Transcript Keys to a Successful Budget - Carnegie Mellon University

Grant Budgeting Basics
Donna Marano
Director of Finance & Administration
Civil & Environmental Engineering
Denise Murrin Macey
Business Manager
Engineering and Public Policy
October 31, 2005
©Sharon McCarl
Session Focus
 Theory-What is a good budget?
 Practical-What are the pieces and how do I
put it together?
 Routing and Approvals
What is a good proposal?
 A good idea, well expressed, with a
clear indication of methods for pursuing
the idea, evaluating the findings, and
making them known to all who need to
know - NSF
What is a quality proposal?
 Manageable focus
 Plan of work
 Plan of resources needed
Point to Remember
Throughout It All, Remember, Proposals
Are Approved Based on the Science,
Then Whether the Budget Is Justified. A
Good Budget Requires Justification but
It Is Not the Primary Factor in
Evaluation.
Budgeting Defined
 “The Budget Plan is the Financial
Expression of the Project or Program as
Approved During the Award Process”
(OMB Circular A-110, Subpart C, Section
_.25).
 Business Side-What do I need to
accomplish the goals of this project?
Budgeting Principles
 ALL costs (direct and F&A) that can be
identified with a particular sponsored
project should be identified and budgeted
(somewhere) AT THE PROPOSAL STAGE
 ALL costs (direct and F&A) of a particular
sponsored project should be borne by the
sponsor (to the maximum extent possible)
Costing Defined
 The Process Used to Determine the Amount
Required to Acquire the Goods and Services
Necessary to Achieve Project Objectives
Pricing Defined
 The Process Used to Determine the Amount
Requested from the Sponsor to Acquire the
Goods and Services Necessary to Achieve
Project Objectives
Guiding Regulations
 Office of Management and Budget (OMB)
Circular A-21
http://www.whitehouse.gov/omb/circulars/a021/a021.html
 Cost Accounting Standards Board
http://www.whitehouse.gov/omb/procurement/casb.html
22 Standards for Industry
4 Apply to Educational Institutions
 OMB Circular A110
http://www.whitehouse.gov/omb/circulars/a110/a110.html)
 Institutional Policies
Characteristics of Costs
 Reasonable
 Allocable
 Allowable
 Treated Consistently
Reasonableness
 Test - Is the expense reasonable? Logical?
 Reasonable person test
 Is it normal for this type and level of
expense to be charged on projects of a
similar nature?
 Market Value-Appropriate Bids
Allocable
 Was the cost incurred solely for the
advancement of the project?
 Can the expense be clearly identified with
the project?
 Assigning inappropriate expenses is
FRAUD!
Allowable
 Reasonable and necessary
 A-21 section J
 In conformance with limitations/exclusions
(example foreign travel, equipment)
Treated Consistently
 Cost Accounting Standards
 Must be able to defend cost estimates
Cost Accounting Standards
501-Estimating, Accumulating and Reporting
costs
502-Consistency in Allocating Costs Incurred
for the Same Purpose
505-Accounting for Unallowable Costs
506-Consistent use of Cost Accounting Period
OMB Circular A-110
 Financial Management Standards
– Rules for Accounting, Asset Management
 Cost Sharing
Cost Sharing
 “…that portion of project or program costs
not borne by the Federal Government.”
(OMB Circular A-110, Subpart A, Section
_.2(i))
 Know your department or college’s policy
& procedures
 NSF Statement 10/19/04 (NSB-04-157)
Questions???
Consider the Source of Funding
 Sponsor Awarded Funding
– State or Federal Government
– Industry
– Foundations
 Institutionally Provided Funding
– Start-up Fund
– Seed Fund
– Faculty Development
– Cost Sharing
Assess Budget Needs
 Budget matches narrative
 Amounts
– Reasonable for scope of work
– Well justified
– In-line with program
– Allowable
 Includes adjustments for future years
Types of Costs
 Direct Costs
– “…costs that can be identified specifically with
a particular sponsored project…” (OMB
Circular A-21, Sec.D.1)
 Facility and Administrative Costs
– “…costs incurred for common or joint
objectives and [that] therefore cannot be
identified readily and specifically with a
sponsored project…” OMB Circular A-21, Sec.E.1
Types of Direct Costs
 Personnel
 Fringe Benefits
 Equipment
 Supplies
 Travel
 Subcontracts/Consultants
 Other
Personnel
 Individuals who are employees or students of
Carnegie Mellon
 Vacant Positions (to be named)
 Generally no administrative positions
 Funding in proportion to project effort using base
salary
 Include fringe benefits (full or part-time)
 Include salary increments
 Remember salary caps
Fringe Benefits
 Pooled or composite rate
 Rates proposed by Carnegie Mellon and
approved by the Office of Naval Research
– Full-time  37.5 hours
– Full-time  37.5 hours Federal
• Issue: dependent tuition 3.60%
29.50%
25.90%
Fringe Benefits
– Part-time  17.5 and < 37.5
– Part-time Mandatory < 17.5
18.5%
10%
• Mandatory (FICA, unemployment, worker’s comp)
• Non-CMU students
– Additional Compensation
10%
Equipment
 Cost  $1,000 & Useful Life  2 Years
 Exclusive use by project
– Computers
– General purpose
equipment
Equipment
 Itemize and Justify
– Competitive Pricing ( 3 bids > $2,500)
– Price Reasonableness
 Identify Sole Source Suppliers at the
Proposal Stage
Supplies
 Must be specific to project (check A-21)
 Avoid general purpose items
 Itemize and justify
 Examples
– Chemicals, glassware, non-capital equipment
– Animal purchases, enzymes
Travel
 Itemize and justify
 Who, what, when, where, why and how
 Include business purpose and destination
 Separate domestic and foreign travel
 Do not include patient care or consultant
travel
Other
 Animal housing
 Publication and page charges
 Subject incentive and travel reimbursement
 Rentals & maintenance contracts
 Equipment Usage (# hours and rate)
 Long distance
Subcontracts
 Itemized budget
 Statement of work
 Commitment to perform (w/signature)
 Justify need and selection criteria
 Include direct and F&A in your budget
Consultants
 Employee vs. Consultant (substantial fines)
 Justify contribution to project and budget
 Include name and affiliation
 Include all costs including travel & per
diem
 Include biographical sketches
Flags
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



Animal Research
Radioactive/DNA
Human Subjects
Effort > 100%
Employees ???
Subcontract > 50%
Unallowable (get it in
writing)
 Space or Cost Sharing
Facilities and Administrative
Costs (a.k.a. Indirect Costs)
 “…costs incurred for common or joint
objectives and [that] therefore cannot be
identified readily and specifically with a
sponsored project…” OMB Circular A-21,
Sec.E.1
 Two Components
– Facilities
– Administration
Facilities and Administrative
Costs
 Federal rates set by our cognizant agency
ONR in negotiation with Carnegie Mellon
– Applies to subcontracts with federal prime
 Modified Total Direct Cost Base
 Industrial Rate 56 %
 Federal Rate 45% (DOD Contracts 49%)
 Federal Rate Off-Campus 28.8%
Facilities
 Depreciation and Use Allowance
– Interest on Debt (specific buildings)
– Equipment & Capital Improvements
 Operation & Maintenance Expenses
 Library Expenses
Administration
 GA - General Administration
– Executive & Administrative, Central functions
 DA - Department Administration
– Administrative and Clerical Staff, office
supplies, telephones, travel
 Sponsored Project Administration
 Student Administration & Services
Calculation
 Modified Total Direct Cost Base
 Carnegie Mellon example
– Total Direct Costs Less:
– Equipment
– 1/2 graduate student costs
– Portion of sub-awards in excess of $25,000
 On-site vs. Off-site rate
 Check Sponsor Terms
Summary
 Preplanning
 Know regulations and sponsor requirements
 Know special requirements
– Animals, Human Subjects, Subcontracts, Cost
Sharing
 Check Math
Questions???
Getting Started
 Sponsor
– Federal, Non-federal (what rates and rules
apply)
– Special Rules or Instructions (caps, F&A)
 Project Dates
 Subcontracts or Multi-departmental Budgets
 Special Approvals (animals, human
subjects)
Personnel
 Who will work on this project?
 What will this person contribute?
 Where will this person work?
 What is this person’s status? Employee,
graduate student, consultant???
 Type of Appointment
 How much effort is required?
 Are there security issues?
Equipment
 What do you need?
 What is the importance of this item to the
research?
 Does it qualify as capital equipment?
 Is it general purpose equipment?
 Is it available elsewhere? Borrow or share
 Cost analysis Lease vs. Purchase
Travel
 How does this trip enhance the goals of the
proposed research?
 Who will travel?
 Where?
 Why?
Supplies and Other Expenses
 What do you need?
 What is the best way to estimate the cost?
– Do the numbers-avoid excessive guessing
– Check recharge rates, facility charges, historical
expenses
– Match budget detail to accounting system
 Controlled Substances?
 Cost of an Audit
Proposal Routing
 Contact Business
Manager
 SPEX Sponsored
Projects Exchange
 Generates Proposal
Routing and Sign-off
Sheet
 Carnegie Mellon
Proposal Number
Disclosure and Signatures
 Investigator(s) Disclosure and Assurances
– Must read and check appropriate box
– Conflicts must be resolved –Susan Burkett
 All proposals require approval prior to submission
– Signatures
•
•
•
•
•
PI
Department Head
Dean
Pre-award Office
Associate Provost-Institutional Official
Routing Time
 Allow Adequate time for review
 Carnegie Mellon reserves the right to
withdraw any proposal AND
 You need time to copy and collate before
the express mail pick-up
 Electronic Submissions