Budget Overview


The budget and its accompanying narrative are vital components of the proposal.  Your budget must be sufficient to perform the project but also be in accordance with sponsor and University guidelines.  For example, some sponsors will not allow you to purchase equipment or pay salaries, some limit the total amount of funding you can request over the life of the project or in each year.  Some want detailed budgets; some want you to budget in blocks of $25,000 (known as 'modular' budgeting).  Each sponsor is different and their budget requirements or restrictions must be observed.

The major components of a budget are:

  1. direct costs,
  2. indirect costs (also known as F&A), and
  3. budget narrative/justification

Direct Costs

By definition, direct costs are incurred to support a specific project, can be specifically identified to a project with relative ease and a high degree of accuracy, AND are allowed by the terms and conditions governing the award that is funding your project.  They are essential to the conduct of the project and specifically related to the project objectives.  Direct costs can be further broken down as follows:

Personnel Services: salaries, wages, and fringe benefits of UVA employees and students; and

Other than Personnel Services (OTPS): all other direct costs, including consultants, travel, supplies, equipment, subcontracts, subject payments, tuition remission, shipping, printing, etc.

If the cost of the project that you are proposing is in excess of the amount of funding that the sponsor can or is willing to provide, the sponsor might expect you to provide evidence of additional funding from a different source or from your own institution.  If your department or school is providing some of the cost of the project, this is called 'cost-sharing.'

Indirect Costs

Indirect costs are those institutional expenses incurred for common or joint objectives which cannot be identified readily and specifically with a particular sponsored project.  For example, the cost of operating and maintaining buildings, the use of common equipment, general and departmental administrative expenses, sponsored projects administration, and library costs are essential in the support of sponsored program activities but cannot be readily identified to be directly charged to a specific program. 

The University regularly negotiates with the federal government the indirect cost rates that will be in effect for given fiscal years.  Our 'cognizant government agency' for this purpose is the U.S. Department of Health and Human Services.  Our negotiated indirect cost rate agreement includes different rates depending on the nature of the activity being funded, e.g., research vs. instruction, and the location, i.e., on-grounds vs. off-grounds, of a particular sponsored activity. 

Another term for indirect costs is 'F&A', named for the two separately calculated components which make up a combined indirect cost rate:  (1) Facilities, and (2) Administration.  Our full on-grounds indirect cost rate for sponsored activities includes both these components; the off-grounds rate includes only administration.  The federal government currently caps the administration component of indirect cost rates at 26%; the facilities portion of UVA's full on-grounds rate increased to 32% effective July 1, 2015.  Therefore, our full on-grounds F&A rate for sponsored activities is 58%.  The on-grounds F&A rate will increase to 61% as of July 1, 2017. The University has a published policy concerning the application of indirect costs in grant budgets and the process by which a waiver can be requested.

The off-grounds rate lacks the facilities component entirely and is made up of only the administration component.  Since administration is currently capped at 26%, that is our off-grounds indirect cost rate for all sponsored activity, whether research, instruction, or other activity. 

To complicate things, even when the sponsor allows use of the full on-grounds indirect cost rate in your budget, not all direct costs are necessarily included in the 'base' for calculating indirects.  For example, equipment items with a unit cost in excess of $5,000 are excluded from the base, as are tuition remission, rent of non-University owned office space, and the cost of individual subcontracts in excess of the first $25,000, regardless of the term of the subcontract. 

Budget Narrative/Justification

The budget justification/narrative is simply an explanation of the costs contained in your budget.  The sponsor and reviewers should be able to easily compare your budget narrative to the budget forms/dollar amounts and the research narrative.  For example, if you have stated in your research narrative that you will arrange for an outside evaluator in a particular year of your study, your budget should provide for an evaluator or consultant in that year.

Some sponsors want very detailed budget narratives; some are content with a minimal amount of narrative.  The NIH frequently requires submission of what is termed a 'modular' budget, i.e., funds are requested in blocks of $25,000 and a minimal budget narrative is provided that principally explains your personnel costs and touches on OTPS items only if they are unusual.  You will still have to prepare a detailed budget in order to get the proposal approved by UVA's Office of Sponsored Programs, but the detailed budget will be an internal tool and not be submitted to the sponsor.

 

last revised 2/15/2017; asb