Budgeting Direct Costs of Sponsored Programs

Scope

Per the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (2 CFR 200; Uniform Guidance), the University is required to provide reasonable assurance that federal awards are managed in compliance with federal statutes, regulations and the terms and conditions of the federal award.

The procedure for developing budgets for direct costs must include a spending plan aligned with the objectives of the research work outlined in the proposal narrative.

Definitions

Cost principles establish standards for the allowability of a cost. A sponsoring agency’s budget guidelines will vary depending on the sponsor and activity included as scope of work. federal guidelines on cost principles appropriate for budgeting and expending federal funds are based on:

Reasonableness: A cost may be considered reasonable if the nature of the expenditure and the amount involved reflects the action that a prudent person would take under the circumstances.
Allocability: A cost is allocable if it is beneficial to the project.
Allowability: Costs must be allowed in accordance with the Uniform Guidance and terms of the sponsored agreement.
Consistency: Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or facilities and administrative (F&A) costs, and the method used to estimate, record, and report costs must be consistent as well. See the table below for a description of how costs should be treated.

Total Cost of a sponsored project is the sum of allowable direct and allocable indirect costs (Facilities & Administrative Costs).

Direct Costs are those costs that can be identified specifically with a particular sponsored project, an instructional activity, or other institutional activity, and can be directly assigned to such activities relatively easily with a high degree of accuracy.

Total Direct Costs (TDC) consist of all charges directly associated with research.

Modified Total Direct Costs (MTDC) consist of salaries and wages, fringe benefits, materials and supplies, services, travel, and subawards up to the first $25,000 of each subgrant or subcontract (regardless of the period covered by the subgrant or subcontract). Equipment, capital expenditures, charges for patient care, tuition remission, rental of off-site facilities, participant support costs, scholarships, and fellowships as well as the portion of each subaward in excess of $25,000 shall be excluded from modified total direct costs.

Facilities and Administrative Costs (F&A) are indirect or overhead costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project. F&A costs are assessed at federally negotiated rates and MTDC base unless a sponsoring agency uses a different overhead rate. The federally negotiated rates for F&A and fringe benefits can be found on the Rates page.

Responsibility

The Principal Investigator (PI) is responsible for:

Ensuring that the rate of spending on sponsored awards are aligned with the approved budget.

Grant Managers are responsible for:

Reviewing the sponsored program budget balances.
Alerting the PI and taking corrective actions if expenses are not aligned with the authorized budgets.

School/Departmental Administrators are responsible for:

Covering overdrafts on sponsored programs.

The Office of Sponsored Programs (OSP) is responsible for:

Overseeing budet deficits as they pertain to sponsored programs.

Procedures

It is important to demonstrate that the budget proposed is reasonable, allowable, and consistent. A budget justification should be submitted to allow each budget item to be explained relative to the proposed research. The specifics of the sponsoring agency’s budgetary guidelines should be followed carefully. Budgets should be prepared for the entire proposed project. Both direct and F&A costs should be identified in the budget. The following categories are generally included in the preparation of a proposal budget.

Budgeting and Charging of Direct Costs

The following categories of costs are considered to be direct costs of sponsored programs and should be included as appropriate in the budget request:

Personnel, salaries and wages

The salaries and wages of University employees directly associated with the sponsored program are considered direct costs. These costs should be charged to the project in proportion to the percent of each employee's effort expended on the program during each pay period except for that portion which may be applied to cost sharing. Typically, these are budgeted with an inflation rate of 3% per year.

Faculty: The DHHS (“NIH”) salary cap should be applied to all awards originating from any DHHS agency (NIH, HRSA, AHRQ, SAMHSA, CMS, among others).
Graduate Research Assistants: Graduate Research Assistant wages directly associated with the sponsored program project are considered direct costs and should be charged to the project in proportion to the effort expended on the program during each pay period except in the rare case when a graduate assistant’s cost is being used for cost sharing.
Student Workers: Budgets should reflect estimated hours of work on the project at an hourly rate.
Postdoctoral fellows: typically follows NIH NRSA stipend levels, which can be found on the NIH website.
Administrative/Clerical Staff: Per Uniform Guidance, salaries of administrative/clerical staff should normally be treated as F&A costs; however, such salaries may be included in the budget with justifications explaining how such services are integral to a project or activity, and individuals involved can be specifically identified with the project or activity.
Other professionals: Examples of personnel in this category include research associates, technicians, and programmers whose salaries are budgeted based on estimated effort required for the project.
Fringe Benefits: The employer's cost of fringe benefits is considered a direct cost and is charged to sponsored programs based on federally approved rates. These composite rates include the cost of the University and State retirement programs, health insurance, group life insurance, social security, disability insurance, workmen's compensation, and unemployment compensation. The current negotiated rates to be applied to budgeted salaries and wages can be found on the Rates page. LINK TO PAGE ONCE CREATED.
Note: Graduate Research Assistant health insurance costs are budgeted under Other Direct Costs and are subject to F&A charges.
Tuition: The In-State portion of tuition (remission) for enrolled graduate students, along with any associated required fees, should be budgeted and charged as a direct cost in proportion to the percent of each graduate student’s effort expended on the program during the semester.

Equipment

Equipment is defined as a tangible personal property with an expected service life of one year or more and a unit acquisition cost of $5,000 or more. Materials and supplies used to fabricate equipment which is subsequently capitalized and where ownership is retained by the University also fall under this category.

Note: Equipment costs are exempt from F&A recovery unless the indirect cost basis for the award is TDC.

Travel

Travel should be treated as a direct cost of the grant or contract where such travel will provide direct benefit to the program and is within specific sponsor restrictions. Reimbursement of travel costs are subject to the Commonwealth of Virginia and University standard policies and procedures. Sponsors request that domestic and foreign travel are detailed in the proposal.

Foreign travel is considered to be travel outside the United States and Canada, including travel within the U.S. or Canada when en route to or returning from a foreign destination.

Domestic travel is considered to be travel within the United States and Canada.

Examples of travel expenditures are as follows:

Travel, Subsistence and Lodging, For
Travel, Public Carrier, For
Travel, Personal Vehicle
Travel, State Vehicle
Travel, Rental Vehicle, U.S.
Travel, Public Carrier, U.S.
Travel, Subsistence and Lodging, U.S.

Please refer to TravelUVA for further information about domestic and foreign travel.

Trainee Support Costs

Trainee Stipends are allowable as direct costs on fellowships and training grants only. This cost category is restricted and any increase or decrease in the total amount budgeted requires prior sponsor approval. The most frequently encountered stipends are as follows:

Undergraduate Stipends
Graduate Stipends
Post Doctoral Stipends

Trainee In-State and Out-of-State tuition and fees charged to regularly enrolled students should be budgeted and charged as a direct cost of training grants. Charges to this cost category are frequently subject to specific program restrictions and reference should be made to the sponsoring agency policy guidelines to determine allowability of charges. The expenditure types for trainee tuition and fees are as follows:

Undergraduate Tuition and Fees
Graduate Tuition and Fees

Trainee travel costs within the terms of the sponsor award for full-time trainees who have received formal appointments are considered direct costs of the grant. The travel must be in accordance with University and sponsor regulations.

Materials and Supplies

The cost of supplies, materials and non-capitalized equipment (under $5,000 or items costing more than $5,000 with an expected service life of less than one year) directly required for the performance of the grant or contract are considered direct costs. Supplies include acquisition of animals for use in research, laboratory supplies, etc.

Consultant Services

Consultant Services are considered to be advice or assistance of a purely advisory nature provided for a predetermined fee by an outside individual entity. Individuals providing consulting services must always meet the criteria defining an Independent Contractor.

Other Services

Direct costs in this expenditure category include but are not limited to the following:

Telecommunications (Long Distance Service; Note: Universal Guidance section §200.216: “Prohibition on certain telecommunications and video surveillance services or equipment” applies for federal or federal flow through awards.)
Printing (other than stationery)
Photocopying, Microfilming, Developing and other Reproduction
Publications Costs - Sponsored Programs
Freight and Express Service
Technical Services
Animal Care

The services listed above may be provided by internal service providers or external vendors. Charges for services offered by internal services providers should be based on rate schedules issued by each support service activity as approved by the University.

Subawards

An external or outgoing subaward is issued by the University that formalizes a collaborative research relationship with a third-party to perform substantive sponsored project services under a Sponsored Award made to the University. Such costs are allowable as direct costs to sponsored program projects. All subawards must be made in accordance with University and sponsor regulations. Under MTDC base, only first $25,000 for each subaward is subject to F&A.

Rental of Off-Site Facilities

Off-site facilities are considered to be non-University-owned property occupied by a sponsored project. Such charges are exempt from F&A recovery. Expenditures in this category include:

Rent, Buildings and Facilities
Rent, Land

Alterations and Renovations

Prior sponsor approval is required for this expenditure. Generally, alterations and renovations are direct costs only where they are essential to adapt existing space or utilities to accomplish the objectives of the sponsored program. The space provided must actually be occupied by the project.

Research Patient Care

Prior approval is required before incurring research patient care costs. Once approved, such costs are generally limited to the amount originally provided in the sponsored award budget and sponsor permission is typically required to increase or decrease this budget line item. Research patient care costs are exempt from F&A recovery unless the indirect costs basis for the award is TDC.

Research Patient Care Costs include the costs of routine and ancillary services provided by hospitals to individuals participating in research programs. The costs of these services normally are assigned to specific research projects through the development and application of research patient care rates or amounts. The University of Virginia Medical Center has established a rate agreement with the federal government that governs these charges.

Costs associated with procedures that are not for the research study (standard of care charges) are generally not allowed expenditures under sponsored awards and are paid by the patient or the patient’s third-party insurer.

Research patient care costs do not include otherwise allowable items of personal expense reimbursement, such as patient travel or subsistence, consulting physician fees, or any other direct payments related to all classes of individuals, including inpatients, outpatients, subjects, volunteers and donors costs of ancillary tests performed in facilities outside the hospital on a fee-for-service basis (e.g., in an independent, privately owned laboratory) or in an affiliated medical school/university based on an organizational fee schedule data management or statistical analysis of clinical research results.

Participant Support Costs

Participant support costs are those costs paid to (or on behalf of) participants in meetings, conferences, symposia, and workshops, when there is a category for participant support costs in the award budget. Registration fees, travel allowances, manuals and supplies, and tuition and stipends may be regarded as participant support costs in this case.

Participant Support Costs should be budgeted as follows:

Participant Support - Stipends
Participant Support - Subsistence
Participant Support - Travel
Participant Support - Other

Note: Participant support costs may not be rebudgeted into other cost categories without prior approval from the sponsor and re exempt from F&A recovery unless the indirect cost basis for the award is TDC.

Other Direct Costs

Any direct costs not included in direct cost categories indicated above.

Cost Sharing or Matching

Ssponsors often require itemized budgets for cost sharing or matching proposed on grants and contracts. These costs are portion of the project costs that are not paid for by the sponsor but must follow federal or sponsor budgeting guidelines. Waived indirect costs, when used for cost sharing, must be included in the proposal budget and justifications.

Ownership

The Executive Director of the Office of Sponsored Programs is responsible for ensuring that this procedure is necessary, reflects actual practice, and supports University policy.

FIN-017: Consistent Treatment of Sponsored Program Costs

FIN-028: Minimum Effort on Sponsored Programs

FIN-051: Proposing and Managing Cost Sharing on Sponsored Programs