement.
Resources for Consultant Costs
- Supply Chain Management: Independent Consultants
The University defines equipment as items that cost at least $5,000 and have a life expectancy of at least one year. These items should be included as equipment in the budget and excluded from MTDC.
- List each item individually and describe as completely as possible.
- Provide current prices with sources noted. Original vendor pricing information should be retained.
- Explain any inflationary factors that have been used to estimate anticipated increases.
- If equipment is to be fabricated rather than purchased, itemize the individual component parts and estimated labor costs, explain the basis for calculations, and retain supporting documentation. If title of the fabricated equipment is retained by UC, no indirect cost applies but California taxes do; if title goes to the sponsor, then full indirect cost applies.
Effective July 1, 2014 through June 30, 2030, the California State Board of Equalization (SBOE) will be offering a reduced sales/use tax rate on equipment purchased for research. Process and program information is available from Supply Chain Management - CA Partial Sales Tax Rate Exemption.
The reduced rate will apply to:
- Machinery and equipment that will be used at least 50% of the time, and for over one year, in research and development anywhere in California
- Leased equipment, special purpose buildings, and non-inventorial equipment such as computers that are subject to the same requirements stated above
- Equipment or devices used or required to operate, control, regulate, or maintain the machinery, including, but not limited to, computers, data-processing equipment, and computer software, together with all repair and replacement parts with a useful life of one or more years, whether purchased separately or in conjunction with a complete machine and regardless of whether the machine or component parts are assembled by the qualified person or another party
- Computers used to acquire data and or control research instrumentation are eligible.
The SBOE has limited the partial rate exemption to $200 million annually UC system-wide. Due to this cap, it is the PI’s decision to apply this exemption when budgeting for the cost of equipment at the proposal stage or to apply the full sales/use rate.
Note: If the PI chooses to estimate the cost of equipment using the partial rate exemption at the proposal stage, and the exemption is not available when the equipment is actually purchased, the PI will need to re-budget to pay for the equipment with the full sales/use rate. Similarly, if the PI applies the full sales/use rate at the proposal stage, and the partial rate exemption is available when the PI purchases the equipment, the PI may be allowed to re-budget any extra funds that result.
Resources for Equipment
- Equipment Threshold (threshold increased to $5,000 effective July 1, 2004)
- Property Management: Equipment Management
- Supply Chain Management: CA Partial Sales Tax Rate Exemption
Supplies are expendable items under $5,000, specifically related to the project.
The University threshold for equipment changed from $1,500 to $5,000 effective July 1, 2004. Items costing less than $5,000 should be included as supplies in the budget and included within the MTDC base.
- List by specific categories of cost (e.g., chemicals, glassware, survey forms, small electronic components) with an estimate of the cost of each category.
- Explain how estimates were derived. Historical costs can be the basis of budget estimates for ongoing projects or in cases where similar work has been performed on another project.
Resources for Supplies
- Equipment Threshold (threshold increased to $5,000 effective July 1, 2004)
Specify for each trip:
- Purpose and destination (if known)
- Number of individuals traveling
- Mode and cost of transportation (e.g., airfare, mileage reimbursement)
- Number of days of per diem and the per diem rate
Resources for Travel
Subagreements with Collaborators
Before a sponsor’s funds can flow from UC Berkeley to another entity, it is necessary to determine if the participating entity is a “contractor” or a “subrecipient.” It is important to correctly categorize subrecipients and contractors at the proposal stage because indirect cost charges (F&A) are applied to “all” contractor costs but only to the first $25,000 of a subaward or subcontract when UC Berkeley’s negotiated rate is applied. If an entity is incorrectly budgeted as a subrecipient in the proposal and it becomes necessary to treat the entity as a contractor at the award stage, the PI may lack sufficient project funds to cover the indirect costs that will be charged. This can negatively impact project outcomes.
Furthermore, SPO must flow down all of the compliance requirements from award received by Berkeley, e.g., effort reporting on federal awards, to each subrecipient. Contractors are not subject to all of these compliance requirements and may be ill prepared to comply with such requirements if they are incorrectly classified as a subrecipient. The following section delineates the differences between a contractor and a subrecipient.
Contractor: A contractor provides similar goods or services to a number of entities. The services of a contractor are repetitive in nature, and a contractor’s goods are commonly available to many customers. A contractor therefore requires little, if any, instruction as to how to go about producing the good or service. A contactor is paid when the service or product is accepted by the customer/client. A contractor engages in “work for hire” and thus should not have copyrights and/or other intellectual property rights related to any materials, inventions, works of authorship, software, information and data conceived or developed by UC Berkeley in the performance of the project.
Subrecipient: A subrecipient relationship exists when an outside entity performs a significant portion of the scope of work or objectives of the award received by UC Berkeley. A contractor may carry out an important “task” in support of the project, but a subrecipient must meet performance targets that are tied to UC Berkeley’s program objectives. A subrecipient also has the latitude to make policy and organizational decisions governing how it carries out a program, i.e., programmatic decision-making. This involves constructing a plan or method of action; executing this plan with available human and financial resources; evaluating the outcomes/results; revising the plan, strategies, and tactics as necessary; and reporting the results. A subrecipient is a true partner and as such may assert copyrights and/or other intellectual property rights related to the work performed.
A subrecipient, unlike a contractor, also is held responsible for compliance with applicable sponsor requirements, program statutes, regulations, rules, policies (including local policies), and guidance. A subrecipient must submit a comprehensive closeout package at the end of the agreement. A contractor is only required to provide an invoice.
Including Subrecipients in Proposals
Each proposed subrecipient should be named in the proposal. The proposal should incorporate documentation from each subrecipient, including a complete itemized budget, budget justification, Statement of Work to be performed, and a description of the subrecipient’s qualifications to perform that work. The proposal also should include a Subrecipient Commitment Form or FDP Expanded Clearinghouse Participant Commitment Form signed by each subrecipient’s authorized official as well as any other required documents required by the sponsor (e.g., letter of commitment, a signed cover sheet, signed certification form, etc.).
By signing the Subrecipient Commitment Form or FDP Expanded Clearinghouse Participant Commitment Form, the subrecipient’s authorized official is approving the information provided and thereby certifying that the entity is an acceptable collaborator and a true subrecipient. At the proposal stage this is sufficient. However, before issuing a subaward to any collaborating entity SPO must be satisfied that the subrecipient’s most recent financial audit information poses no unmanageable risks and that the subrecipient’s proposed Scope of Work reflects the work of a true subrecipient. (See above.)
Budgeting for Subrecipients
The costs of each subrecipient should appear in UC Berkeley’s proposal budget as a separate line item that includes both the subrecipient’s direct and indirect costs. Berkeley’s negotiated indirect cost (F&A) rate should then be applied on only the first $25,000 of the total amount of the subaward/subcontract. However, the negotiated F&A rate is applied to “all” contractor costs. Note: When a lesser F&A rate is all that the sponsor will allow, the lesser F&A rate is applied to “all” subaward/subcontractor costs. The following chart illustrates these relationships:
|Type of Recipient||Negotiated F&A Rate||Lesser F&A Rate|
|Subrecipient||Charged on first $25,000 of subaward||Charged on all subaward costs|
|Contractor||Charged on all contractor costs||Charged on all contractor costs|
Distinguishing a Subaward from a Subcontract
Two types of transactions are typically received by SPO: Awards and Contracts.
“Award” means financial assistance (grants, cooperative agreements) that provides support or stimulation to accomplish a public purpose.
“Contract” means a contractual agreement to procure goods and/or services for the direct benefit or use of the Sponsor.
Under an “Award” of financial assistance Berkeley may issue a “subaward” to any entity that is needed as a collaborator on the project. However, when Berkeley receives a “Contract” and wants to provide project funds to a collaborating entity the appropriate transaction is a “subcontract.” Note: Sponsor approval may be assumed if a subrecipient is named in the Berkeley proposal, depending on sponsor requirements. Subcontracts may require additional prior written approval of the sponsor.
Per UC Business and Finance Bulletin BUS-43, a “sole source justification” must accompany requests for contracts when competition is deemed unacceptable and the dollar amount will exceed $10,000. Additionally Procurement must conduct a competitive bidding process for those requests that exceed $50,000. However when an entity is a collaborating subawardee or subcontractor the foregoing is not required. Should a contractor be incorrectly classified as a subawardee or subcontractor and the sole source justification or competitive bidding process not be addressed, the use of the contractor could place Berkeley at risk for audit findings that could impact future funding from the sponsor.
“Named” vs. “TBD” Collaborators
When the name and/or role of another entity is still “TBD” (to be determined) at the proposal stage, it is safest to budget for this entity as though the entity will be a contractor. This is because if at the award stage a contractor relationship is determined to be more appropriate, it may be necessary for the PI to modify the proposal budget to include appropriate F&A charges.
Resources for Subagreements
Alterations and Renovations
Budgets may include essential alterations and renovations necessary to convert interior space necessary to adapt an existing facility or to install equipment. Routine maintenance and repair are generally not considered alteration and renovation expenses.
- Specify the amount
- Provide justification
Other Direct Costs
Use previous department and investigator experience when available. BAIRS reports can provide comparative data for estimates, and consult with faculty and staff colleagues for assistance. Always follow agency guidelines on direct costs in proposal budgets. Typical categories of other direct costs are listed below. On federally sponsored projects, postage, local telephone costs, and memberships cannot be charged unless they are specifically approved by the agency.
- Stipends. Stipend charges are allowable for projects with a training component and fellowships. For the Berkeley campus, all individual grants for student fellowships are considered a fellowship and have no indirect cost applied. All individual grants for postdoctoral or faculty fellowships from federal agencies are considered research funding, and the research indirect cost rate is applied.
- Publication/documentation/dissemination costs. This category includes expenses for publication in established journals. Costs for publication of a book, monograph, or other publication usually cannot be charged without prior approval from the sponsor.
- Meeting costs, participant costs.
- Computer usage rates.
- Allowable telecommunications charges.
- Equipment maintenance. Charges should be based on maintenance agreements.
- Equipment rental. Charges may be included as rental costs if the cost of equipment rental is required for the project.
- Rental costs. When projects are conducted in rental space not owned by the University, the off-campus indirect cost rates apply, and the rental charges must appear on the proposal budget.
- Service agreements. Service agreements generally result in delivery of a product and may be issued to either individuals or companies. They are sometimes included in the cost of equipment purchase.
- General, Automobile, and Employment Liability (GAEL) charges (on non-federal awards only). Note: When GAEL is disallowed, the PI will be responsible for identifying a discretionary fund source to cover the GAEL costs.
Resources for Other Direct Costs
- Business and Finance Bulletin BUS-79: Entertainment
- General, Automobile, and Employment Liability (GAEL)
- OMB Uniform Guidance
- UCOP Operating Guidance Memo No 94-5: Departmental Direct Charging of Designated Categories of Expenses; Supplement Number One
Indirect (F&A) Costs
Indirect or facilities and administrative (F&A) costs represent those expenses that cannot be easily identified to any specific project, but that are incurred for common or joint objectives. Indirect cost elements include items such as operation and maintenance of facilities, including building depreciation, library expenses, space, utilities, payroll, accounting, and other services. Different F&A rates are applied to on and off campus research, instruction, and other activities.
The University’s standard indirect cost rates are negotiated with the federal government (UC Berkeley’s cognizant federal agency is the Department of Health and Human Services) and applied to all projects regardless of the sponsor, unless the University has approved an indirect cost waiver. Some sponsoring agencies do not reimburse indirect costs at the full rate. The University will honor these exceptions when the organization has written guidelines or will provide a letter from an authorized official stating agency policy on payment of indirect costs. The type of base and any cost items excluded from the base must be specified in either the written guidelines or sponsor letter.
All projects are considered to be subject to the on-campus F&A rate unless the project meets the criteria for use of the off-campus F&A rate. The off-campus F&A rate is used when the project is conducted throughout the project period at facilities not owned or leased by the University. If leased space and leased costs are directly charged to the project the off-campus rate must be used. Note: The off campus rate will not be applied when a PI chooses to conduct his/her project off campus for convenience (i.e., when campus or other University facilities are available).
If the project is conducted partially on and partially off campus, the University will determine which rate to use based on where the majority of work takes place. The University will look at a combination of factors in making this determination: Berkeley personnel effort and/or salary costs; whether the amount of time project activities continuously take place off campus is significant (e.g. longer than one semester or three summer months); and the extent to which university systems, resources, facilities, personnel, and students are being used throughout the project.
If all of the following conditions are met, simultaneous use of both an on-campus and off-campus rate for a project may be allowable for any given project year:
- The project is significant (total salaries, excluding fringe benefits, for the project exceed $250,000/year); AND
- The on-campus and off-campus portions can be clearly identified by means of separate budgets; AND
- The direct costs associated with each portion of the project must total at least 25% of the direct costs of the annual budget.
When applying the above criteria all subcontract costs shall be excluded, and each year of the project requires separate analysis. Contact your SPO CGO for additional assistance.
The Modified Total Direct Cost (MTDC) base is used when the federally negotiated rates are applied. It is derived by excluding certain costs from the direct cost total. At Berkeley, MTDC excludes equipment and fabrication of equipment, capital expenditures, charges for patient care, tuition remission, rental costs of off-site facilities, scholarship, and fellowships, as well as the amount of each subaward over $25,000. Not all sponsoring agencies may apply all of these categories to the MTDC; check the specific agency guidelines for instructions on budget calculation.
The Total Direct Cost (TDC) base includes all of the direct costs being charged to the sponsor. Nothing is excluded from the base prior to calculating the indirect costs (F&A). This base is typically used when a sponsor declines to pay Berkeley’s federally approved indirect cost/F&A rate and an F&A waiver is granted by the University.
The Total Cost (TC) base is used when the sponsor states that only a certain percentage of Total Project Costs can be charged for indirect (F&A) costs.
The following three examples are provided to illustrate how different indirect cost bases affect project costs.
MTDC Base. In Case #1 below, the University is allowed to charge the federally negotiated on-campus rate for organized research. Direct costs total $100,000, and $10,000 of this amount is for equipment (an item excluded from MTDC under Berkeley’s F&A agreement with DHHS).
|Case #1 MTDC Base|
|F&A rate (56.5% x MTDC)||$50,850|
TDC Base. In Case #2 below, the University is prohibited by official sponsor policy from charging the federally negotiated on-campus rate for organized research. The sponsor allows a rate of 10%. As in Case # 1 direct costs total $100,000, and $10,000 of this amount is for equipment.
|Case #2 TDC Base|
|F&A rate (10% x TDC)||$10,000|
TC Base. In Case #3, the sponsor has indicated that no more than 10% of the Total Costs (the total amount requested) can be used for F&A. Unlike Case #2 above, it is not appropriate to simply multiply 10% against the Total Direct Cost base because in Case #2 the F&A ($10,000) is actually only 9% of the Total Costs (10,000 / 110,000 = .09). For such cases you will need to know both the maximum amount of F&A that can be charged as well as the “actual” F&A rate being used.
Determining the Maximum Amount of F&A to Charge
- Step 1: Deduct the allowed F&A percentage from 100% (e.g., 100% - 10% = 90%).
- Step 2: Divide the amount of Total Direct Costs in the budget by this percentage to obtain Total Costs (e.g., $100,000 / .90 = $111,111).
- Step 3: Multiply the Total Costs obtained by the percentage for F&A allowed by the sponsor. This will generate the maximum allowed F&A (e.g., $111,111 * .10 = $11,111).
- Step 4: Check the calculation. The Total Costs minus the Total Direct Costs should equal the amount of the F&A charged to the sponsor (e.g., $111,111 - $100,000 = $11,111).
This scenario is illustrated below:
|Case #3 TC Base|
|Total Direct Costs (TDC)||$100,000|
|Total Cost (TC)
($100,000 / .90)
|F&A rate (10% of TC)
(.10 x $111,111)
|($111,111 - $100,000)||$11,111|
Determining the Actual F&A Rate Used
Using the information provided above:
- Step 1: Identify the sponsor’s allowed F&A percentage of Total Costs (e.g., 10%).
- Step 2: Deduct the allowed F&A percentage from 100% (e.g., 100% - 10% = 90%).
- Step 3: Divide Step 1 by Step 2 for the “actual” indirect cost rate being used. (e.g., 10% / 90% = .1111 = 11.11%).
How to Calculate Indirect Costs When Using a Split Rate
Although the UC Fiscal Year (FY) is July 1st through June 30th, project budget years may cross multiple UC fiscal years. It is therefore possible for a project to be subject to two different federal F&A rates depending upon when the rate was negotiated and takes effect. For example if the project year is from January 1st to December 31st, and the F&A rate changes on July 1st that same year, the project will be subject to two different federal F&A rates.
When this occurs, for budgeting purposes F&A costs should be calculated using a split rate as describe below. Do not attempt to blend two F&A rates to create one composite rate.
- Divide the MTDC base for the project year by 12 to get the direct project costs per month.
- Multiply the amount of direct costs per month by the number of months subject to the first F&A rate.
- Apply the first F&A rate to this amount.
- Multiply the amount of direct costs per month by the number of months subject to the second F&A rate.
- Apply the second F&A rate to this amount.
- Add the amounts in steps #2 and #3 to determine the total amount of indirect (F&A) to charge the sponsor using a split rate.
Example: Project Period January 1, 2019 to December 31, 2019
F&A rate 1: 50% from January to June 2019 (6 months)
F&A rate 2: 60% from July 2019 to December 2019 (6 months)
- MTDC/Mo: $120,000/12= $10,000
- $10,000 X 6 months: $10,000 X 6= $60,000
- FA @ 50%: $60,000 X .50= $30,000
- $10,000 X 6 months: $10,000 X 6= $60,000
- F&A @ 60%: $60,000 X .60=$36,000
- Total F&A: $30,000 + $36,000= $66,000
Resources for Indirect Costs
- Office of the Chief Financial Officer: Composite Benefit Rates, Facilities and Administrative Costs
- Facilities and Administrative (Indirect Cost) Rates
- Facilities and Administrative (Indirect Cost) Waivers
Cost Sharing and Matching Funds
Some funding agencies require the grantee institution to demonstrate its financial commitment to the project, or the commitment of other funding sources, by sharing the project costs.
Cost sharing should be included in the proposal only when the sponsor requires cost sharing as a condition of applying for an award. Cost sharing must be documented in the same way as other charges. Unfulfilled cost sharing commitments or lack of documentation may result in a reduction of costs allowed against the sponsored project and a return of funds to the agency.
Note: By using language in proposals that cites percentage of time, salaries, or specific levels of support, principal investigators can commit to cost sharing, even unintentionally. Any quantifiable cost offered in the proposal becomes a legally binding and accountable commitment of the University upon award. For more information and for examples of language that may be used to address the issue of academic or programmatic contributions or support without creating a contractual and auditable commitment to cost sharing, see Cost Sharing Basics.
Cost sharing funds may come from an outside source in the form of cash contributions, volunteer services, or donated property; from the University’s own funds (e.g., personnel effort without salary recovery); or from shared resources or facilities. If the award is federal, only acceptable non-federal costs qualify as cost sharing.
Types of cost sharing
- Direct-Cost: Direct-cost cost sharing is the provision of faculty and staff time and related fringe benefits, dedicated equipment, tuition, computer support, and other resources as direct support for the project, as well as related indirect costs. Commitments made by departments, schools, or other units must be detailed in the proposal and appropriate approvals must be included.
- Indirect (F&A) Cost: This type of cost sharing occurs any time the University agrees to recover less than the federally negotiated indirect cost rate. Approval from the UC Office of the President is required if an indirect cost rate is lower than the university applied rate.
Matching funds, if required by the funding agency, are raised from non-federal outside sources to increase the level of support provided by the funding agency. Such funds must be identified by the donor or funding source for use as matching funds.
Always follow agency guidelines when preparing budgets with cost sharing or matching funds; formats vary by sponsor. The simplest version of a cost-sharing budget has three columns: amount requested from sponsor, UC contribution amount, and total project costs (the sum of the first two columns).
Resources for Cost Sharing
- Cost Sharing Basics
- Contracts and Grants Accounting Cost Sharing
- UCOP Contract and Grant Manual, Chapter Five - Cost Sharing
- UC Berkeley Procedures for Cost Sharing And Matching (memo on provision of central funds for cost sharing required in grant applications)
- Request for Central Campus Cost Sharing Form
The budget justification provides the rationale for proposed expenditures. The primary purpose of a justification is to provide support for the funds requested to ensure adequate funding. Follow agency guidelines to prepare budget justifications; requirements for the amount of documentation to support proposed costs and the detail of cost descriptions vary by sponsor.
Major items to include in budget justifications:
- Salaries for faculty, research associates, graduate students, technicians, or staff*
- The University’s definition of a “Year” for budgeting of senior personnel salaries (As of April 1, 2018 this is the Fiscal Year: July 1–June 30.)
- Permanent equipment
- Large or unusual categories of supplies
- Foreign travel and extensive domestic travel
- Use of consultants (e.g., why the expertise is not available in-house, unique qualifications of individuals)
- Subagreement costs
- Any special items not easily justified by the nature of the proposal as a whole
*Note: If the PI is requesting salary for summer as well as academic months, the budget justification should explain the two rates used.
For sample budget justifications for NIH, NSF, and other agencies, see Budget Justification Templates.
Sample NIH Modular Budget Template
This NIH modular budget template should be provided for SPO review instead of a detailed categorical budget. Although the NIH does not require such a breakdown at the proposal stage, it is SPO’s responsibility to determine if F&A costs have been estimated properly. To do this, SPO must be able to identify budgeted items that are subject to and excluded from F&A charges. If the F&A rate is applied inappropriately at the proposal stage, the PI may not receive sufficient funds from NIH for his/her project at the award stage. Note: The modular budget format may be used for budgets that include no more than $250,000 per year direct costs over a period of five years. If the PI is requesting more than this amount, NIH (and SPO) will require a detailed categorical budget for review.