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Budget Preparation

Budget Preparation

An accurate and realistic budget is everything. Please construct yours with equal attention to detail and consideration for guidelines provided by sponsors and university policies. Contact grants accounting staff in the Finance Office for information related to drafting a project budget. The CFO must approve all budgets prior to submission. Please consider the following when developing a project budget:

Direct costs are the costs directly associated with a project (i.e. items cannot be purchased, or events cannot take place without external funding). Direct costs may include personnel, equipment, supplies, participant costs, travel, and other expenses.

Indirect costs are those goods and services that are needed for a project, but not purchased or secured because of the project. For example, computers, pencils, and the time and effort of the Facilities staff who keep the lights working in our buildings are essential to the work, but not directly attributed to the project, and are thus representative of indirect costs.

Some funding organizations allow an applicant to recover a certain percentage of indirect costs; percentages may vary based on the type of funding agency. If a funder allows indirect costs to be part of the budget, the funder understands that resources beyond those listed in the budget are necessary to complete the work.

NOTE:   Spalding University does not currently have a negotiated indirect rate with the federal government, but will negotiate a new rate in AY 2022.  Indirect policy for Spalding is currently in discussion.

Allowable, reasonable, allocable: These are the three basic considerations for whether a cost may be included in a budget. In regards to federal awards, these principles may change depending on the project, but must be used to determine if the costs are appropriate. Cost principles for federal grant expenditures (including subaward pass-throughs and grants-related contractual agreements) are contained in the Office of Management and Budget (OMB) Uniform Guidance for Grants and Agreements (Subpart E — Cost Principles). Consider the following when deciding if a cost is allowable and review proposal solicitations carefully (external funders may have additional restrictions):

Allowability of costs (2 CFR §200.403)

  • Is the cost reasonable and necessary for the project or program?
  • Is the expense in compliance with laws, regulations, and grant terms?
  • To what extent is the expense allocable to the grant?
  • Is the cost adequately documented?
  • Is the cost or expense consistent with university policies and procedures?

Reasonable costs (2 CFR §200.404)

  • A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.
  • Consideration: Do sound business practices support the expenditure?

Allocable costs (2 CFR §200.405)

  • Allocable means the good or service can be assigned to an award or cost objective in accordance with the relative benefit achieved.
  • If a cost benefits two or more projects, activities, or programs in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit.

Unallowable expenses include (but are not limited to):

  • Alcoholic beverages
  • Entertainment costs
  • Personal expenses or purchases
  • Lobbying
  • Participant support costs not specifically addressed in your award letter
  • International travelcosts not specifically addressed in your award letter

All expenditures are processed through the Finance Office and are reviewed to ensure they are allowable under the terms of the award and are made within the allowed time period, properly authorized, and adequately documented. If an invoice does not provide adequate information as to the nature of the charge and how it relates to the sponsored project, the PI/PD must supply other supporting documents or narrative.

The following policies are available from the Finance Office and provide clear guidance as to what costs constitute appropriate charges in accordance with university policies:

University Purchasing Policy

Fifth Third Card Program Cardholder Agreement

Spalding University Travel Reimbursement Policy

Proposed budgets should include all project, or direct (and indirect), costs allowed within the guidelines provided by the granting agency, or external funding source, and the university. Multi-year budget line items may be adjusted upwards by three percent (3%) per year to allow for inflation and/or cost of living expenses. Common budget categories are listed below; contact grants staff in Advancement or staff in the Finance Office for assistance in creating a budget.

NOTE:   The CFO, or their assigned designee, must approve all proposed budgets.

NOTE:   The commitment of time and effort by faculty and staff typically represents a significant amount of project cost. Salary allocation is based upon distribution of total full-time effort (FTE), which includes teaching, research activities, and campus community citizenship. Understanding allocation of effort and the corresponding charging of salaries, and/or supplemental pay, to projects is an important component of project management.

NOTE:   For regular exempt employees and faculty paid through the payroll system, pay is remuneration for all work that benefits Spalding. For full-time employees and faculty, this is 100 percent FTE. One-hundred percent FTE does not equate to any set number of hours; it is the totality of all effort compensated by the university.

Institutional Base Salary (IBS) – Paid by Spalding to individuals for time spent on research, teaching, and other activities. It includes regular and supplemental pay; excludes honoraria, vacation accrual, and extra compensation (e.g. tuition reimbursement); excludes income an individual is permitted to earn outside of Spalding responsibilities (e.g. consulting); and may not be increased by replacing Spalding salary with sponsored project funds.

Faculty Effort – No one individual can offer more than 100 percent FTE; the Office of the Provost/Office of Academic Affairs and individual academic units may define unique thresholds for how much FTE faculty members are allowed to reserve for non-sponsored activities.

Administrative Course Release – Administrative course release must be approved by the academic unit chair or program director, academic dean(s), and provost. See the Spalding University Faculty Handbook for more information.

Travel, Lodging, Meals, and Tips – See Cost Principles for specific information. Include provisions for all necessary personnel, including students.

NOTE:   2021 Standard Mileage Rate: $0.56/mile (business travel); rates set by IRS.

Human Subject Compensation – Incentives for research participation are an allowable expense, generally. All research involving human subjects must receive approval by the Research Ethics Committee (REC).

Software and Licenses – Contact Information Technology/Help Desk or the Center for Teaching and Learning (CTL) before purchasing software or licenses to ensure that the desired product is compatible with existing systems.

Publication Costs – Copying, binding, and distributing project results are generally an allowable expense.

Consultants – Individuals with a particular skill or expertise may be contracted to work with sponsored projects. For projects and contractual agreements funded through federal awards, the university will vet consultants and vendors through the System for Award Management (SAM) prior to entering into a contractual agreement.

NOTE:   Spalding employees should not receive payment for consulting on the project of another Spalding employee, as on-campus consultation is generally considered an expectation of collegial behavior.

Evaluators – A primary criterion for selecting an evaluator is that he or she must be external to the project. The evaluator may be from on- or off-campus, however, in order to maintain impartiality in findings or results, the evaluator cannot be involved in the implementation of the project.

Conferences/Workshops – Meeting expenses may include catering, speaker fees, travel, advertising, lodging, room and equipment rental, materials, etc.

Personnel – Project personnel are those individuals who conduct award activities, and may include faculty members or researchers, staff members, students, or consultants and evaluators.

Compensation:

  • Salary – A salary is a fixed regular payment made to an employee calculated on an annual basis. Contact Human Resources for assistance in determining a reasonable salary for a person with the necessary skill and rank. Multi-year awards should request a three-percent (3%) cost-of-living increase per year for any proposed project period.
  • Wages – Wages are associated with employee compensation based on number of hours worked multiplied by an hourly rate of pay. Contact Human Resources for assistance in determining a reasonable wage for a person of the necessary skill and rank.
  • Stipends – Stipends are usually paid out from an award in one or two lump sums for work on a particular project. If allowed by the granting agency, budgets that include stipends over multiple years may be subject to a three-percent (3%) cost-of-living increase per year under the award. The hourly wage rate is established as part of the university budgeting process, which means that PIs/PDs will need to use an estimated rate in their proposals. Please contact the Finance Office for assistance; if awarded, actual rates will be used during the grant period.

    NOTE:  Students who receive a stipend or academic year wage from an external funding source need not be paid on the same funding scale as students receiving internal college funds. Like other employees, a student paid through an external funding source should receive wages that are reasonable for a person with the necessary skill set.

Benefits and Taxes:

If it is proposed that an individual’s salary or wages will be funded entirely through an external award, the application or proposal budget should also request an appropriate percentage of employer-paid benefits and employer-paid taxes, as applicable. Employer-paid benefits include medical insurance, life insurance, long-term disability insurance, worker’s compensation, and others. Employer-paid taxes include those mandated by the Federal Insurance Contributions Act (FICA) and Medicare.

In circumstances where a partial amount of an individual’s salary is to be paid from an award, the benefits cost should be adjusted proportionately according to estimated time and effort on behalf of the program or project. If a multi-year award allows for cost-of-living increases, calculate a new benefits charge based on each annual increase.

NOTE:  Regardless of context, contact Human Resources and grants accounting staff or payroll representatives in the Finance Office for instruction on calculating benefits, taxes, and any annual increases.

Stipends (whether they are received by students, faculty or staff) are not charged benefits; however, they are subject to employer-paid FICA and Medicare taxes.  Budget proposals that provide stipend support should include requests to cover for employer-paid FICA and Medicare tax expenses.

If a multi-year award allows for annual increases, be sure to calculate these taxes on the increased annual stipend. Contact Human Resources and grants accounting staff or payroll representatives in the Finance Office for directions on calculating taxes and annual increases.

Fringe benefits – Fringe benefits, such as health insurance, are paid at a rate that is pre-determined by the university each year. Rates are variable depending on the employment status (full-time, part-time, student) of the individual in question.

Some funders permit fringe benefits to be included in the budget portion of grant applications; however, others may specify in their proposal guidelines that fringe benefit costs are not allowable. Please note that fringe benefit rates may change. For all proposals that include salaries or stipends, there should also be a budgeted line item for benefits.

Other Personnel Costs:

The following budget items may or may not apply to project personnel as determined by guidance outlined in the contract or proposal solicitation and needs of the project. Contact your supervisor or Human Resources for more information.

Recruiting – Costs associated with announcing and advertising a position and interviewing candidates may be an allowable cost.

Professional Development – Faculty and staff sometimes receive funds to support research and their attendance at conferences, workshops, or other professional development activities. Contact your supervisor or Human Resources for more information.

Cost share is the portion of project expenses that are not covered by the external funder and may be provided by the university or by other organizations. Funding opportunities that require cost share can specify the amount or percentage of the project that must be supported by other sources, or the value of the cost share could be left vague. Generally, the university does not enter into voluntary or non-required cost-share agreements.

Matching funds represent a commitment by the grantee to provide or raise a portion of project funds in order to gain funding agency support. Generally, these funds must be committed or “in-hand” before the funding agency will release its promised portion. Matches can be 1:1 (each partner contributes the same amount), or any other ratio, such as 2:1 (where the funding agency contributes two dollars for each one that the grantee contributes), or 0.5:1 (where the funding agency contributes half of the dollars that the grantee contributes).

In-kind contributions are non-monetary resources such as time, equipment, and materials that are gifted to a project without compensation. Unless otherwise specified, in-kind gifts may be used to meet cost-share or matching obligations. In-kind contributions must be assigned a reasonable and justifiable value and that value should be documented accurately in project records.