Pre-Award

Budget Development

Funding from awards must be expended in accordance with governing regulations and agency policy. Pre-award reviews budgets to determine costs are allowable, allocable, and appropriate to grants in accordance with the Office of Management and Budget (OMB) Circular A-21, the agency’s policies and guidelines, and institutional policy. 

A cost is allowable when:

  • It serves a University business purpose, including instruction, research, and public service.
  • It is permissible according to UTHealth policy and federal regulations (regardless of whether it is a sponsored project).
  • It is permissible (for a sponsored project) according to the terms and conditions of the agreement.
  • It complies with the rules for allowability as covered in OMB Circular A-21, which dictates that costs must be reasonable. A cost is reasonable when: a) prudent person would purchase the item at that price; b) the cost is necessary for the performance of the activity; and c) incurrence of the cost is consistent with established University policies and practices.

Costs must be allocable to the sponsored agreements. A cost is allocable when:

  • It is incurred solely to advance the work under the sponsored agreement.
  • It benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods.
  • It is necessary to the overall operation of the institution and in accordance with OMB Circular A-21, is deemed to be assignable in part to sponsored projects.

Costs must be given consistent treatment through application of those generally accepted accounting principles (GAAP) appropriate to the circumstances.

All costs incurred on a grant must conform to any limitations or exclusions in OMB Circular A-21 or the sponsored agreement.

PIs should work with their departmental administrative officials to develop a budget which ensures all costs in the budget are fair and reasonable for a research project in accordance with A-21, agency policies and guidelines, and institutional policy.

Below is a list of resources for determining allowable costs:

PREPARING BUDGETS

When preparing a budget for a grant applications, consider the following:

  • Build the budget following sponsor guidelines. The typical order of precedence is: 1) funding opportunity announcement; 2) agency’s general grant guide; 3) agency’s policies and guidelines; 4) OMB Circular A-21 “Cost Principles for Educational Institutions” for federal budgets; 5) University policies.
  • Know budgetary limits for the project period, spending caps, etc. (i.e., travel, personnel).
  • Include only costs that are allowable, reasonable, and allocable to the project. Check the agency’s policies and guidelines; these will often lists allowable and unallowable costs. For NIH projects, refer to 10.7 Allowable and Unallowable Costs and Activities for a list of allowable and unallowable costs.
  • Provide a detailed justification for each category of cost. Items that you are requesting that usually are not allowed (i.e. food) requires an extremely detailed description justifying why the cost is necessary.

COST SHARING

The University seeks to support its faculty in the pursuit of their research interests while, at the same time, allocating all available resources to comprehensive support of the whole university enterprise. Cost sharing, as defined below, may be requested by the grantor in the form of funds or other university resources that would be contributed or allocated to a sponsored project over and above the support provided by the grantor. This commitment made by the University creates the requirement to track cost sharing in accordance with HOOP 75

The university actively discourages voluntary cost sharing on the part of principal investigators; exceptions may occasionally be made if the project in question is deemed by the Executive Vice President for Academic and Research Affairs to warrant a voluntary commitment. All exceptions must be approved prior to submission of the grant proposal by the Executive Vice President for Academic and Research Affairs. Refer to the Cost Sharing Template on the Forms page.

NIH FEDERAL BUDGETS

This section refers to preparing a budget for the National Institutes of Health (NIH). Additional resources are located on the NIH website. 

Direct Cost Categories

Personnel

Personnel costs often comprise 65-80% of total funds requested. All personnel with effort on project must be listed by name, and all personnel paid on a project must be employees of the University. 

  • Principal Investigator(s)
    • Effort should reflect work required for project.
    • If applicable, use the Salary Cap Limitations (NIH Salary Cap).
    • Fringe benefits must correspond to approved institutional fringe benefit rate tiers.
    • May add/delete personnel in future project years if scientifically necessary.
    • May increase/decrease effort if scientifically necessary in future project years.
    • Salary inflation should not exceed the sponsoring agency’s inflationary limit (the current NIH cost of living/inflationary rate is 0% per NOT-OD-12-036).
  • Consultants
    • May not be employees of the University.
    • If consulting costs are substantial (>$10,000), a subcontract may be required.
    • If awarded, department will handle consulting arrangement and payment through Procurement.

Equipment

  • Ask for what is reasonably needed for the project, especially if setting up a new lab.
  • Itemize each piece with a cost over Institutional threshold for equipment ($5,000). The threshold of $5,000 is for unit items, not individual items that add up to $5,000.
  • Equipment is usually easier to justify in the early research years rather than later years.
  • Equipment should be required 100% for project.
  • Equipment is excluded from the F&A base. 

Materials & Supplies

  • Budgeted supplies must be essential to the proposal.
  • Supplies should be itemized by category (glassware/plasticware, serum/radioisotopes, chemicals, sequencing kits).
  • Animal purchase is usually in supplies.

 

Travel (Domestic & Foreign)

  • Include in the narrative the purpose of the travel and how it is is directly related to the proposed research.
  • The standard request is one domestic trip for PI.
  • Additional travel can be requested as required by the individual project.
  • Purpose of travel must directly benefit the project.
  • Foreign travel must be necessary and extremely well-justified.

Patient Care Costs (Inpatient & Outpatient)

  • Represents payments to hospitals and/or clinics for either in-patient or outpatient care.
  • Patient care cannot include travel, lodging, or donor/volunteer/incentive fees. These costs should be in the Other Expenses category.
  • Additional information on patient care costs is located on the NIH website.

Alternations and Renovations

  • A&R costs are very rare.
  • Equipment installation is not normally considered renovations.
  • Alterations and renovations greater than $25,000 must be approved by NIH.

Other Expenses

Examples of other expense items are:

  • Animal care costs (check with the Center for Laboratory Animal Medicine [CLAMC] for current rates).
  • Publication costs, page charges, color plates.
  • Equipment maintenance contracts (costs must be based on project usage percent).
  • Donor/volunteer fees, including travel, lodging, per diem stipends.
  • Fee charges for services (mass spec., EM, flow cytometry).
  • Patient participant incentives and travel costs.
  • All other costs identified as a direct charge necessary to do the research.
  • Tuition which is excluded from indirect costs.

Subcontracts (Consortium/Contractual Costs)

The F&A costs for the first $25,000 of each consortium may be included in the modified total direct cost base.

  • Most subcontracts are to other non-profits, but in special circumstances the University will subcontract to commercial or foreign institutions. See the Vendor vs. Subcontractor grid for additional guidance.
  • Subcontract direct and indirect costs are included in the University's direct costs.
  • As stated in the University federally-negotiated F&A Rate Agreement, “modified total direct costs shall exclude equipment, capital expenditures, charges for patient care, student tuition remission, rental costs of off-site facilities, scholarships, and fellowships, as well as the portion of each subgrant and subcontract in excess of $25,000."

Indirect Cost Category

Refer to the Funding Opportunity Announcement (FOA) to determine whether indirect costs (IDC) are allowable. The FOA will also delineate whether there is a cap on the indirect cost rate.  If there are no mandatory restrictions to IDC, use the applicable F&A rate per the University’s F&A Rate Agreement for federally-sponsored projects. Any voluntary exceptions to the IDC rate will require an approved IDC wavier, which should detail the amount of F&A to be waiver, and should be approved by the department chair and dean.

Unallowable Costs

Certain cost items are not allowed to be charged to federally sponsored projects. Also, items factored into the indirect costs that may not be included in the direct costs of a project. To determine whether a cost item is allowable, refer to OMB Circular A-21, as well as the agency’s polices and guidelines, program announcement, and university policy.

The following cost items are typically considered unallowable:

Food

In accordance with OMB A-21 section J.32, Meetings and Conferences, the costs of meals are allowable when the primary purpose of the meal is the dissemination of technical information. The NIH Grants Policy Statement Section 7.9.1 further expands that grants funds may be used when certain meals meet the following guidelines:

  • Meals are for subjects and patients under study provided that such charges are not duplicated in participants’ per diem or substance allowance.
  • Meals are an integral and necessary part of a meeting or conference (i.e., a working meal where business is transacted). For example, on a conference grant for scientific meetings supported by the conference grant.
  • When such costs are specifically approved as part of the project activity in the Notice of Grant Award.

In all cases the cost of any meal must meet a test of reasonableness.

Additional requirements to consider for the allowability of meals for federally-sponsored projects are as follows:

  • Meal expenditures must comply with University policy and meet the OMB A-21 definition of consistent treatment.
  • The costs must be reasonable, and should pass the “prudent person” test.

Recurring business meetings, such as staff meetings, should not be broadly considered as meetings for the primary purpose of disseminating technical information in order to justify charging meals or refreshment costs to grants. The few cases where meals may be allowed are typically for major projects and conference grants, not standard R01 grants. 

PI and departments must include a detailed description in the budget justification indicating the reason for the meal, planned agenda for the meeting/conference, documentation justifying the need for the meeting to occur during a meal, and the amount of time that will be spent discussing technical matters. Regardless of the request type (meals for meetings, patients, etc.), the budget justification must be very detailed and the justification tied specifically to the scope or aim of a project.

In all circumstances, serving alcoholic beverages at such meetings is not an allowable cost. Additionally entertainment costs, such as food, are unallowable.

 

Office Supplies

The inclusion of general office supplies on a budget or budget justification is generally not an allowable cost as direct costs, per OMB Circular A-21 F.6.b(3), which states, "Items such as office supplies, postage, local telephone costs, and memberships shall normally be treated as F&A costs."

However, there may be some circumstances where charging office supplies to a grant may be permissible. The best way to make this determination is to look closely at the type of research being conducted.

If the project is mainly laboratory research, then general office supplies should be removed because they will be covered under F&A costs.

If the research consists primarily of surveys, questionnaires, and data collection, then it may be justifiable to include general office supplies in the budget and include an expanded justification that notes the "increased use of general office supplies outside of normal use."

If the supplies are not specifically allocable to the grant, they are considered general office supplies and should not be charged as a direct cost to the grant account.

At the minimum, PIs and departments must include a detailed description in the budget justification indicating the use of the office supplies, the reason they are required for the project and not included in normal F&A costs, the way they will be fully allocable to the project.  The justification should be very detailed and tied specifically to the scope or aim of a project.

Administrative Expenses

In accordance with OMB Circular A-21, the salaries of administrative and clerical staff should normally be treated as F&A costs. Direct charging of these costs may be appropriate where a major project or activity explicitly budgets for administrative or clerical services and individuals involved can be specifically identified with the project or activity. 

A "major project" is defined as a project that requires an extensive amount of administrative or clerical support, which is significantly greater than the routine level of such services provided by academic departments.

Examples of major projects are:

  • Large, complex programs such as general clinical research centers, primate centers, program projects, environmental research centers, engineering research centers, and other grants and contracts that entail assembling and managing teams of investigators from a number of institutions.
  • Projects which involve extensive data accumulation, analysis and entry, surveying, tabulation, cataloging, searching literature, and reporting (such as epidemiological studies, clinical trials, and retrospective clinical records studies).
  • Projects that require making travel and meeting arrangements for large numbers of participants, such as conferences and seminars.
  • Projects whose principal focus is the preparation and production of manuals and large reports, books and monographs (excluding routine progress and technical reports).
  • Projects that are geographically inaccessible to normal departmental administrative services, such as research vessels, radio astronomy projects, and other research fields sites that are remote from campus.
  • Individual projects requiring project-specific database management; individualized graphics or manuscript preparation; human or animal protocols; and multiple project-related investigator coordination and communications.

NIH Modular Applications

The modular grant application format is an extension of NIH's streamlining and reinvention initiatives, designed to focus the attention of investigators, their institutions, peer re-viewers, and NIH staff on science rather than budget details. It applies to research grant applications requesting up to and including $250,000 direct costs per year.

DOD GRANTS

An additional requirement for the internal review process for DOD projects is verification of actual base salary. For DOD projects, all salaries listed for all personnel should be at their current pay.  Departments will be requested to provide a salary verification sheet (HRMS Employee Funding History).