1. business and industrial
2. business operations
3. human resources

BROWN
Office of the Vice President for Research
NCURA Region 1, 2015
Budgets Beyond the Basics
Complex Budgeting for the Pre-Award
Administrator
Michael A. Kostyshak
Brown University
Learning Objectives:
Focus on 4 main areas that require special attention:
•
•
•
•
Time periods
Appointments & Effort
Indirect Cost
Cost Sharing
BROWN
Office of the Vice President for Research
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Fun With Math!!!!
Working with Percentages
• 5% = .05 but it does NOT = .05%
• Factor of 100 difference!
• .05% = .0005
• .05% raise on $50,000
• = $25.00
BROWN
Office of the Vice President for Research
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Fun With Math!!!!
Working with Percentages
• To increase a number by 5% multiply the
number (the Base) by .05 and add them
together:
100,000 X .05=5,000
100,000+5,000=105,000
-OR• Simply multiply the Base number by 1.05
100,000 X 1.05 = 105,000
BROWN
Office of the Vice President for Research
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Fun With Math!!!!
Working with Percentages
• To find the Base from the Total and the %
• DO NOT apply the % to the total and subtract!!!
• Divide the Total by 1 + %
• Total = 105,000 and rate is 5%
• $105,000 / 1.05 = $100,000
• Helpful if there is a total funding limit:
TC=$300,000 F&A Rate is 62%:
300,000 / 1.62 = $185,185 (TDC with no deductions)
BROWN
Office of the Vice President for Research
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Time Periods
Time Periods
• Fiscal year vs. Period of Performance
• Indirect Cost Rates, Benefit Rates, Salary
increases, etc. change with the Fiscal Year
• Generally average the costs over the period
of performance
• Apply the correct rate for the relevant time
period
BROWN
Office of the Vice President for Research
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Time Periods - example
Budget Period = April 1 – March 31
Fiscal year = July 1 – June 30
• 3 months in one fiscal year
– April, May, June
• 9 months in the next fiscal year.
– July through the following March
• NOTE the Summer and AY months are split
over 2 fiscal years = 4 time periods per year
BROWN
Office of the Vice President for Research
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Appointments & Effort
Faculty Salary & Effort
• Salary Depends on the Appointment
– 9, 10, 12 months
– Annual increase may be by fiscal year or
anniversary date of appointment
• Effort is Expressed 2 ways
– “Person Months”
– “Percent of Effort”
BROWN
Office of the Vice President for Research
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Appointments & Effort
• “Person Months”
– The number of months of the relevant budget year
committed to the project
– For purposes of calculating the value of one
month, Calendar, Academic, Summer,
doesn’t matter…
– Divide the total salary by the appointment to get
the monthly salary:
BROWN
Office of the Vice President for Research
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Person Months-Example
Person Months:
• $90,000/ 9 months = $10,000 per month
• Multiply by the number of months in the
budget to get the salary requested
• ½ of a month = $5,000
BROWN
Office of the Vice President for Research
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Person Months
Converting Person Months to Calendar Year
Effort:
• Divide the person months by 12 X 100 to get
the effort in calendar year %
• Effort =. 5 Person Month,
.5 / 12 = .0416 X 100 = 4.16% of 12 months
BROWN
Office of the Vice President for Research
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Appointments & Effort
Percent of Effort The portion of the relevant time
period committed to the project.
9 month appointment:
33.3% Summer =
1 Month
11% Academic Year = 1 Month
8.3% Calendar Year = 1 Month
10 month appointment:
50% Summer =
10% Academic Year =
8.3% Calendar Year =
BROWN
Office of the Vice President for Research
1 Month
1 Month
1 Month
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Percent of Effort - example
PI working 5% AY and 25% of the Summer:
• 9 month appointment at $90,000
• 5% AY effort = $90,000 * .05 = $4,500
• 25% Summer effort =
• 90,000/9 = monthly salary of $10,000
• 3 summer months * 10,000 = $30,000 total summer salary
• .25 * 30,000 = $7,500
• $4,500 + $7,500 = $12,000 10% of total annual salary
• Calendar Effort: 5% of 9 + 25% of 3 = 1.2 months = 10%
BROWN
Office of the Vice President for Research
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Appointments and Effort
Converting Percent of Effort to Calendar Year
Multiply the effort by the appointment to get
person months.
5% of 10 months =. 5 month
• .5 / 12 = .0416 X 100 = 4.16% of 12 months
BROWN
Office of the Vice President for Research
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Indirect Cost
• Function of Direct Cost
• Certain Costs are exempt:
– Equipment (>$5,000 AND > 1 year of use)
– Tuition, Health Fee for Grad Student RA
– Participant support costs
– Subcontract amounts >$25,000 per sub
• Sub Total Cost is a Direct Cost to Prime Recipient
BROWN
Office of the Vice President for Research
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Indirect Cost - example Year 1
Start Date = April 1; F&A increase on July 1:
Total Direct Cost
$125,000
– Deduct Tuition & Health Fee
($12,000)
– Deduct Equipment
($60,000)
MTDC = 53,000
3 months at 62%
=
$8,215
9 months at 62.5%
=
$24,844
Total Indirect Cost = $33,059
Total Cost = TDC + IC = $158,059
BROWN
Office of the Vice President for Research
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Fun With Math!!!!
• To find TDC from Total Cost WITH deductions:
TC=$300,000; F&A 62%; Equip. $25,000; Tuition= $15,000:
TDC = “D”
MTDC = “D” – 40,000 I=.62*MTDC
Basic Equation:
D + I = 300,000
Rewrite Basic Eq. in terms of D: D + .62(D – 40,000) = 300,000
Get rid of parenthesis:
D + .62D – 24,800 = 300,000
Combine like terms:
1.62D = 324,800
Divide each side by 1.62 to isolate “D”
D = 200,494
200,494 + .62(160,494) = 300,000
BROWN
Office of the Vice President for Research
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Subawards
• Understanding Subawards and Indirect Cost
• Subrecipient Total Cost is a Direct Cost to the PTE
• PTE charges IC on the first $25,000 of Subaward
Total Cost for the life of the subaward
• This may include sub’s indirect cost
BROWN
Office of the Vice President for Research
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Subawards
IC calculation in Prime Budget:
Year 1
Year 2
PTE TDC:
100,000
100,000
Incl. Sub Total Cost:
15,000
PTE MTDC
100,000
PTE Indirect (62.5%) 62,500
PTE Total Cost:
$162,500
BROWN
Office of the Vice President for Research
15,000
95,000
59,375
$159,375
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Subawards
NIH Modular Budgets
• Direct costs requested in $25,000 “Modules”
• Modules do not include Subaward Indirect Cost.
• TDC = Module amount plus Subaward Indirect Cost
• MTDC is calculated the usual way using the module amount
plus Subaward Indirect Cost
BROWN
Office of the Vice President for Research
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NIH Modular Budgets
Total Direct Cost =
Deduct Subcontract F&A
Basis for calculating the modules:
Module amount
Add Subcontract F&A
PTE Total Direct Cost
$128,081
(5,000)
123,081
Calculate F&A@ 62%:
equip = 60,000 tuition = 15,000 MTDC = 55,000
Apply the Rate = 55,000 * .62
F&A =
Total Cost =
BROWN
Office of the Vice President for Research
125,000
5,000
$130,000
34,100
$164,100
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Cost Sharing
Cost Sharing on Sponsored Projects
BROWN
Office of the Vice President for Research
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Cost Sharing
• Cost Sharing is like DARK MATTER:
1.
2.
3.
4.
Real
Hard to see
We know it is there, can observe its effects
MUST ACCOUNT FOR IT
BROWN
Office of the Vice President for Research
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Cost Sharing
• Definition:
– A portion of total sponsored project/program costs
not funded by the sponsor
– All contributions, including cash and in-kind, that
a recipient makes to an award
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Definitions
– Mandatory Cost Sharing:
•
•
•
•
•
Required by the Sponsor
Identified or quantified in the proposal
A commitment of the University
A condition of receiving the award
Must be captured and documented
– Voluntary Cost Sharing :
• Not required by the Sponsor
• May be Committed or Uncommitted
BROWN
Office of the Vice President for Research
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Definitions
– Voluntary Committed Cost Sharing:
• Identified or quantified in the proposal
• Commitment of the University
• Must be captured and documented
– Voluntary Uncommitted Cost Sharing:
•
•
•
•
BROWN
Not identified in the proposal, or other communication
Not a condition of the award
Not a binding commitment of the University
Does Not require documenting or reporting
Office of the Vice President for Research
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Cost Sharing - Types
• Cash, In-Kind, Reduced F&A
• Cash
– Payment for the direct costs of a project
• In-Kind
A non-cash contribution to a sponsored project or program
Provided by a third party
Based on Fair Market Value
Any form of Allowable: goods, services, real property,
equipment, supplies or other expendable property
– Directly benefiting a specifically designated project only
–
–
–
–
BROWN
Office of the Vice President for Research
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Cost Sharing - Types
• Reduced F&A - Unrecovered Indirect Cost
– Unrecovered indirect cost attributed to the direct
costs being covered by the Recipient.
– F&A cost rate less than the rate allowed by the
sponsor
BROWN
Office of the Vice President for Research
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Cost Sharing - Impact
• Financial impact
– Reduces total institutional dollars available for research endeavors
– Inability to recover F&A costs associated with cost sharing dollars
• Administrative/Compliance impact
– Associated administrative requirements
– Failure to properly document cost sharing may result in audit
findings
• Facilities and Administration Rate impact
– May reduce University’s future indirect cost rate
BROWN
Office of the Vice President for Research
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Fun With Math!!!!
F&A Costs / Direct Cost BASE = F&A Rate
$62,500 / $100,000 = 62.5%
$62,500 / $101,000 = 61.88%
An increase in the BASE will reduce the rate
BROWN
Office of the Vice President for Research
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Cost Sharing - Effect on the Rate
• Are some costs/sources better than others?
• Graduate student support
– graduate students are partially excluded from MTDC
(tuition, health fee);
• Equipment & Participant support
– excluded from MTDC for research base
• Cost Sharing from gift funds intended for research
– Destined for the research base anyway…
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Office of the Vice President for Research
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What is NOT Cost Sharing
• Costs that occur before or after the period of performance of
the project
• Preliminary work done with department funds, start-up
funds, or gifts, etc. prior to the proposed work
• Work covered by other grants that have their own unique
Scope of Work
• Cost that are not allowable under the award
BROWN
Office of the Vice President for Research
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Cost Sharing Pitfalls
• Most sponsored projects require faculty effort
• Beware of expressions of support that are not included in the
budget figures
– Budget narratives, work scope, facilities statements, letters of support
– Referencing the use of start up funds…
• Revised budgets due to a sponsor cut in funding should
include a corresponding cut in cost-sharing commitment
• Remember that most direct cost sharing has a respective F&A
component
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Office of the Vice President for Research
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