Chapter
4 -
Preparing The Budget
Preparing a proposal budget is a complicated
job because the university and most sponsors have many rules,
regulations, and requirements to observe. The rules are important
because they ensure the openness and financial soundness of the
transaction or, in some cases, express the programmatic preferences
of the sponsor. The rules also ensure uniformity of treatment
among the faculty members seeking external funds. However, faculty
members cannot always take the time for these complications, so
the Grants Office staff will make every effort to assist in the
budget preparation. Please consult with the Grants Office about
your budget early in the proposal process.
This manual does not cover the procedures
for execution of financial documents once a grant or contract
is awarded and the funds are available. These "post-award"
procedures are handled by the Office of the Vice President for
Administration and Finance. Contact that office immediately after
you receive the grant award letter.
OMB Circular A-21, "Cost Principles
for Educational Institutions," describes allowable and unallowable
costs. A copy of A-21 and other documents are available in the
Grants Office. Some agencies may have more restrictive rules.
Make sure that you know what costs are allowable before you prepare
your budget.
Most government agencies have a
prescribed budget format, and some private foundations do. Refer
to guidelines from the funding source for the budget format.
In most cases, the budget should
be organized by the type of cost --- salaries, fringe benefits,
supplies, travel, equipment etc. --- rather than by the type of
work or the stages in the project. Organization by the type of
cost is consistent with the actual accounting practices and regulations
for both the sponsor and Fort Hays State University, so budgeting
that way saves confusion and difficulty later. In a few cases
(most likely for contracts), the sponsor may wish to see cost
figures attached to each major part of the work; in those cases,
it is usually wise to do both kinds of budgets. For complex budgets
involving several years and/or several subcontractors, many pages
may be needed to display the budget and the supporting narrative.
Federal agencies may require that you estimate or state exact
costs by the quarter for the year. If so, the budget forms reflect
this requirement.
Sponsors often have announced policies
about the kinds of expenditures they will support. Federal agencies
state allowable and non-allowable expenditures. Know the specifications
for your intended sponsor and prepare the budget accordingly.
Sponsors usually also know what things cost in their fields of
endeavor, so do not make the budget unusually fat or lean. Agencies
view fat budgets negatively, and they question every budget that
does not request funding adequate to complete the project.
Fort Hays State University adherence to the rules
and regulations is monitored by the auditors for the federal government,
the state government, and other sponsors, as well as our own internal
auditor. The sponsors will disallow (require Fort Hays State University
to return) funds that the auditors determine have been spent improperly.
Federal agencies name specified rules about budgets. Copies of
A-110 and A-21 are available for review in the Grants Office.
A. Direct Costs
Budget Explanation Pages
or Budget Narrative
You
should usually include in your proposal a page of a few paragraphs
of Budget Explanation or Budget Narrative in which you explain
the items shown on the budget, why they are necessary, and how
they are calculated. This information will help reviewers understand
your project and simplify any later discussions with the sponsor's
staff on why you requested certain amounts for various tasks.
Large or unusual items (such as international travel, consultants,
expensive equipment, subcontractors, or construction costs) should
certainly be explained; routine or small items may not need explanations.
For matching funds or cost sharing, indicate the source of the
contribution. This text will usually be placed just before or
just after the actual budget pages.
Personnel:
Salaries and Wages
Compensation for personnel is an
area covered by many federal and state regulations because there
are potential problems with taxes, with conflict of interest,
and with fringe benefits. The following sections cover only the
most frequently encountered questions. Please check with the Grants
Office and the Personnel Office in advance if you have any questions
about your own situation.
When stating salaries and wages,
use percentage of time on the project, not hours. Use whole hours
per week, i.e., 20 hours = 50%, 10 hours = 25%, 6 hours = 10%.
Then develop the scheme for months or the year. Use the nine months
academic year plus summer for faculty; use twelve months for administrators.
Remember that faculty are on nine month contracts though they
may be paid over twelve months. Use the academic year contract
salary.
The following notes on personnel
costs refer to people who will be paid as employees of the university.
If a substantial portion of the work is to be done by employees
of another organization (by faculty and staff at another university,
for example), then that work might better be handled as a subcontract.
See the sections below on consultants and subcontracts.
Faculty (Reassigned)
Time in the Academic Year. Specify the percent of time
that will be reassigned for the project and budget that percent
of the faculty member's academic year salary. Note: A few
sponsors will pay only the actual cost of the replacement instructor,
which is usually less than the professor's salary. Some sponsors
may not pay at all and expect the university to provide the funding
for a replacement.
Faculty Salaries
for Summer. Monthly payments for grant work during summer
will usually be made at the rate of 1/9 of the annual approved
nine-tenth salary for a full month of such summer employment.
(Remember that the monthly pay most nine-month faculty receive
is based on a twelve-month distribution of a nine-month salary.
Thus, to determine the amount to charge for a month of your time,
divide your academic year contract salary by
nine, not by twelve.) Some private sponsors may have
no objection to paying a higher rate of pay for summer, but federal
and state will not pay higher salaries as this is prohibited by
regulation. You cannot enhance your salary with grant
dollars from federal agencies, nor can you enhance the salaries
of the participants. If audited, one must show the regular
contract salary and what was paid. Also, if you prepare a multi-year
proposal, you use the average merit increase expected when you
project the budget. Use caution; if the average merit increase
has been four percent, you do not budget ten
percent per year increase (see "Salary Increases: Future
Years" below).
The off-duty period starts on the
day after the last day of a semester or academic year; the off-duty
period ends on the day before the first day of the academic year
or semester as defined in the academic calendar. Other holiday
periods (e.g., Christmas and Easter recesses) are regarded as
part of the regular school year. The Summer term is defined by
the class schedule for those employed to teach in the Summer term.
Faculty
or Staff to be Employed Upon Receipt of the Grant
Classified Staff Overtime.
If your project is funded, be aware that there may be restrictions
on having some categories of state-funded personnel work on your
project on an overtime basis. Note: Check with the Personnel
Office for the information pertinent to the individual or office
involved. Overtime for staff requires certain approvals in writing.
Staff-Assigned Time for the Project.
Any staff to be assigned to the project must be cleared through
all channels including the Personnel Office. Check with the Personnel
Office for the information pertinent for the individual or office
involved. For faculty not yet employed, use the average salary
for the position(s). For staff, check with the Personnel Office
for the proper range and salary for the duties assigned.
If you wish to use a current classified
staff for a grant, you should write at least 50% minimum replacement
and show the current employee as 50% on this grant. Above 50%
is also acceptable. If a classified position is written into your
grant, you should indicate that the person will be on a "limited
time appointment" for the time of the grant. The Personnel
Office must be advised so that a limited term employment contract
can be used.
Student
Assistants. The use of student assistants is strongly encouraged
because it provides work experience as well as income for students.
Student salaries have a lower rate charged for fringe benefits.
Students are not permitted to work more than 20 hours per week
on campus during the academic year, with 15 hours being most appropriate.
Other rules apply to students who work in the Summer on grants.
For instance, students working 20 hours per week in the Summer
are required to maintain a minimum enrollment. The salary rate
for students is the current hourly wage unless there is administrative
approval of a higher rate. The rate must be justified to the federal
agency in your budget narrative and approved.
Salaries and Job Descriptions for
Other Staff. Individuals hired for a project must be hired according
to standard Fort Hays State University procedures and must be
paid according to a standard Fort Hays State University job title
and description. These restrictions apply to full-time classified
employees (e.g., 40 hours/week) for any length of time, but are
also recommended for part-time employees. If none of the titles
and job descriptions in the existing personnel system fits your
needs, then you may identify an appropriate title, job description,
and salary range based on similar work required in the professional
field. A brief documentation of such a "position survey"
should be included in the budget explanation pages of your proposal.
If no similar job description can be located, please contact the
Personnel Office to explore alternate procedures.
Salary Increases in Future Years.
If the proposal period is to extend over more than one fiscal
year or to start in a future fiscal year, remember to include
salary increases for the future pay periods. Remember also that
a one-year grant probably will cross two state fiscal years, so
careful salary planning is essential as you prepare your proposal.
The percent increase must be at the authorized increase rate for
other faculty.
If the pay increase rate for a future
period is unknown, use an estimate. An increase of five percent
per year would be an appropriate figure to cover merit increases
as you estimate future salaries for your budget. Note:
Since some agencies only fund the first year, in a multi-year
budget, remember to adjust salaries in the continuation application
budget.
For future salaries for staff employees
who are at the top of their range and, therefore, are ineligible
for step increases, contact the Personnel Office for an estimate.
Any merit or cost-of-living pay increases that are granted to
the employees by the university will have to be paid by the project
grant, so plan ahead in your proposal as any increases will come
out of your grant. Salary increases apply to temporary as well
as part-time employees if the grant is for more than one year.
Personnel:
Fringe Benefits
Fort Hays State University provides
for various fringe benefit levels for different employees depending
on their personnel status. When you write a proposal, you must
also request money to reimburse the state for the fringe benefits
that must be paid to persons employed on the project. These fringe
benefits will almost always include social security (FICA), worker's
compensation insurance, and unemployment insurance; they may also
include retirement and health and life insurance.
Different benefit levels are provided
to different categories of state and university employees, and
the benefits and their costs change from time to time. For faculty
members, for example, the fringe benefit charges are higher due
to the retirement contribution. When planning your proposal budgets,
remember the benefit rates for the current year are available
in the Grants Office or in the Personnel Office. The Personnel
Office will assist with estimates for future years for classified
personnel salary increases and fringe benefits. Check with the
Grants Office for further information. Note: In the past,
grant writers had to break down all components of the fringe benefit
package; now agencies are beginning to accept a flat percentage.
Check the proposal guidelines or contact the agency to determine
how to state fringe benefits.
Consultants
It occasionally is appropriate to
pay persons to be involved in the project as consultants rather
than as employees, especially for short periods of time or for
highly focused and specialized tasks. These individuals are usually
paid an "Honorarium." Show the compensation for a consultant
in terms of days or hours to be worked multiplied by the daily
or hourly rate to be paid. Remember that fringe benefits should
not be added to the consultant's payments if this
payment is by "Honorarium." For that reason, consultant
costs are usually listed separately or under "Other Costs"
(see below) rather than under "Personnel."
Consultants can be paid travel costs,
so estimate such costs as appropriate and indicate them in your
budget.
Caution: Government
regulators and auditors have paid great attention to defining
the appropriate use of consultants because the institution does
not pay the government the same taxes for a consultant as for
an employee. The Internal Revenue Service (IRS) has given notice
that it will increase its auditing efforts in this area. Some
sponsors may put limits on the amounts that can be paid to consultants.
If the consultant is to play an important role in the project,
it will help to specify who the person is and include a resume
or vita. Due to IRS regulations, please check with the Personnel
Office about paying the consultant; specific forms are used to
request payment. Note: It may be better to pay the person
as a "temporary" employee. A consultant will be obligated,
based on the honorarium level, for extra fee rates, such as for
the social security tax.
Fort Hays State University normally
will not pay Fort Hays State University employees for any
services on a consultant basis. Any services to be obtained from
Fort Hays State University employees (staff or faculty) should
be shown in the "Personnel" category, usually with the
compensation shown as a percentage of their regular salaries or
a set amount, and always with fringe benefits also included. This
requirement holds even for small commitments, such as a few days.
Equipment
Generally,
items costing more than $5,000 and having a useful life of more
than one year are considered to be equipment rather than supplies.
(Library books, works of art, recordings, and built-in furnishings
are typically not included in the definition.) While some sponsors
are willing to supply equipment for their grantees, and some sponsors
have special programs to supply equipment, other sponsors are
wary of equipment purchases knowing that the equipment may be
wanted and used for purposes other than those of the funded project
and will be used after the grant for other purposes. Be sure to
check with the sponsor's published guidelines or with its staff
to determine if equipment purchases are allowed. Also check if
there is a dollar limit for purchases without prior approval.
Some sponsors will ask you to consider
ways of obtaining the equipment other than purchasing it. Does
a colleague on campus have equipment you could share? Would leasing
the equipment be appropriate? The university's purchasing office
or the President's Office may also want to be sure that you have
considered such alternatives.
Be sure to explain exactly what
equipment is being purchased and why it is needed for the project.
Be sure your price estimates are accurate and include such costs
as shipping, installation, warranty, and maintenance. Usually
only one-year maintenance costs may be included in your proposal,
so determine how future maintenance costs will be paid to insure
that the equipment will be maintained. State in the proposal how
you will pay maintenance costs after the first year. For large
or unusual purchases, you may be required to include a quote from
a vendor of equipment or services on bidding. State in your proposal
that the State of Kansas bidding process will be used.
Sponsors are usually not willing
to pay for general purpose equipment such as typewriters, desks,
and filing cabinets, and computers for reports. Requests for personal
computer equipment should be justified carefully. Make sure that
you ask for the level of computers needed, not more or less, as
agencies may challenge the request and may even deny the grant.
Equipment acquired through a grant becomes university, not
departmental, equipment. Any exceptions must be approved by the
Provost. Note: The Omnibus XXXXXXX FY97
Appropriations Bill (P.L. 104-208, Section 506) requires that
all equipment and products purchased with grant and other federal
funds should be American-made if possible.
Supplies
Virtually every project requires
some expenditure on supplies. For large amounts of money or for
large portions of the total budget, the request for supplies should
be explained. A brief list of the types of supplies needed is
usually useful for your own planning, even if the sponsor does
not require it. Agencies are moving toward less specificity for
supplies, so always check the guidelines or call the agency.
Travel
Local
travel should be estimated as the number of miles to be driven
times the standard rate for state/private car usage. The official
state mileage chart must be used; you can get extra miles for
driving in the vicinity. A copy of the official mileage chart
is available in the Business Office. Also, a list of official
mileage from Hays is available in the Grants Office. In some cases,
you may also need to include estimates for parking and toll fees.
Travel that requires an overnight
stay should be estimated by adding the costs for hotel and meals.
In some cases, you may also need to include other items, such
as airfare, registration fees, car rentals, parking, airport parking,
toll roads, and taxis. There may be a limit on the rate for hotel
and other expenses either by the sponsoring agency or by state
regulation. Be sure to check the sponsor's guidelines for limits
on per-diem rates and other expenses, as well as the State of
Kansas limits. The state guidelines are the official rate. Copies
of the guidelines are in departmental offices, the Grants Office,
and the Business Office. If you are traveling to a high-cost city,
check the high-cost guideline rates for hotels and meals.
The amount of care required
in estimating travel costs depends on the nature of the proposal.
In some instances, such as proposing a conference presentation
trip as one part of a large research project, round numbers like
$1000 or $750 will suffice. In cases where the travel is important
to the nature of the project or is a large portion of the budget,
such as supporting the travel of conference participants or traveling
to gather research data, a more careful breakdown of travel costs
would be appropriate. In all cases, travel expenses will be governed
by and should be estimated using the Official State Travel Contract
(or call the Business Office) for airfare travel, motel/hotel,
car rentals, and State of Kansas and Fort Hays State University
travel policies.
Note: Always remember
to include travel to a project director's meeting if the granting
agency requires one. Agencies will pay registration fees for PI/PD
meetings. Registration and workshop fees for professional meetings
should also be included if necessary for a successful project.
Note: If international
travel is required, remember that the traveler must fly
on an American flag carrier if federal funds are used, (i.e.,
American, TWA, Continental, United; Not Nippon, JAL, etc.)
Campus Services
Use of Forsyth Library on-line database
searches, services of the Computing and Telecommunications Center,
Center for Teaching Excellence and Learning Technology (CTELT),
and other campus sources as part of the project activities must
be included in the grant budget, if appropriate. There are certain
costs associated with these services, so check if the services
must be purchased or if they can be used for in-kind matches.
Check with the director of the specific service for current costs.
Include the director of the service area on your check-off form.
Subcontracts
It
is sometimes necessary to subcontract for part of the work that
cannot readily be done by Fort Hays State University faculty or
staff. Such arrangements can range from a simple consultancy agreement
for the services of one individual to an elaborate arrangement
between two institutions. If the subcontractor will be doing a
major portion of the project, it is usually best to include a
letter of intent from the subcontractor with your proposal. Please
consult the Grants Office, the Budget Office, and the Personnel
Office if subcontracts are needed in your proposal. The chair,
Dean, Provost, and President's approval may be needed. Remember
that the Fort Hays State University faculty and staff cannot be
used as subcontractors on your grant; they must be listed as salaried
personnel. Remember also that you may be required to go through
competitive (State of Kansas) procedures to obtain a subcontract
or, more often, to justify your "sole source" decision.
Cost sharing/matching requirements
maybe required by the agency. For instance, NSF has a one-to-one
match requirement for Instrumental and Laboratory Improvement
(ILI) grants. Cost sharing may require actual non-federal cash
from the university or a third party, in-kind contributions by
the university or a third party, or a combination of non-federal
cash and in-kind contribution. Please check the program announcement
for cost sharing requirements. Since university officials approve
the match, make sure that the Yellow Budget Sheet is completed,
including account numbers and authorizing signatures. Only designated
administrators can commit funds.
Cash refers to non-federal
cash, that is, university cash, third-party cash items that can
be converted to cash, such as stocks or land, or other support
that may be described in the program document. Check the guidelines
or call the agency for specifications.
In-kind contributions may
be defined in the program announcement. Campus facilities, furniture,
telephone, donations of time by a third party, and reassigned
time of faculty may be considered in-kind based on the particular
program. Again, check the guidelines or call the agency for specification.
New regulations may include campus
facilities as part of the indirect cost, so remember to check
it. In-kind contributions must be documented.
B.
The Negotiated and Modified Indirect Costs
Indirect costs are real costs associated
with the cost to administer the grant. Check with the Grants Office
for the current federally negotiated indirect cost rate. The Department
of Health and Human Services negotiates the rate annually with
Fort Hays State University.
Modified
Indirect Costs
The U. S. Education Department General
Administrative Regulation (EDGAR) specifies eight percent as the
modified indirect cost rate. Other federal agencies may have other
rates. Check with the agency to determine if there is a limited
or modified indirect cost rate.
Note: The modified
indirect cost rate may apply to total direct costs, or the agency
may specify a percentage.
Note: If the rate
is less than the indirect cost rate, claim the difference as a
university match. When the grant is being approved on campus,
you will need to request approval of any rate less than the negotiated
rate and explain why.
Checklist
for Proposal Budget Items
(Not an inclusive list)
A. Personnel
Academic Personnel
Graduate Assistants
Student Assistants
Computer Programmers
Tabulators
Secretaries
Editorial Assistants
Administrative Aides
Technicians
Other Hourly Personnel
Other Salaried Personnel
Fort Hays State University has an
Internal Auditor who provides audits for grants. The auditor can
provide information as needed for the agency. Periodically the
State of Kansas audits the university as well. If the agency asks
about A-133, advise that Fort Hays State University is in compliance.
An agency may audit your grant. There are protocols
to follow if there is an audit.
