Developing a Proposal Budget
The proposal budget should delineate the entire cost of the project and accurately reflect costs that are necessary to complete the work. The budget should reflect the methodology/approach described in the proposal narrative. Reviewers should be able to determine if sufficient funds are being requested to successfully complete the project and that those requests are reasonable given the scope of work proposed. Accuracy and detail are essential in budgeting and PIs must use the UM Budget Template to most accurately estimate project costs based on UM policies and sponsor guidelines. Budgets must be finalized in the UM Budget Template before being translated into the sponsor's required format. The Departmental Research Administrator (DRA) and the OSP Pre-Award Team are available to assist PIs in developing budgets that are consistent with university and agency policies and guidelines. These staff members have access to current information related to university costs such as salaries, fringe benefit rates, travel allowances, tuition, and fees.
Major Budget Categories
Sponsored project costs fall into two categories: direct and indirect costs. Indirect costs are also referred to as “Facilities and Administration (F&A),” “IDCs,” or “overhead.”
Sponsored project costs are categorized as either direct or indirect costs. Indirect costs—also known as Facilities and Administrative (F&A) costs, indirect cost recovery (IDC), or overhead—represent the expenses that support research activities but cannot be easily attributed to a specific project. These include costs such as building maintenance, utilities, IT infrastructure, administrative support, and compliance services. F&A ensures the institution can maintain the physical and administrative infrastructure necessary to support sponsored research.
Guidance on allowable costs is provided under the Uniform Guidance, Section 200.453.
Salaries and Wages
- Faculty, Professional LOAs, and Classified Staff: Most, if not all, Federal agencies view research as an activity that is standard to an appointment at an Institution of Higher Education (IHE) and will compensate personnel for their time and effort according to the time and effort allocated to the grant. Current salary figures as listed in the InfoGriz Report “Active Employees with Longevity, Union Affiliation, and Retirement Information” must be used. Any deviation from salaries listed in this report requires documentation such as a signed merit award letter or written confirmation of the pay rate from UM HR. For multi-year proposals, an escalation factor of 3.5% per year may be applied.
- Administrative Staff: Per Uniform Guidance, Section 200.413, the salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs. Direct charging of these costs may be appropriate only if all the following conditions are met:
- Administrative or clerical services are integral to a project or activity;
- Individuals involved can be specifically identified with the project or activity;
- Such costs are explicitly included in the budget or have the prior written approval of the
- The costs are not also recovered as indirect costs.
If you plan to direct charge any administrative or clerical services, please fill out the Cost Allowability Confirmation Sheet
- Graduate Research Assistants: GRAs may work up to 9.23 months per academic year appointment at a maximum of 47.5% effort. They are allowed to work 2.77 months per summer appointment at a maximum of 47.5% effort. Grad Students also need to budget for the GAP payment as established in the Graduate Student Collective Bargaining Agreement. If not hired on a GRA contract, Graduate Students may be hired as an hourly student employee.
- Extra Compensation: Extra compensation may not be paid from a sponsored project unless all the following conditions are met:
- The UM employee’s work must cross departmental lines (see 2 CFR §200.430(h)(3));
- The extra compensation is approved by the employee’s department prior to proposal submission;
- The extra compensation is included in the proposal budget and budget justification; and
- It is approved by the sponsor at the time of award.
Fringe Benefits & Health Insurance
There are different fringe rates established for faculty, LOAs, classified staff, full-time students and temporary personnel. These rates can be found in the Fringe Benefit Rate Sheet and are automatically updated in the budget template when an appointment type is selected in Column A under the personnel section.
Health insurance is assessed based on a monthly cost and is pro-rated based on effort and institutional FTE. Health insurance should be manually calculated for any employee working less than 1 FTE and greater than .5 FTE. See manual health insurance formula in budget template cell AM13. Employees working less than .5 FTE are not eligible for health insurance. Student employees do not receive health insurance as a benefit of employment.
Note that Montana Law, Section 2-18-703 MCA requires UM to contribute a certain dollar amount towards the insurance group benefits costs for each UM employee. That contribution is required regardless of whether the employee has elected or declined insurance coverage by a state-sponsored group benefit plan. Thus, the benefits charged to the sponsor must include the statutory insurance benefits contribution amount for each employee proposed to be paid under the grant.
Capital Equipment
Per Uniform Guidance, Section 200.33, “equipment” means tangible property (including information technology systems) having a useful life of more than one year and a per unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-Federal entity for financial statement purposes, or $10,000. The University of Montana's capitalization level is set by the state of Montana and remains at $5,000.
It is important to note that the acquisition cost of equipment includes modifications, attachments, and accessories necessary to make an item of equipment usable for the purpose for which it will be purchased. See also Section 200.12, Capital Assets,Section 200.20, Computing Devices, Section 200.48, General Purpose Equipment, Section 200.58, Information Technology Systems, Section 200.89, Special Purpose Equipment, and Section 200.94, Supplies.
Travel
Per Uniform Guidance, Section 200.474, travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the non-Federal entity. Allowable costs include meals, lodging, airfare, and ground transportation which must be in accordance with State of Montana travel rates. Current per diem and mileage rates are available from UM Business Services.UM Business Services. Some sponsors require a separate category for domestic and foreign travel. For international travel, UM requires budgets to include GeoBlue health insurance, as needed.
Principal Investigators must provide sufficient detail in the budget narrative or equivalent to support all travel costs. Insufficient, inaccurate, or inconsistent detail for travel costs could result in delays during submission through OSP or at the sponsoring agency.
Participant Support Costs
As defined in 2 CFR 200.1, participant support includes items such as stipends or subsistence allowances, travel allowances, manuals, supplies, stipends, tuition, registration fees, and other costs paid to or on behalf of participants or trainees (but not employees) in connection with conferences or training projects. Program participant support costs are relevant on research projects only IF the project includes an education or outreach component and is approved by the sponsor. Program participant support should be detailed in the budget justification.
Program participants personally benefit by attending the conference/training, and do not perform work or services for the project/program or University. If meal expense is paid to a vendor, code to 62817 Meetings & Conference Costs.
If participants are UM students and they receive:
- tuition or personal items that they keep as part of an approved scope of work (e.g., books, electronic devices, or other supplies), payment is processed via a Scholarship (see below); or
- a stipend, payment is processed via a Stipend (see below).
If a program participant payment is a flat amount and made directly to an individual, the income tax consequences are entirely their responsibility. If a participant is paid $600 per year or more, it is IRS-reportable by the University. Any payments for participants that are non-US citizens are subject to tax withholding, please reach out to the HRS Foreign National Specialist for further information.
Other Direct Costs
Materials and Supplies
All consumable materials including the purchase cost of animals as well as small items of equipment that do not meet the threshold for “capital equipment” are listed under this category. Each item or group of items should be listed categorically and justified by using catalog prices or reasonable estimates plus taxes and shipping costs. All materials and supplies must be purchased in accordance with UM Procurement Policy and Procedures. Uniform Guidance, Section 200.453 stipulates that:
- Costs incurred for materials, supplies, and fabricated parts necessary to carry out a Federal award are allowable.
- Purchased materials and supplies must be charged at their actual prices, net of applicable credits. Withdrawals from general stores or stockrooms must be charged at their actual net cost under any recognized method of pricing inventory withdrawals, consistently applied. Incoming transportation charges are a proper part of materials and supplies costs.
- Materials and supplies used for the performance of a Federal award may be charged as direct costs. In the specific case of computing devices, charging as direct costs is allowable for devices that are essential and allocable, but not solely dedicated to the performance of a Federal award.
- Where Federally-donated or furnished materials are used in performing the Federal award, such materials will be used without charge.
Communications
This includes long-distance, cell phone, postage, courier service (FedEx, etc.), advertising, and other costs of communicating. Cell phone use must conform to UM’s Policy on Mobile Communication Devices. Typically, cell phone use is treated as an indirect cost and not as a direct cost to the project. Cell phone costs are allowable on non-Federal awards when permitted by the sponsor. Cell phone costs may be charged to Federal awards in exceptional circumstances which must be fully justified in the budget narrative. Satellite phones can be allowable for fieldwork if required by the sponsor. See the Cost Allowability Confirmation Sheet if you plan to direct communications.
Maintenance and Repair
Per Uniform Guidance, Section 200.452, costs for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) are allowable. Costs for improvements which add to the value of buildings and equipment must be treated as capital expenditures.
Publication Costs
Uniform Guidance, Section 200.461 stipulates that publication costs for electronic and print media, including distribution, promotion, and general handling are allowable. Proposers are to include a best estimate of the costs of any publications.
Human Subject Payments
Research study participants receive payments or incentives in the form of virtual incentives payment, checks, or non-cash items (gift giveaways, gift drawings).
If participants are research subjects about or from whom personal information is collected, the project will need review and approval from the Institutional Review Board for the Protection of Human Subjects (IRB).
Contract Services
Uniform Guidance, Section 200.459 stipulates that the costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non-Federal entity, are allowable, subject to some limitations. This category consists of services rendered by others excluding rentals, repairs, and maintenance. This category includes consultant and professional services, honorariums/speaker fees, and general off-campus services provided by others. On-campus services (e.g. animal care, technical services, plant growth, etc.) should also be included in this budget category. Most Federal agencies limit the minimum and maximum daily compensation rates paid to off-campus consultants which can be found by accessing the agency-specific grants administration guide.
Subawards
Subawards are used when the subrecipient contributes in a substantial and creative way in designing and/or conducting the sponsored activity. A subrecipient contributes measurable effort and their qualifications may be instrumental in helping the University obtain the prime award; thus, they often function as a co-investigator on a project. Subawards are routinely issued to other institutions to reimburse for facilities, personnel, equipment, or other institutional resources. Program compliance requirements and other terms and conditions of the prime award are passed down to the subrecipient.
Each subaward PI should prepare and submit a detailed budget in excel, a detailed budget justification, scope of work, and UM’s Subrecipient Commitment Form to be completed by their OSP office or equivalent and once it is approved, it should be provided to UM’s OSP office for review and approval prior to proposal submission. Each subaward budget will be listed separately on the subaward line item on UM’s budget as a direct cost.
For further guidance on Subawards, consult OSP’s Subaward page.
Rental Costs of Real Property
Per Uniform Guidance, Section 200.465, rental costs are allowable to the extent that the rates are reasonable in light of such factors as: rental costs of comparable property, if any; market conditions in the area; alternatives available; and the type, life expectancy, condition, and value of the property leased.
Note: The rental of space for meetings or conferences, whether on campus or off campus, is not included in this line item – please see Meeting & Conference Costs below. Additionally, the rental of vehicles or equipment to carry out the work outlined in the proposal is also not included in this line item. Vehicle rental is itemized under Travel and equipment rental is itemized under Contract Services.
Meetings & Conference Costs
XXX current info on UM’s website: https://www.umt.edu/sponsored-programs/propdev/budgetinfo/meetings.php
Tuition Remission
UM's cost of education includes tuition and fees. For budgeting purposes, the line "Tuition" includes tuition and mandatory fees, and may include health insurance, if explicitly allowed by the program or sponsor. Opt-out fees are never allowable. Graduate student (GRA) tuition and fees must be budgeted per the current TA/RA tuition sheet. If an employment expectation exists, wages are paid via a graduate contract and such contracts usually include tuition support. Otherwise, tuition, mandatory fees, and health insurance, if allowable, are paid via a Scholarship mechanism.
GRA Health Insurance
Health insurance for GRAs may be budgeted if allowable by the sponsor. Health insurance is budgeted per semester based on the student health insurance policy through Curry Health Center. The insurance premiums can be found on the Student Health Insurance page of the Curry Health Center’s website.
Sample budget narrative text for Tuition Remission and GRA Health Insurance:
Tuition Remission: Tuition, including mandatory university fees, for 9 credits each semester for two semesters and health insurance for two semesters for the Graduate Research Assistant is budgeted each year in Y1 through Y3. In Year 1, tuition is budgeted to be $5,778 per semester. UM policy requires 3% annual escalation for tuition remission in the out years. In Year 1, mandatory student health insurance is budgeted at $2,232 per semester. UM policy requires 3% annual escalation for student health insurance in the out years.
Indirect Costs
Per Montana University System Board of Regent Policy 404 – Indirect Cost Recovery Rate, the University seeks to recover all Facilities & Administrative (F&A) allowed by the sponsor. Project budgets should apply the maximum F&A rate allowed in each period to reflect UM’s federally negotiated rate agreement.
UM's federally negotiated indirect cost rate is based on modified total direct cost (MTDC) as detailed in the F&A Rate Agreement. MTDC includes all salaries and wages, fringe benefits, materials, supplies, services, travel, and subawards up to the first $25K of each subaward (regardless of the period covered by the subaward). MTDC excludes equipment, capital expenditures, participant support costs, tuition remission, charges for patient care, rental costs of off-site facilities, scholarships, and fellowships, as well as the portion of each subaward in excess of $25K.
The effective F&A recovery is considerably lower than the real costs incurred. The University further subsidizes research when a reduced, non-standard F&A rate is applied to a project. While there are circumstances where a reduced F&A rate may be appropriate, it is important to understand that this results in a loss of revenue to the University.
In instances where a sponsor does not allow UM's federally negotiated F&A rate, publicly available sponsor documentation is required to be provided to OSP, and the limitation of F&A must be shown to apply to all applicants.
If a sponsor directs the application of a rate other than UM's federally negotiated rate, F&A is typically based on total direct costs (TDC) for non-federal awards and MTDC for federal awards, unless otherwise specified by the sponsor or where other extenuating circumstances exist.
For proposals where the sponsor limits F&A and cost match is required, meeting the required match shall be done with part or all of unrecovered F&A; if any additional match is needed, beyond unrecovered F&A, UM's full negotiated indirect cost rate is applied to the additional match.