Budget Issues: Sub-Contracting, Matching, and Indirect Cost

Budget Issues:Sub-Contracting, Matching, and Indirect Cost Richard Mocarski Coordinator of Research Communications Office for Sponsored Programs

Getting Started • What is needed for the project? • What are allowable costs?

Budget Staples (Normally Allowable Costs) • Personnel • Consultants • Equipment (>$5,000) • Supplies (tangibles) • Travel • Other Expenses (services, lab fees, participant support) • Consortium/contractual Costs • F&A costs (Indirect)

Budget Nukes (Normally Un-Allowable Costs) • Office Supplies • Computers! • Administrative support! • Entertainment Costs • Alcohol • Voluntary Cost Share • Anything not directly related to the proposed project. • Anything for another project!

Key Words • Direct Costs: Any cost directly associated with the project. • F&A (Facilities and Administration) or Overhead or Indirect Costs: Any cost vital to the project but not directly related (i.e. lights, central administration, office supplies, etc.). The University has a standard, negotiated rate for capturing these costs. • Equipment: An item having a unit cost of $5,000 or more and life of over 1 year. • Supplies: Expendable items with a useful life of less than a year and a unit cost under $5,000. Something you can hold (i.e. Widget)

Where’s the Guidance? • Sponsor Guidelines • RFA, PA, website, etc. • University Guidelines • OSP contact. • http://osp.ua.edu/policy_procedures.html • Federal • OMB (Office of Management & Budget) • FAR (Federal Acquisition Regulations) • State • Bid Law

Where’s the Guidance? • Both the Sponsor’s guidelines and the University’s guidelines must be followed. Where there are contradictions, the more restrictive of the two must be followed. • Generally, University regulations conform to the federal and always to state regulations, but are more specific and sometimes more restrictive.

Regulations, Policies & Procedures- Financial – Federal – Order of Precedence Award Special Conditions Program Rules Agency Rules OMB Circulars and/or FAR Financial Stewardship of Sponsored Project Funs. Cindy Hope and Tammy Hudson http://osp.ua.edu/site/training.html.

University Policies • PI Salary/Effort • “The federal government has clarified that, except in very unusual circumstances, each federally funded project should have allocated to it some level of committed Principal Investigator/Project Director (PI) effort.” • “As the federal government requires that it be charged no more than any other sponsor, the University is generally required to charge all sponsors for some portion of faculty effort related to any sponsored activity.” • Exceptions: Sponsor doesn’t allow effort or the PI’s sole function is that of a mentor. • http://osp.ua.edu/Minimum_allowable.html

University Policies • Cost Share (Matching) • The University of Alabama does NOT support voluntary cost sharing. • Mandatory cost share must be negotiated with the appropriate officials prior to the submission of the proposal.

Cost Share:Mandatory • Cost share at the lowest level allowable. • Use waived indirect (if required, and allowed). • Use release time if possible. • The difference between in and out of state tuition (if possible – is the GRA out of state?)

Budget Components:Personnel • Any person who is devoting effort to the project should be paid from the project. • Senior Key Personnel include the PI and any person who is integral to the project’s success. • Other personnel can include Graduate Research Assistants, Post-Docs, Research Techs, Senior Collaborators who are not key, etc.

Personnel Cont. • Unallowable Personnel include administrative support staff. • Fringe Benefits • Faculty and Salaried Staff: 28.41% • Hourly Staff: 36.61% • Post-Docs: 17.38% • GRAs: Health Insurance ($117 a month) and FICA in the summer (7.7%) • http://osp.ua.edu/fringe.html

Personnel Cont.: Buyouts • Buyouts are when faculty use funded research time to reduce their course load. • Each department has a different buyout rate and a different procedure for securing a buyout. • Before a buyout can be budgeted, it must be approved by the faculty member’s department head.

Budget Components: Consortia (Sub-Awards) • A contract to another organization that conveys a portion of the UA project’s scope of work. • A budget, scope of work, and letter of commitment signed by an authorizing official need to be obtained. • First 25k subject to F&A costs.

Budget Components: Consortia vs. Vendor • Consortia should have programmatic responsibilities. Participant. • Vendors provide goods or services within its normal business operations or offers services similar to many other providers. Hired labor.

Budget Components: Consortia – The 25k Rule • Each sub-award is subject to indirect charges on the first 25k of that total award. • Each sub-award charges their own indirect costs on their direct costs.

Budget Components: F&A (indirect) costs • Research costs to your institution which are not specifically related to your project. • Each institution has a negotiated rate for indirects (F&A). UA has a federal F&A rate for research of 44.5% for research grants. • Certain items are exempt from F&A. (Tuition, Equipment, Patient Care, Rent, Consortia costs above 25k)

Budget Components: Use of Different Rates • Research vs. Service • On-Campus vs. Off-Campus (http://osp.ua.edu/On_OffCampusRateApplication.pdf) Are you leasing space? Are any activities being performed on campus? What percentage? Are the project costs over 100k?

Examples Direct Costs ►Non-administrative Salaries, Wages, Fringe Benefits, such as: > Principal Investigator > Faculty > Research Assistant> Scientist > Technician > Post Doc. ►Animals and Animal Care Per Diems ►Consultants ►Equipment (Technical & Scientific) ►Maintenance/Repair - Scientific Equipment ►Page Charges/Reprints/Reference Materials ►Freight/Other Transportation > UPS > FedEx > Priority Mail ►Rental of Space / Equipment (Non-UA owned) ►Service/Recharge Center Charges ►Subcontracts ►Materials & Supplies > Chemicals (Lab) > Gases > Radioisotopes ►Telephone Charges - Long Distance ► Travel Indirect Costs ►Administrative and Clerical Salaries, Wages, Fringe Benefits, such as: > Fiscal Officer > Accountant > Department Administrator > Secretary > Administrative Staff officer > Staff Asst. ►Computer Hardware (General Purpose) ►Dues & Memberships ►Equipment (General Purpose) > Copier > Office Furniture ►Maintenance/Repair - General Purpose Eqmt. ►Meals & Refreshments ►Printing ►Postage ►Subscriptions ►Office Supplies > pens > pencils > transparencies > binders > paper, tablets > staples > files, folders > computer software (general) ►Telephone Charges > Basic line charge > Pagers > Voice mail Financial Stewardship of Sponsored Project Funs. Cindy Hope and Tammy Hudson http://osp.ua.edu/site/training.html.

Preparing Your Budget (cont.) • UA uses Modified Total Direct Costs • Indirects are calculated by applying the indirect rate to the direct cost base. • Base = total costs - • Tuition • Equipment • Patient care costs • Consortia costs above 25k

Budget Modifications • Proposed budgets may be increased or reduced at the time of award by the sponsor. Due to budget restraints, number of awards, feasibility, etc.

Budget Modifications Cont. • Scenario 1: Budget cuts are due to agency constraints and are under 10%. • The modification can be done at a local level. • Scenario 2: Budget cuts are due to agency constraints and are over 10%. • Evaluate if the project can still be done. • Yes: The modification can be done at a local level. • No: Contact your program officer.

Budget Modifications Cont. • Scenario 3: Budget cuts are due to review committee’s recommendations. • These cuts are normally large. • Talk to your program officer, whether or not you agree with the assessment. • As with Scenario 2: • The Aims may need to be hedged. • The award may need to be turned down.

Budget Management:Pre-Award • If allowed by the sponsor, you may begin spending funds up to 90 days before the award start date. • Pre-Award Cost Form: http://osp.ua.edu/OSP-Authorization%20for%20Pre-Award%20Costs-0504.doc

Budget Management:Revision • For grants under expanded authority, re-budgeting between categories of less than 25% can be done locally. • >25% needs written approval

Budget Management:Revision • Any change in scope, absence of greater than 3 months or change in PI, need for additional funds, or transfer of a significant portion of the research (i.e. sub-agreement) must be approved, in writing, by the sponsor.

Budget Management:Monitoring • Monthly, or at least quarterly, the PI should review expenditures. • Costs should be incurred at a reasonable rate, as sponsors consider expenditure rates an indication of progress.

Budget Management:Monitoring Cont. • Contract and Grant accounting sends financial reports to the sponsor per the sponsors guidelines. Therefore, even if progress reports have been submitted, an agency might question the progress if the expense reports do not match. • Carryover and no cost extensions should be avoided if possible!

Questions? Richard Mocarski Coordinator of Research Communications Office for Sponsored Programs 205 348 7163 rmocarski@fa.ua.edu

Budget Issues: Sub-Contracting, Matching, and Indirect Cost