Grant Proposal Budget Preparation

1. Determine the Ground Rules

Find out from the application guidelines, Research Office, or funding agency all the established budget regulations, including:

	Allowable Direct Costs - What items can be charged to the agency? Will it pay for outside consultants? Travel both inside and outside the United States? What are the rules about purchasing equipment? Will it pay for salaries for principal investigators or project administrators?
	Facilities & Administrative Costs (also called F&A, indirect costs, overhead) - Indirect costs pay for office and laboratory space, heat and lights, library services, administrative and other costs. Every institution is assigned a federal agency with whom it negotiates an indirect cost rate each year, based on an audit of the previous year's transactions. No institution arbitrarily sets its own indirect cost rate. The negotiating agency for the University of Idaho is the Department of Health and Human Services; the current F&A rates are found on the Proposal Fact Sheet.  In preparing a proposal budget, the F&A costs are computed on Modified Total Direct Costs (MTDC) base. MTDC excludes permanent equipment costs in excess of $5,000 per unit, graduate student fees and insurance, rental cost of off-site facilities, scholarships, fellowships, and the portion of each subaward in excess of $25,000. F&A is charged on the first $25,000 of subawards at the UI on-campus rate. You may download UI's F&A Rate Agreement (PDF).   Where facilities and administrative cost rates are mandated by the agency, or in instances where agencies will not pay them at all (and so state in their guidelines), the university may accept the conditions. A statement from the agency or copy of the pertinent portion of the guidelines must be attached to the external support form, and these cases must be approved the Vice President for Research.
	Cost Sharing - Federal agencies require that some part of the cost of a project be borne by the applicant institution. When cost sharing is required and no rate is specified, about 5 to 10% is acceptable. This is usually provided by pledging some portion of personnel salaries with related fringe benefits, and in some cases, indirect costs. Other sources of cost sharing can be used, but they must be carefully documented for auditing purposes. If the agency does not require a match, don't do it. You will be held to your commitment. Contribute only what is required. In the case of the NSF standard requirement for a 1% cost share, the university will provide the cost share and it is not necessary to include it in each proposal. In the case of other NSF projects that require a different cost share amount, follow the guidelines to provide the appropriate cost share. Learn more about cost sharing in a special 2000 issue of Research Management Review
	Matching - Matching costs are slightly different from cost sharing. Matching costs are commitments by the university to spend its funds in a certain proportion to funds provided by the granting agency. Typically, this sort of commitment is required for equipment or facility grants and is a commitment of actual dollars, rather than an in-kind contribution.
	Minimum-Maximum Price Range - Before preparing a proposal and budget, determine what would be an appropriate amount to request. The guidelines usually will tell you the maximum amount allowed. Request the maximum if you can justify it, but never request more money than the program allows. Many agencies publish lists of grant awards made the previous year. The approximate range of previous awards can be found in the Catalog of Federal Domestic Assistance, or individual agency annual reports.

2. Identify the Total Cost of the Project

Developing the budget is an excellent test of how clearly and completely the project has been described. The principal investigator should be able to work through the narrative of the proposal and identify the costs to be included in the budget.

If the project is approved, the PI may be asked to give a rationale for various items in the budget. It is a good idea to prepare a budget justification worksheet which outlines the basis on which each cost was developed. Identify the page in the narrative which substantiates the particular expense, and mention any special purpose for the funds not documented in the proposal.

The budget justification worksheet can also help the PI identify the items which can be used to substantiate local cost-sharing funds. For example, many funding sources will count as "match (at the regular salary rate normally paid consultants) the time contributed to a project by a volunteer advisory board, particularly if the board is composed of professionals.

3. Prepare the Final Budget

If the granting agency provides a budget form, you must use it. Otherwise, organize your budget according to the following commonly used categories. Each category links to the UI policy details for that category. Please call the URO or Grants & Contracts for help with your budget.