Sponsor Guidelines Should Always be Consulted for Specific Directives on Budget Preparation. The Following Represents General Guidance.
The budget is the financial plan for the project or program. It includes both the sponsor and non-sponsor share of the total project cost. Proposed project costs are comprised of allowable direct costs, facilities and administrative (F&A) costs, and cost sharing. Allowable costs are those that are reasonable and allocable to the sponsored project and allowable under University and sponsor policy.
The budget should be subdivided into periods of twelve month duration (unless partial year funding is anticipated). If cost sharing is included, each budget period should include columns for both Sponsor and University costs.
A budget narrative (Narrative) should be prepared to explain how the budgeted costs relate to the project. The Narrative should provide sufficient detail to allow the sponsor to determine whether the proposed costs are reasonable and appropriate. Key elements to include in the Narrative are:
- A detailed justification of the expense or service
- How the expense relates to and benefits the project
- The anticipated cost
- The time period in which it will be utilized
- Other information that will aid the sponsor in evaluating the proposed item
A direct cost is any expense that can be identified specifically with a particular project or activity and be directly assigned to an activity with relative ease and a high degree of accuracy.
Consumable Materials and Supplies: Travel: Equipment: Subawards: Services:
Consumable Materials and Supplies:
Cost sharing may include only expenses that are allowable on and allocable to the project and incurred during the project period. The establishment of a separate University account (FOP) will be required to record and track University cost sharing commitments. It is the department’s responsibility to provide documentation which supports cost sharing commitments. See “Policies and Procedures Applicable to the Conduct of Sponsored Projects - Cost Sharing Documentation Requirements .” Documentation and support of cost sharing commitments must accompany the proposal documents submitted to ORS for review. If any individuals named in the proposal are contributing effort which is not being reimbursed by the sponsor, then that effort is considered a cost share.
Cost sharing may include only expenses that are allowable on and allocable to the project and incurred during the project period. The establishment of a separate University account (FOP) will be required to record and track University cost sharing commitments. It is the department’s responsibility to provide documentation which supports cost sharing commitments. See “Policies and Procedures Applicable to the Conduct of Sponsored Projects - Cost Sharing Documentation Requirements .” Documentation and support of cost sharing commitments must accompany the proposal documents submitted to ORS for review.
If any individuals named in the proposal are contributing effort which is not being reimbursed by the sponsor, then that effort is considered a cost share.
Sometimes referred to as indirect cost (IDC) and overhead, F&A costs are actual costs not always readily associated with a specific project such as building space, heating, lighting, administrative, etc. F&A is calculated as a percentage of the Modified Total Direct Cost (MTDC) or Total Direct Cost (TDC).
- If the a federally negotiated indirect cost (full) rate is employed, use the MTDC
- If a non-federally negotiated indirect cost (less than full) rate is employed, use the TDC
Total direct cost includes all direct costs (personnel, fringe, tuition, equipment, supplies, travel, other, etc.) charged to a sponsored program.
Modified total direct cost consists of salaries and wages, fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of the each subcontract (regardless of the period covered by the subcontract). Formally, the MTDC is the total direct cost less:
- Individual subcontract funds over the first $25,000
- Equipment (At UIC, an acquisition cost of $5000 or more, including components for fabrication of equipment which cost $5000 or more)
- Arrangements under which federal financing is in the form of loans, scholarships, fellowships, traineeships or other fixed amounts based on such items as education allowances or published tuition rates and fees of an institution.
- Patient Care Charges
- Tuition Remission included as a direct cost
- Rental Costs
- Capital Expenditures
- How are the F&A rates determined?
The rates are negotiated by the Office of Grants and Contracts with our cognizant federal audit agency, the Office of Naval Research, about every four years and are published in our Facilities and Administrative Rates Negotiation Agreement.
The basis for our F&A calculation is the Modified Total Direct Cost basis (MTDC), which consists of the direct costs of a sponsored project including salaries and wages, fringe benefits, materials and supplies, services, travel, and subgrants and subcontracts up to the first $25,000. Under the MTDC calculation, F&A is not assessed on equipment over $5,000, capital expenditures, patient care charges, tuition remission, rental costs, scholarships and fellowships, and the portion of each subgrant/subcontract in excess of $25,000.
- When am I required to use the federally negotiated F&A rate?
The federally negotiated F&A rate applies to all sponsored projects regardless of sponsor. However, there are certain circumstances under which the University may elect to accept a reduced F&A rate. Some of these exceptions are as follows:
Statutory Limitation. Certain federal grant programs such as federal training and fellowship grants may be limited by law as to the amount of F&A charged.
Published Sponsor Policy. Some sponsors (e.g. non-profits and foundations) will limit the rate they are willing to pay. The University reserves the right to review any published F&A limitation to ensure the limited rate is consistent with our institutional practices for that class of sponsor.
- When is the “Off-Campus” F&A rate applicable?
If a project involves work at on and off-campus sites, a single F&A rate should generally be applied consistent with where the majority of the work is to be performed. The criteria for use of the off-campus rate is as follows:
Performance at the off-campus location must be on a continuous basis and of sufficient duration, normally a full semester, summer term, or the period of performance of the sponsored agreement; intermittent performance is not sufficient;
The University personnel working or engaged on the project must be physically located at an off-campus site; and
Off-campus costs may include costs incurred at the off-campus site for salaries, related fringe benefits, supplies, utility costs, rent, local travel, and other similar costs that are treated as direct. Travel to and from an off-campus site is considered an off-campus cost.
- Are there different F&A rates for various types of project?
Yes, our federally negotiated rate agreement provides rates for organized research, sponsored instruction, and other sponsored activities. The rate types are described as below:
Organized Research. All research and development activities of an institution including those sponsored by Federal and non-Federal agencies or other entities constitute Organized Research. For this purpose, research is defined as being under a contract or grant aimed at the discovery and interpretation of facts, revision of accepted theories, or the application of such new or revised theories, which also require separate accounting and reporting. This includes basic, applied and developmental research.
Sponsored Instruction. With the exception of research training, Sponsored Instruction includes all teaching and training activities, whether they are offered for credits toward a degree or certificate or on a non-credit basis, and whether they are offered through regular academic departments or separate divisions, such as a summer school division or an extension division.
Other Sponsored Activities. Any program or project financed by Federal or non-Federal agencies or other entity which involves the performance of work other than Sponsored Instruction and Organized Research. Examples include health service projects, community service programs, facility use and technical testing.
- If the F&A rate changes between the time of proposal and award or during the course of a project, which F&A rate should be used?
Usually, the F&A rate used in the proposal budget will be honored upon award. However, there may be instances when UIC does not have a final negotiated rate with the Federal government at the time of an award. When this occurs, the provisional rate used at the time of the award must be adjusted once a rate is negotiated and approved by the cognizant agency for indirect costs.
Once awarded, the F&A rate remains fixed* for the life of the award (including subsequent supplemental increments of funding to the same award). For this purpose, competing renewals, and competing supplements, are considered new awards and should use the rate at the time of the competing renewal submission.
*The University’s current rate agreement is effective for FY14 – FY17, and includes incremental rate increases in FY15 and FY17. All awards beginning in FY15 and FY16 will have a rate of 59.8% assessed for FY15 and FY16. If awards continue beyond FY16, the assessed rate will increase to 59.9% in FY17 and remain 59.9% for the life of the award. Any award beginning in FY17 will be assessed at a rate of 59.9% for the life of the award
- What rate do we use when a project is being transferred from another institution?
The F&A rate on projects transferred from an investigator’s previous institution should be calculated based on our current negotiated rate.
- Do we calculate F&A on Participant Support Costs?
No, participant support costs should be excluded from the F&A base calculation. Participant Support expenses generally include costs of transportation, per diem, stipends and other related costs for participants or trainees (but not employees) in connection with sponsored conferences, meetings, symposia, training activities and workshops.
- What F&A rate do we assess on Fellowships?
It depends. Normally, we do not assess F&A on Fellowships. However, if a sponsor permits recovery of F&A on fellowship funding, that rate should be included in the budget.
- Can the difference between a reduced F&A rate and our negotiated rate be used as cost sharing?
It depends. If the reduced rate is a result of a statutory limitation, any F&A above the limitation is unallowable and cannot be cost shared. If the University elects to charge a rate less than the negotiated rate, the difference could be used to meet mandatory cost sharing.
- What rate should I use for a sub-awardee that does not have a negotiated F&A rate?
Federal cost principles permit a non-negotiated rate of no more than 10% on a Modified Total Direct Cost (MTDC) basis.
- What is the F&A rate for clinical trials?
We do not have a separately negotiated rate agreement for clinical trials, but it is customary to charge 25% Total Direct Costs (less IRB fees) for industry sponsored clinical trials. All other trials would use the federally negotiated rate.
Using a Less Than Full Rate
Some sponsors will only reimburse an F&A rate (a.k.a administrative, overhead or indirect costs) that is lower than the federally negotiated rate. In this scenario that rate is applied to the Total Direct Cost. This means that no exclusions will be taken before applying the F&A. Under these circumstances both a waiver of indirect costs and published sponsor guidelines are required to accompany the PAF.
From time to time a sponsor limits both the indirect cost rate and which direct costs may be assessed that rate. Under these rare circumstances, the full limitation must be expressed in the waiver and supported by documentation. The budget template allows for a customizable MTDC in these situations.
Always review the programs guidelines as many sponsors indicate what costs, including F&A, are and are not allowable. When applying less that the full F&A rate, a copy of the sponsor's guidelines must be included with the proposal when submitted to ORS.