Budgeting Demystified

1. Budgeting Demystified Gretchen Davis Richey, Office of Sponsored Programs December 16, 2011 Gerberding 142 University of Washington

2. Outline • Budget Categories, Formats, Object Codes • Identifying your costs • Finding hidden costs • Estimating your costs successfully • Writing good budget justifications • Calculating F&A accurately • Hints and best practices

3. Facts • A well-developed budget will increase your chances of getting funding • Salaries usually make up the majority of the budget so accuracy is important • Always refer to GIMs for the latest rates: Benefits, F&A • Don’t cost share unless it is required • Always follow sponsor requirements

4. Components • Direct Costs • Facilities & Administration Costs • Budget Justification

5. The Goal • Budget tightly matches the scope of work • Use the same terms and amounts • Clear and concise, in non-technical terms • Further clarifies how the project will be accomplished • X of subjects will be screened to get Y of subjects who will complete the study protocol

6. Where to Start • The first step of building a budget is a clear understanding of your scope of work and location of the project. • The second step is understanding the allowable costs for the Program Announcement.

7. Budget Categories • Step Three: Choose a set of budget categories to develop your budget (direct costs) • UW Object Codes • Sponsor Budget Categories • Modular Budgets for NIH • Some funding vehicles allow non-itemized budgets for projects <$250,000 per year. • Module = $25,000

8. UW Financial Categories

9. Identify Budget Line Items • Step Four: Use the budget categories to identify direct cost line items for your project • F&A will be discussed later

10. Salary • Department administrator or fiscal specialist can look this up in OPUS/HEPPS (payroll system). The SAGE Budget Tool will pull this data automatically. • Institutional Base Salary (IBS) • UW portion is listed in OPUS/HEPPS • Additional Clinical Salary is paid to persons with clinical appointments; the source is UWP or CUMG

11. What is Institutional Base Salary? • See GIM 35 • Non-clinical • A = State Salary • B = Grant Funded (other) • Clinical • X = University Salary • Y = Clinical Salary • Additionally… • ADS = Administrative Support • ENS = Endowed Supplements

12. Salary • Remember to include increases for promotions, merit increases (follow sponsor instructions & justify) • Effort may fluctuate between project periods • Calculating person months (see OSP website calculator) • Sponsor Salary Cap • How should this be presented on the budget? • Any amount over the “cap” is cost sharing but does not have to be documented on the eGC1 • Allowable administrative salaries

13. Benefits Benefit rate is determined by employee type. See GIM 3 for a list of current rates The SAGE Budget Tool will pull this data automatically

15. Equipment & Supplies • Supplies • Equipment • >$2,000 and useful life is greater than one year • Certain projects may qualify for the Machinery & Equipment Tax Exemption • See the EIO website

16. Travel • Travel office - http://f2.washington.edu/fm/travel/ • Fly America Act • Per Diem Rates • Adv approval required for any exceptions • International travel has special considerations

17. Other items to consider Rent International projects Patient care costs Animal care costs

18. Usually Disallowed • Admin/Clerical salaries* • Office supplies* • Food and alcohol • Any category not allowed by the sponsor *These costs are covered by F&A

19. Off Campus Projects are an “Unlike Circumstance” • Costs that are usually unallowable can be allowable, but must be justified • Based on OMB A21 • Includes: • Telephone • Office supplies • Rent

20. Peel the Onion • Once you have the basic line items identified, identify the hidden costs • Shipping samples • Human or Animal Subjects expenses • Screening costs • Rent

21. Estimating Costs Hints for success include: • Accurately calculate salaries, including clinical (A/B) components, step increases for classified staff, expected promotions for faculty or staff • Get up to date equipment cost quotes from vendors & attach in proposal

22. Budget Justification - Good • Justification matches the cost categories and sufficiently “itemizes” the costs • Written in non-technical language, understandable by someone without scientific background

23. Budget Justification - Bad • Insufficient information from the reviewers perspective – “We have benefits included” • Doesn’t match the budget request • “False elegance” – use of language to veil a perceived weakness. Overly technical or condescending verbiage • “Program official said it’s okay” (provide proof) • Cut and pasted text from elsewhere in the proposal

24. Reasonable vs Allowable vs Allocable • Reasonable • A prudent person would find the costs acceptable • Allowable • The sponsor instructions allow the costs (A21) • Under “like circumstances” costs are treated the same • Allocable • Costs must benefit the project • You must be able to prove that the cost is directly related to the project

25. “F&A” are those costs that pay for expenses which cannot be identified to a particular project, program or activity Facilities & Administration Costs

26. Calculating F&A – read GIM 13 • Read GIM 13 & Attachment A • Base • Determine budget items excluded from the F&A calculation • TDC vs MTDC • Location • On campus • Off campus • Other options

29. Base Type • F&A costs are calculated on a base amount • The base amount is the total of all line items of a budget that are subject to F&A costs (per sponsor instructions) • There are several base types: • MTDC = Modified Total Direct Costs • TDC = Total Direct Costs • S&W = Salaries and Wages • TDC less T&E = Total Direct minus Tuition & Equipment

30. Grocery Store Analogy • In your cart • Meat, veggies, TP  Direct Costs • At checkout • Tax calculated on the paper products only  F&A • Paper products = Base • Tax % = Rate • Total cost of groceries + Tax = Grand Total

31. Importance of Sponsor Instructions Provides overall instructions for the application If sponsor approval is needed at the preparation phase Allowable costs Salary caps F&A rate & base Budget format (modular or full, NIH only) Overall policies

32. Why are Instructions Important? Most questions can be answered in the sponsor instructions (read them before contacting OSP) All requirements in the instructions must be met Maximize opportunity to get funding (little mistakes may have big penalties) Some optional forms must be included if project includes this type of work (i.e., subcontracts)

33. UW Tools for Budget Building • SAGE Budget • Budget preparation tool • Pulls in salaries and benefit rates • Calculates subtotals and F&A • Able to attach to eGC1 • Able to modify based on feedback • Able to use for multiple projects • Sign up for SAGE Learning • http://www.washington.edu/research/main.php?page=learningAbout

34. Budget Documents • Use SAGE Budget Tool or a spreadsheet to develop your budget • Don’t create a pdf – it obscures the formulas • Identify line items excluded from F&A • Justify unlike circumstances • Show draft budget to expert for feedback

35. Hints • Initially prepare the budget using either the UW object codes or the sponsor budget categories • When the budget is finalized, translate the budget figures to other forms • Do use past proposals as models • Don’t simply copy a prior submission • Precedent may not be a valid reason for current practice (rules change, people make mistakes) • Always attach a detailed budget spreadsheet • No PDFs • Please consider contacting your OSP administrator early in the preparation process if you have questions

36. Budget Checklist • PI must review and approve the final budget • PI assures you that all budget items are allocable, reasonable and allowable • Confirm the current benefit rates are being used • Check that the budget $ matches on all budget and budget justification pages • Application meets sponsor requirements • Take and break and then review the final one last time

37. Questions & Discussion

38. Thank You