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Budget Development

Proposal Budget Development

Your budget is a financial proposal that reflects the work proposed. It outlines the expected project costs in detail, and should mirror the project description. A budget is presented as a categorical list of anticipated project costs that represent the researcher's best estimate of the funds needed to support the proposed work. The term “best estimate” is important here. You will be held to using the costs detailed in your budget, so make sure you’ve correctly estimated what you will need to complete the project.

Reviewers want to know how reasonable the cost of your project is. They will ask themselves whether you are over or underestimating your expenses. A careful review of the budget lets the reviewer know that you're not asking for too much or too little, but rather, just enough funding.

Prepare a detailed budget even for sponsors that accept lump sum budgets. Throughout the review process, sponsors may want more details about how you generated your overall figure, or where the money will be going. You will also need the details to help you complete the UCOP required budget justification.

Preparing Your Budget

Find more information about various budget components and budget preparation.

Budget Related Links

Each of the categories below has links to relevant resources related to the topic. For a page with just these links, please visit our Helpful Links page.

Direct Costs

Direct costs on a project will vary according to what is in your actual program or project. They do, however, have three things in common: they benefit the specific project for which the budget is written, they are necessary to complete the budget, and they are charged or recharged directly to the sponsored project. Below are some common direct costs.

Salaries & Wages

One of the major components of any budget will be accounting for the people who will be working on the project. The budget category "salaries and wages" is designed to account for ONLY UC Davis faculty or staff. Non- UC Davis employees will be listed on their appropriate subaward budget.

If you know the specific person who will be working on a project, you should use their actual salary to calculate the total cost. If you don't have this information, you should talk to the person in your department or area who processes payroll. You may also need to talk to the payroll staff in another department if an employee on the project works outside of your department.

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Fringe Benefits

Fringe benefits are listed on a proposal budget as a set percent of salary. For all employees, you will use the Composite Benefit Rate schedule provided by the Accounting Department. You will find the appropriate job classification for each employee, and use the rate listed for each fiscal year of your project.

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Equipment

For something to be considered equipment, its cost must be at least $5,000. It must also be personal property which has a normal life expectancy of more than one year, can be appraised for value, and is complete in itself. That is, it does not lose its identity when affixed to or installed in other property. Make sure the equipment is not general purpose and the need for it is well documented.

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Materials & Supplies

Materials and supplies are expendables, such as lab supplies and specialty supplies, which the researchers need to complete the project. In the budget, you should list each individual supply item and cost. How much detail about supplies should you put in the budget? A good rule to follow is: the higher the amount for the category, or the less obvious the cost for the work that will be performed, the more detailed the breakdown should be. It's not a good idea to just list "lab supplies" or "research materials". Remember that you should not include miscellaneous or department (general) supplies, like copy paper, office chairs, or pens, because these are included as Facilities and Administrative, or overhead, costs.

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Patient Care Costs

For budgeting purposes, "Patient Care Costs" are the costs of routine and ancillary services provided by hospitals to individuals participating in research programs. The costs of these services normally are assigned to specific research projects through the development and application of research patient care rates or amounts.

The following are examples of what are not considered “patient care costs”:

  • First doctor-patient visit
  • Follow-up visits (Physician /Nurses)
  • Physical Exam performed by the Physician
  • Physical Exam performed by a Nurse
  • Taking "patient's history" by a Physician or a Nurse
  • Any other services provided by a Nurse, or a Medical Technician
  • Referrals to other doctors within the hospital or department

 

Projects with patient care costs always involve human subjects, so the project must have IRB approval.

 

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Institutional Review Board (IRB) Review Fee

Researchers need to account for applicable IRB Review Fee in their proposed budgets for industry-sponsored projects, as well as budgets for all subcontracts they expect to receive from such industry sponsors.  For projects subject to IRB review, IRB Review Fees will be collected based on the following rates for all industry sponsored projects, regardless of the committee reviewing them:

  • Initial Review:                  $3,400
  • Each Annual Review:       $1,600

 

Applicability

The above listed IRB Review Fees apply to all research involving human subjects, fully, or in part funded by extramural funds, and conducted by UC Davis employees, students, or agents, except for those projects that are fully and directly funded by the following sources:

1. Federal government

2. State of California and its local governments

3. Non-profit foundations

4. UC Davis Departmental discretionary funds

 

Additionally, the following IRB reviews will not be assessed IRB Review Fee:

  • Reporting adverse events;
  • Annual review of investigator-initiated clinical trials (however these projects continue to be subject to IRB Review Fee for their initial review);
  • Review of modifications and amendments of previously IRB approved projects;
  • Projects that qualify as “Exempt Review”, as defined by the Code of Federal Regulations, Title 45, Part 46, Section 101(b)(1) through 101(b)(6) §46.101(b)(1) through (6),- (http://www.hhs.gov/ohrp/humansubjects/guidance/45cfr46.htm/l46.101(b)(1)#46.101(b)(1));
  • Unfunded projects, such as projects conducted by undergraduates, as a part of their educational activities are also exempt from the application of IRB Review Fees;
  • Medical records research that is not industry-sponsored;
  • Reporting of noncompliance, potential unanticipated problems, or adverse events;
  • Applications involving a non-research use of a Humanitarian Use Device;
  • Application for emergency or one-time use of an investigational drug or device.

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Travel

General travel costs include a variety of expenses, including ground and air transportation, communications, lodging and subsistence or per diem, foreign travel, currency exchange fees, and passport and visa costs. In your actual budget, you need to make sure that you list the total cost of domestic and foreign travel separately.

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Graduate Student Fees

Graduate students employed on a sponsored project are entitled to have their fees or tuition remitted on their behalf by the University. To be eligible for tuition and fee remittance, the student must have at least a 25% appointment. This can be a combined total of appointments across all sponsored projects. The fees and tuition remitted must be charged to the contracts or grants on which the student is appointed. The fees and tuition must also be charged in proportion to the effort charged to the project. As of 2011, the Budget Resource Management office has approved an escalation of 10% for student fees and tuition. You should take this into account on multi-year budgets which involve graduate students.

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Consultants

Consultants work out of their brain, bag, or brief case, and typically work on an hourly basis. They don't use resources of an entity such as a university or company, and don't own the resources of the entity for which they are consulting. If you are calling someone a "consultant" in your budget, but they will be utilizing University resources, you should evaluate whether they are, in fact, a subcontractor.

As a part of the budget, you will need to obtain a written scope of services and fee schedule from any consultants. Finally, you will need to determine whether there is any conflict of interest between the institution or PI and the consultant. In general, you'll examine whether the consulting agreement is with a current or recent employee, their near relatives, or an entity in which an employee controls or owns a financial interest. Make

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Subawards

There are four standard items which Sponsored Programs will always need for a subaward: budget (broken down by year), scope of work, subrecipient monitoring form, and institutional approval from the receiving institution. Approval from the receiving institution generally consists of a short letter agreeing to the terms and conditions and any required cost share. It should come from an institution contact with signature authority. For example, at UC Davis, this would be the Sponsored Programs office.

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Lease Costs

When lease costs are charged directly to a sponsored project, you may use off-campus indirect cost rate for your budget calculations. Remember that the lease charges must still be allowable, allocable, and consistent. You must also be able to document the lease and other associated charges.

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Other Direct Costs

Your budget may have other direct costs which don't have their own budget categories. This may include items such as equipment repair and maintenance, computing time, publication costs, animal care, or other costs associated with completing the project. You should list these costs on your budget, and describe them in detail in your budget justification.

Estimating Costs

Once you know your budget categories, you'll need to identify and project the costs for a sponsored project using generally accepted cost estimation methods. For categories other than salaries and wages you'll need to estimate your costs. There are multiple accepted cost estimation strategies:

  • Historical Costs
    • What has it cost in the past?
  • Current Costs
    • What do catalogs and websites that sell this product currently charge?
  • Vendor Quotes
    • What is a vendor telling you it will cost for them to supply you with the product?
  • Approved Recharge Rates
    • If you're using a UC Davis resource, what is the approved recharge rate?

It's ok to use methods other than these to estimate your costs. Just be sure that your process is logical, you can explain it to someone else, and you are able to document how you obtained your numbers.

Escalating Costs

When you estimate your costs, you should remember that costs increase over time. Because of this, we recommend that you include a modest escalation in the estimate of costs for direct charges. Escalating costs is consistent with the University's cost principles, and with the University's policy of recovering all costs of conducting sponsored projects. Escalation helps to ensure that your project receives adequate funding. You should use an escalation rate of 3 to 5% for most direct costs. There are two exceptions to this. As mentioned, tuition and fees should be escalated at a rate of 10% per year.

Documenting Costs

Once you've estimated your direct costs, you'll also need to make sure you keep detailed documentation. Documentation supports how the costs were estimated and the reasons why costs were proposed. This is our proof that we are not just making up all of the numbers.

You can use any of the materials you used for your cost estimation as documentation. These could be things like payroll records, published merit & range increases, catalogs, on-line or other, vendor quotes, proposals, or documentation of historical costs for like projects.

If you are using web-based information as your documentation, you should save either a printed copy or PDF version of the page, not just the link. The auditors will need to see the information you used when you wrote your proposal budget, and the website will most likely update the information, or may not be available at the time of an audit.

Facilities & Administrative Costs

F & A Costs are associated with the general operation of UC Davis. They are costs such as facilities and maintenance, general and departmental administration, clerical and administrative salaries and fringe benefits, general office supplies, general purpose equipment like computers, routine postage, building maintenance and utilities, and library expenses. You'll notice that all of these examples are benefiting multiple projects, and it would be difficult to determine how much of each resource was given to each project.

Awards which are funded must use the Federally negotiated indirect cost rate agreement. Some sponsoring agencies do not reimburse indirect costs at the federally negotiated rate. The University may honor these exceptions when the organization has written policy guidelines stating agency policy on payment of indirect costs.This does not apply to for-profit entities.

To request an exception from the negotiated rates, a request must be sent by the Office of Research, Sponsored Programs to UC Office of the President for review.

Budget Justification

UCOP requires the researcher to create a written description of the estimated costs used to prepare a project budget, as well as an explanation and description of the types of individual costs that make up each larger budget category. This is known as a budget justification, and is required by the university, even if the sponsor doesn't require it.

Your budget justification provides the reviewer, and potentially an auditor, with an explanation of the cost estimation methods used to project the costs, an explanation of why the projected costs are necessary for the research or project, a Description of the types of costs that make up a larger budget category such as "other" or "supplies", and a rationale for why this situation is special, and should include some sort of accommodation or payment of unusual costs. This last portion is especially important if your budget includes something that might raise a flag for sponsors or auditors, like Equipment, especially any that even remotely sounds like general purpose equipment, or non-resident graduate student fees and tuition, which is required by the UC Davis remission policy. Make it clear that all budget requests are reasonable and consistent with sponsor and UC Davis policies.

There is no University required format for budget justifications, but in general, they should follow the same line item format and contain the same costs as the budget form. A reviewer should be able to place the two documents next to each other and see the connection between each item.

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Cost Sharing

Cost sharing occurs when costs of a sponsored project are borne by the applicant institution (UC Davis) instead of by other institutions or agencies. Cost sharing usually occurs with direct costs, but if the sponsor allows it, indirect costs can be used to meet a mandatory cost share requirement.
Make sure that cost sharing is appropriate before you commit to it. UC Policy (APM – 020) says that UC must recover all direct and indirect costs from extramural sponsors. When we cost share, the campus is essentially subsidizing the research. This is why it is not appropriate to cost share on most government contracts or in proposals to for-profit companies.
When you submit a proposal with cost sharing, you will need to have a signature from the party that has authority to commit to the cost share, such as the Dean or department chair. In most cases, the signatures on the data sheet can serve this purpose. If you're unsure who has the authority to commit to a cost share, contact your Proposal Team Leader in the Sponsored Programs Office.