How do I Build a Budget
how do i build a budget
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.
A budget justification should be prepared to explain how the budgeted costs relate to the project. The justification should provide sufficient detail to allow the sponsor to determine whether the proposed costs are reasonable and appropriate. Key elements to include in the justification 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
how do i build a budget
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.
- The salary category should include the names of all individuals who will be involved in the project. Depending upon agency limitations, an appropriate inflation rate may be used to determine salary requirements beyond the first fiscal year.
- Guidelines should be consulted for agency-specific salary caps.
- The salaries of administrative and clerical support staff are normally classified as indirect costs.
- Fringe benefits are charged as direct costs to the project.
- The most current fringe benefit rates should be used.
- The most current University rates may be found at the Office of Business and Financial Services
Consumable Materials and Supplies
- Consumable supplies (with life expectancy of one year or less) are items used exclusively in support of project objectives.
- When supplies are purchased to support the multiple activities of project personnel, they are considered to be indirect costs and cannot be charged directly to sponsored project funds unless specifically related to the project. Such items would include University stationery, toner, pens, tablets, file folders, staples, paper clips, etc. (office supplies).
- Travel should be reasonable, allowable and consistent with sponsor guidelines and University policy. On federally funded projects all foreign travel, including that which is cost shared, should utilize US flag air-carriers whenever possible and regardless of cost or convenience.
- Foreign and domestic travel should be itemized and justified separately.
- Equipment is defined as an acquisition cost of $5000 or more, including components for fabrication of equipment which cost $5000 or more.
- Lease purchase agreements for equipment costing $5000 or more.
Read more on the explanation for UIC equipment thresholds
- Generally speaking, UIC treats subaward direct and indirect costs as Direct Costs.
- A formal proposal from the subawardee, including a statement of work, budget, budget justification, and letter of intent/commitment from the subawardee’s institution should be provided when the proposal is submitted to OSP.
- Computing Services
- Charges for computing services may be budgeted only when these costs are justified as providing a direct benefit to the project.
- Professional Services
- Current or former University employees may not be paid as consultants. Payments to current or former University employees must be paid through the University payroll system. (see OBFS Policies and Procedures Manual, Chapter 17).
- Other Direct Costs:
- Telephone service, including monthly service charges, ISDN, calling cards and cellular phone charges typically should not be included as these are classified as indirect costs. Memberships, postage, and food are typically deemed to be unallowable.
- Further guidance regarding allowability of costs may be found in the “Business and Financial Policies and Procedures Chapter 16” and OMB Circular A-21.
- Tuition remission
- Tuition remission is assessed on graduate assistant salary reimbursement when they meet the applicable campus/department requirements.
- 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 OSP 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.
Facilities and Administrative (F&A) Costs and Rates
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 greater than $5,000
- 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
Industry Sponsored Clinical Trial
The controlled clinical testing of investigational new drugs, devices, treatments, or diagnostics, or comparisons of approved drugs, devices, treatments, or diagnostics, to assess their safety, efficacy, benefits, costs, adverse reactions, and/or outcomes, if any, in human subjects. These studies are conducted in conjunction with obtaining new drug or device approval from the U.S. Food and Drug Administration, under Phase I, II, III, or IV. Pre-clinical laboratory studies or studies in animals are not included under the term clinical trial research and neither are projects designed to develop new compounds, as well as test them; such projects are reported in one of the other research categories.
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 published sponsor guidelines and included in the proposal submission.
If the sponsor does not have published guidelines, but a reduced F&A rate is being requested you must complete and submit a signed F&A waiver.
Use of On-/Off Campus Rate
On-campus rates are used for proposals where all work is done using University facilities. The on-campus rate is to be assessed except when a significant portion of the sponsored agreement is performed at an off-campus site. If a sponsored program is being simultaneously conducted both on- and off-campus, you should budget according to where the majority of work is being performed. Please note that subcontractor effort is not a factor in determining where the majority of UIC work is performed.
The criteria for off-campus:
- Performance at the off-campus site must be on a continuous basis; intermittent performance is not sufficient;
- The University personnel working or engaged on the project must be physically located at an off-campus site; and
- The off-campus performance must be of sufficient duration; normally a full semester, summer term or period of performance of the sponsored agreement.
Facilities and Administrative Costs (F&A)
Chicago Campus Facilities and Administrative (F&A) Rates Finalized FY19-FY22Rates FY19-FY22 Organized Research 59.9% Instruction 40.6% Other Sponsored Activities 36.0% All Off-Campus Awards (Instruction, Organized Research, Other Sponsored Activities) 26.0% Industry Sponsored Clinical Trials 25% Tuition Remission (FY21) 42%