THE IMPORTANCE OF THE BUDGET JUSTIFICATION (also called BUDGET NARRATIVE) The budget justification is the first step in documenting the allowability, allocobility, necessity and reasonableness of possible award expenditures and serves a number of critical functions. Describes the need for or necessity of major categories of expense. All major categories of cost should be justified, starting with the largest expense categories and according to sponsor‟s guidelines. Key points to make include the elements below. Sample budget justifications for NSF and NIH are available on the OSP website. These documents should be modified to fit the application; special attention should be paid to including items that are typically unallowable. REMINDER: All typically unallowable costs (administrative costs such as administrative/ clerical staff – if allowed, office supplies, communication costs, or general purpose equipment or instrumentation such as computers) should be specifically identified and the essentiality as a direct charge clearly explained. Categories and key points to include in the budget justification: PERSONNEL COSTS For key personnel – Describe the individual’s role (PI, co-PI, co-Inv, etc); effort committed to the project (Academic Year and/or Summer, or Calendar) in person months or percent as per sponsor‟s guidelines; and NOTE: Faculty should present both AY and Summer effort separately. Include a statement that SU faculty have 8.5 month appointments responsibilities and activities to be performed in support of the project; and For non-key personnel – Describe the Individual’s role; effort NOTE: individual’s with less than 1.0 FTE appointments should disclose the nature of the appointment e.g. Graduate students (0.5 FTE, 100% effort) responsibilities and duties to be performed in support of the project. Fringe Benefits State that costs are charged according to rates negotiated with DHHS (provide date of rate agreement; changes annually), as applicable to employee category. Current rates are used for budgeting purposes; actual rates in place at time of expense will be charged. Equipment Describe why the equipment is essential for project and why comparable equipment which may be available on campus or in the area is inadequate for project needs. Clearly describe allocobility of cost – item for exclusive use of the project (if item will not be for exclusive use of the project –the total cost of the item cannot be charged to the sponsor). Justify cost (e.g. quotes attached). Justify sole-source acquisition if applicable (i.e. specific brand from unique distributor). Include installation and space renovation costs to make equipment fully functional (e.g. air conditioning). Travel Describe why essential (e.g. attend sponsor-mandated conferences, disseminate project results, etc.) Justify cost: o Number of travelers. o Location (city, state, country) and duration. o Airfare or ground transportation costs per trip. o Lodging and sustenance. o Registration fees. Remember, while SU travel policy does not use government per diem, however these rates can be consulted to assess the reasonableness of costs proposed. http://www.gsa.gov/Portal/gsa/ep/contentView.do?contentId=17943&contentType=GSA_ BASIC Publication Costs Describe page costs, copyright fees, etc. Subcontractors (also called subrecipients or consortium members) Describe who and what they will do. Budget detail and justification is typically required using sponsor‟s forms. REMINDER: OSP requires permission of authorized institutional representative (OSP equivalent) to include subcontractor‟s name in application. Consultants Describe services to be provided. Provide rate per day, and number of days of service and whether travel will be included (where to present travel can vary with sponsor). REMINDER: OSP requires permission of individual named to include consultant‟s name in application. Assists in determining the reasonableness of budget request, quality of PI/PD judgment, and feasibility of project approach in context of resources available and proposed. Serves as documentation for a sponsor’s prior approval of a cost that ordinarily is not be allowable as a direct cost. Some examples: Supplies and consumables Office supplies (binders, copy paper and copier toner) are essential for preparation of the 100 training manuals used in professional development activities. Office supplies (toner) is essential for printing color copies of maps developed during course of award; routine use is black-and-white only. Instrumentation A pre-paid international cell phone is necessary to communicate with project informants and public officials while conducting research in India, Nepal and Sri Lanka. Communication costs Cost of shipping samples from field to SU or between SU and collaborators‟ sites to perform analyses. Cost of mailing publication drafts among authors for review who do not posses specific software to view graphics electronically Facilitates OSA ‘pre-audit’ of high-risk expenditure categories following award The budget narrative is the first place reviewed to confirm the allowability, necessity, reasonableness and allocobility of an item charged to a sponsor, particularly if the justification if the purchase requisition is unclear. Given the latitude many sponsors allow the University in managing awarded funds, adequate documentation to substantiate the necessity, reasonableness, allowability and allocobility of an expenditure is essential. This documentation starts with the budget narrative. UNUSUAL CIRCUMSTANCES Applications that Do Not Require Detailed Budgets – When Are They Due, What Is Needed? Even if the sponsor does not require a detailed budget (e.g. NIH modular grants, American Chemical Society/Petroleum Research Foundation, foundation applications, etc.) OSP requires the complete application be provided to the assigned research administrator by the three-day deadline. For some sponsors (NIH modular grants, foundations or corporations), OSP may require preparation of a detailed budget to ensure that sufficient funds are requested, and to confirm the reasonableness of the project cost, as well as allowability and necessity of items of cost, even though this information is not included in the application. Modular budgets NIH modular budgets are used for R01, R03, R15, R21, and R34 applications requesting $250,000 or less in annual direct costs and are budgeted in $25,000 increments. Modular grants, while not requiring detailed budgets, are still subject to federal regulations pertaining to the allowability of costs (i.e. 2 CFR 215, 220 (formerly OMB Circulars A-110, A-21), NIH Grants Policy Statement and any specific terms and conditions of the solicitation/award), allocobility, necessity, reasonableness, and consistent treatment of costs. Modular budgets present all personnel involved in the project including “to be determined” consultants, collaborators, and subcontractors; their effort in person- months; their roles and responsibilities to justify their level of effort, consortium costs (rounded to the next higher thousand) and any items typically unallowable as direct costs. In the modular budget justification, faculty should clearly present both their proposed academic year and summer effort. Personnel with 12-month appointments should present effort as calendar year effort. Current federal application budget forms require that effort be presented as person-months. Please do not use the NIH person-month conversion tool as it is based on 9-month appointments as opposed to SU’s 8.5 month appointments. See OSP budget template for 8.5 month conversion. Modular grant awards are typically constant for each year of the award; if there is a variation in the number of modules requested (see below), the reason must be explained in the budget justification, e.g. increase is the consequence of one-time equipment purchase. An illustration of constant modules and variable modules is presented below. For example: Year 1 Year 2 Year 3 Year 4 Total Constant Modules Estimated Direct $187,650 $197,000 $235,000 $180,000 $799,650 Costs # Modules 8 8 8 8 32 Direct Costs $200,000 $200,000 $200,000 $200,000 $200,000 Variable Modules Estimated Direct $187,650 $197,000 $260,000 $180,000 $824,650 Costs # Modules 8 8 9 8 33 Direct Costs $200,000 $200,000 $225,000 $200,000 $825,000 To ensure that the appropriate number of modules is requested, OSP requires most applicants to develop an internal budget using the OSP budget template. This allows non-experts to have their budgets reviewed for adequacy of: salary estimates, inclusion and accuracy of fringe benefit rates, and identification of costs which are excluded from F&A recovery such as tuition, equipment and subcontract costs in excess of $25,000. NOTE: Any essential costs that are typically unallowable (e.g., office supplies, alcohol for research use, communication costs such as postage, computers, etc.) should be explicitly identified in the modular budget narrative. In the event of an award, their inclusion will constitute sponsor prior approval of the cost. Fixed Price Proposals In proposals for a fixed price agreement, the sponsor is provided with a lump-sum cost for the research, education or other services proposed. While no budget details are provided to the sponsor, the University does have an obligation to estimate the price from the costs associated with the work plan. In developing the fixed-price request, the items incorporated must comply with federal (if federal sponsor) and university policies. That is, costs must be reasonable, allowable, and allocable to the work; appropriate F&A rates must also be included in the cost. Given the relative imprecision of the cost estimates, it is reasonable to expect that on some occasions the fixed-price may result in funds remaining at the end of the award, while on other occasions the fixed-price will not cover all costs. Fixed-price agreements that consistently result in significant positive balances will be scrutinized so that more accurate estimates can be developed for future applications. Effort committed for key personnel engaged in fixed-price projects is included in the effort certification process. Functional or Activity-based Applications without Detailed Budgets As a general rule, OSP requires preparation of a detailed budget to ensure that sufficient funds are requested, and to affirm that PI effort is explicitly devoted to the project, even though this information may not be included in the proposal. When multiple activities or tasks are proposed, such as administrative costs or program costs, a separate OSP budget template corresponding to each function, activity or task is recommended. The total costs for each activity correspond to the amount to be proposed in a functional or activity-based budget. Many sponsors, e.g. Department of State, also require the line-item details comprising the functional budget. Working with Industry Principal investigators may engage corporations to explore sponsored research activities through a variety of points of contact, such as their own personal contacts or through the Office of Technology Transfer and Industrial Development, the CASE Center, or Corporate Relations. Regardless of the office facilitating the relationship, proposals should be reviewed and approved by OSP prior to submission to the corporate sponsor. The Sponsored Programs Internal Routing and Review form, signed by all key personnel and their respective chairs and/or deans, is also required prior to submission. Budgets and Statements of Work for Industry Proposals Corporate sponsors frequently request that indirect costs be reduced or waived. Such requests ordinarily should not be granted because the full costs of research would then not be recovered. In addition, reducing or waiving indirect costs creates a situation of „inconsistency‟ where the federal government is paying more in indirect costs than corporate sponsors. Statements of work for corporate-sponsored research agreements ordinarily should be limited to no more than ten pages and include the elements presented in What should be included in a statement of work? Office of Sponsored Programs will work with PIs to ensure that all applicable information required to track private use activities for the University‟s annual report to the IRS is included in the statement or work or other documentation.
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