Transcript Sponsored Programs Administration at MSU

Budgeting 101
Sponsored Programs Administration
2012 Research Seminar Series
Budgeting 101
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This session will lay the basic framework for
budgeting in sponsored research. Topics to be
discussed today include:
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Direct vs. Indirect Costs
OMB Circular A-21 General Costing Principles
Allowability of Costs
Cost Share
Mechanics of Building a Budget
OMB Circular A-21
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What is it?
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Sets forth allowability principles for the
reimbursement of costs associated with federally
sponsored projects
Provides guidance for determining direct and
indirect costs
Available at:
http://www.whitehouse.gov/omb/circulars_a021_2004
Direct vs. Indirects
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Direct Costs (OMB A-21 D.1.)
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Costs that can be identified specifically with a
particular sponsored project or
Costs that can be directly assigned to projects
relatively easily with a high degree of accuracy
Indirect Costs aka Facilities and Administrative
Costs aka Overhead (OMB A-21 E.1.)
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Costs that are incurred for common or joint
objectives and therefore cannot be identified readily
and specifically with a particular sponsored project
Direct Costs
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Examples of Direct Costs include:
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Salaries
Fringe
Travel
Commodities/Supplies
Contractuals/Services/Subcontracts
Equipment
Indirect Costs (Facilities and
Administrative Costs)
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Examples of Indirect Costs include:
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Facilities
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Depreciation and use allowances
Interest of debt associated with certain buildings
Equipment and capital improvements
Operation and maintenance expenses
Library expenses
Administrative
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General administration and general expenses
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University wide offices: President’s office, General Counsel, etc
Departmental administration
Sponsored programs administration
Basic Principles of Costing
OMB A-21, C.2
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Reasonable –
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Allocable –
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OMB A.21, C.2(b)
Consistent –
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OMB A.21, C.2(a)
OMB A.21, C.2(c)
Allowable –
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OMB A.21, C.2(d)
Reasonable
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Prudent person test
Considerations for determining reasonableness of
a cost:
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Generally recognized as necessary
Complies with Federal and State laws and regulations
Whether the individuals involved acted with due
prudence
The extent the actions taken are consistent with
institutional policies and procedures
Allocable
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To be allocable
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Expenses are incurred solely for the project OR
Expenses benefit both the project and other work
in a proportion that can approximated
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Split purchases are allowed and are often the most
appropriate way to allocate expenses to projects
Consistent
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Costs must be given consistent treatment
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Cost accounting standard (CAS) 502 requires
consistent allocation of costs
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All costs incurred for the same purpose, in like
circumstances, are either direct costs only or F&A
costs only
Restated: Cannot charge the same cost both directly
and indirectly when it is incurred for the same purpose
and circumstance
Allowable
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The cost must conform to any requirements,
limitations, etc put forth by all of the
following:
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OMB Circulars
Sponsor guidelines
Award document
Institutional policies
Allowable (cont.)
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Allowability criteria applies to both direct and
F&A costs
Certain costs may be allowable only as an
indirect (F&A) cost
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For example, Sponsored Programs expenses are
not allowable as a direct cost, but are allowable as
an F&A cost
To summarize:
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Costs must be treated consistently as either a
direct cost or an F&A cost, when in like
circumstances
‘like costs in like manner’
The Disclosure Statement (DS-2) will provide
some guidance
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Available at:
http://www.controller.msstate.edu/cas/cdst/
Disclosure Statement (DS-2)
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Provides details of how some costs will be
treated. An example:
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Travel costs incurred while performing the function of
general university activity such as travel by executive
officers meeting with the State Board of Trustees to
discuss general university business would be
classified as indirect costs.
Travel by a university employee related to carrying
out the functions of a specific contract or grant would
be classified as a direct charge to that contract or
grant.
Allowability as a direct cost
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Can I charge a computer to my project?
It depends!
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Yes – if being used in a programmatic way.
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Computer needed to be connected to a scientific piece
of equipment for data collection
Computer needed to run simulations, analyze data, etc
No – if being used in a general way
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Check email, browse internet, word processing, etc
Allowability as a direct cost
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Can I charge my dues for a professional
organization to my project?
Typically no, due to lack of allocability
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Benefit is not to any specific project and benefits
other activities of the university
See also OMB A-21 F.6.b.(3)
Allowable in rare circumstances when the
scope of work requires the membership
Allowability as a direct cost
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Can I charge office supplies to my project?
Typically no, due to lack of allocability
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See also OMB A-21 F.6.b.(3)., which states that
office supplies are normally treated as F&A costs
However, they are allowable when in unlike
circumstances
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Used in a programmatic way: conference
materials, pamphlets, etc
Allowability as a direct cost
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Can I charge my administrative assistant to
my project?
Typically no, again due to lack of allocability
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See also OMB A-21 F.6.b.(2)., which states that
salaries of admin and clerical staff are normally
treated as F&A costs
However is appropriate on a ‘major project’
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See OMB A-21 Exhibit C
Cost share
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Anything necessary for the completion of the
project that is not paid for by the sponsor
Irrelevant what the source of funds are:
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MSU – E&G
MSU – Designated
Third party
Etc
Cost share
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Can be separated into two categories
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Committed – must be tracked
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Required by sponsor (committed in proposal)
Not required, but committed in the proposal
Not required, but implied through regulation
Uncommitted – does not need to be tracked
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Typically after the fact ‘volunteering’ of MSU
resources
Cost share (sort of!)
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As PI, do I have to charge my time to the
project?
No, BUT your time will be cost share, and
some portion of it must be committed cost
share and tracked
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Note: this will also require division approval on
the Internal Approval Sheet/Cost Share Form
See OMB Memo 01-06
http://www.whitehouse.gov/omb/memoranda_m01-06/
Allowability of cost share expenses
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To be allowable as a cost share expense, it
must be allowable as a direct cost
Other important criteria:
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Expense must be incurred during the project
period
Can only be used as cost share once
Cannot be being charged to the feds already
(typically F&A costs)
Allowability of cost share expenses
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The sponsor does not allow me to charge
F&A on the project. Can I use this
unrecovered F&A to meet my cost share
requirement?
Only with the prior approval of the Federal
awarding agency
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See OMB A-110 C.23.(b).
Allowability of cost share expenses
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I have two related federal projects. Can I use
my NSF funds as cost share for my USDA
project?
No, unless authorized by federal statute to be
used as cost share.
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See OMB A-110 C.23.(a).(5).
Allowability of cost share expenses
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I bought a piece of equipment a couple of years ago
that I am going to use on my project. Can I use that
as cost share?
Questions:
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Was it purchased with federal funds?
Are the feds already paying for this (through F&A)? Is it
in the F&A pool?
Is it fully depreciated?
If all answers are ‘No’, then you could use the
depreciation value as cost share.
Mechanics of Building a Budget
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Basic Principles
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All costs budgeted must be in accordance with
the principles that have been presented
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Reasonable, Allocable, Consistent, Allowable
Properly budgeted as direct vs. indirect
All costs budgeted should be viewed in relation to
the project and its needs
Your specific RFP may prohibit or require certain
classes of expenses. Read carefully!
Mechanics of Building a Budget
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Personnel
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Principal Investigator, project team, students
Best practices are to do this section first. Many
other expenses will be determined by the
Personnel budget line.
Calculations
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Percentage of effort or person months
9-month vs. 12-month employees
Rates should be based on current salaries; escalations
allowed for future budget periods
Mechanics of Building a Budget
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Fringe Benefits
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Treated as a direct cost
Calculations
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Rates are applied to
budgeted salary
amounts
Different rates for
different employee
classes
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33.18% Faculty/Staff *
0.76% Student
(Enrolled)
21.09% Retirees
9.09% All other
Intermittent Employees
/Student (not Enrolled)
*Assumes $40,000
average salary
Mechanics of Building a Budget
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Graduate Student Tuition
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Rates vary between colleges
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Engineering and Arts and Sciences:
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All other colleges:
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Fiscal Year 2012 - $728/month
Fiscal Year 2012 - $484/month
Escalate 5-6% each year thereafter
Calculation is based on student’s budgeted effort
Mechanics of Building a Budget
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Travel
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Project related conferences, project review
meetings, data collection, etc.
For budgeted project personnel
Calculation
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Per diem rates: http://www.travel.msstate.edu/hcma/plhcma.php
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$36/day - $46 /day
Mileage: http://www.travel.msstate.edu/mileage/mileage.pdf
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$0.51/ mile if no State owned vehicle available
$0.19/mile if State owned vehicle available
Mechanics of Building a Budget
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Equipment
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Definition
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Nonexpendable
Tangible
Useful life of more than one year
Acquisition cost of $5,000 or more per unit
Just because it must be inventoried does not make
it equipment for budgeting purposes
Mechanics of Building a Budget
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Commodities/Materials
and Supplies
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Items to be used for the
project
For example: molecular
biology supplies
(enzymes, reagents,
tubes, pipette tips) to be
used for DNA
sequencing.
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Contractuals/Services
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Services to be
performed by another
entity for the project
 For example, third
party vendor will
perform DNA
sequencing
Unsure? See:
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http://www.accountspayable.msstate
.edu/glc/
Mechanics of Building a Budget
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Subawards
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Subaward is distinguished from a vendor by the
intellectual contribution to the project outcome
Must receive SOW, budget, and budget
justification from subrecipient
Subaward budget must comply with sponsor
guidelines, subrecipient institution policies, and
all federal regulations
Mechanics of Building a Budget
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Participant Costs
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Broadly defined as support provided when a
sponsor funds a project or activity in connection
with formal meetings, conferences, symposia, or
training programs
Specifically, participant support costs are those
costs paid to (or on behalf of) participants in such
events
Treatment of participant costs vary from agency
to agency
Mechanics of Building a Budget
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Facilities and Administrative Costs (F&A)
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Current federally negotiated rates:
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On-campus
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Off campus
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44.5% MTDC – Research
50.9% MTDC – Instruction
31.1% MTDC – Public Service/Other
26% MTDC – Research and Instruction
24% MTDC – Public Service/Other
MTDC – Modified Total Direct Costs
Mechanics of Building a Budget
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Modified Total Direct Cost (MTDC)
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All costs excluding tuition, equipment, patient
care, off-site rentals, scholarships, fellowships
and all subaward costs exceeding $25,000.
Total Direct
Costs
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Exclusions
Modified Total
Direct Costs
Sponsor may further restrict F&A rate
The maximum that can be charged is our
federally negotiated rate
Budget Problem 1 - Personnel
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Dr. Jones ($100,000 annual salary/12 month
faculty) plans a one year project. The project
will require 10% of his time. Calculate the
salary and fringe expenses.
Salary: $100,000 x 10% = $10,000
Fringe: $10,000 x 33.18% = $3,318
Budget Problem 2 - Personnel
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Dr. Jones ($50,000 annual salary/9 month
faculty/0.62 FTE) plans a one year project.
The project will require 10% of his time.
Calculate the salary and fringe expenses.
What does 10% mean? 10% of a 12 month
equivalent or 10% of his actual appointment?
Because of this uncertainty, the
recommendation is to always use person
months.
Budget Problem 3 - Personnel
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Dr. Jones ($50,000 annual salary/9 month
faculty/0.62 FTE) plans a one year project.
The project will require two months of effort.
Calculate the salary and fringe expenses.
First calculate total months in the appointment
Then calculate monthly salary
Then calculate project salary charges
Budget Problem 3 – Personnel
Solution
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Total months in appointment
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Monthly salary
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9 month appointment x 0.62 FTE = 5.58 months
$50,000 annual salary / 5.58 months = $8,961/month
Salary: 2 months x $8,961/month = $17,922
Fringe: $17,922 x 33.18% = $5,947
Budget Problem 4
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Dr. Smith ($100,000 annual salary; 12 month
appointment) has a one year research project
(7/1/12-6/30/13). This project will require 3
months of his time. In addition, he will need
$2,000 for travel to collect samples for his
experiments and $3,000 for chemical supplies
to run the necessary tests. The sponsor will
pay full facilities and administrative costs.
What is the total budget amount?
Solution 4
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Salary: $100,000/12 x 3 =
$25,000
Fringes: $25,000 x 33.18% =
$8,295
Travel:
$2,000
Supplies:
$3,000
TDC: Sum of all direct costs
$38,295
F&A: $38,295 x 44.5% =
$17,041
Total Cost: Sum of TDC + F&A= $55,336
Budget Problem 5
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Dr. Smith ($100,000 annual salary, 12 month
appointment) has a one year research project
(7/1/12-6/30/12). This project requires two
months of her time. In addition, she will need an
undergraduate student to be paid $8.00/hr, 20
hours/wk, for 30 weeks. This project will also
require $5,000 in travel, $10,000 for chemical
supplies and a $10,000 centrifuge for processing
of the samples. The sponsor will pay full
facilities and administrative costs. What is the
total budget amount?
Solution 5
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Salaries:
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PI: $100,000/12*2 = $16,667
Student: $8.00 x 20 x 30 = $4,800
Fringes: ($16,667 x 33.18%) + ($4,800 x 0.76%) =
Travel:
Supplies:
Equipment:
TDC: Sum of all direct costs
MTDC = TDC – Exclusions
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$21,467
$5,566
$5,000
$10,000
$10,000
$52,033
$52,033 - $10,000 = $42,033
F&A: $42,033 x 44.5% =
Total Cost: TDC + F&A
$18,705
$70,738
Budget Problem 6
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Dr. Smith (a Professor in Mechanical
Engineering) is doing a one year research project
(7/1/12-6/30/13). He will work 2.0 summer
months on the project (his 9-month salary is
$60,000). He will need two full time graduate
students who will make $20,000/yr. He will need
$2,000 for travel. Will also need a specialized
piece of equipment for testing material strength
and costs $20,000. It will also be necessary to
pay a colleague at Auburn $40,000 to do part of
the work. Sponsor will pay full F&A. What is
the total budget amount?
Solution 6
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Salaries:
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$4,728
PI: $13,333 x 33.18% = $4,424
GRA: $40,000 x .76% = $304
Tuition: $728 x 1.05 x 12 months x 2 students =
Travel:
Equipment:
Subaward:
TDC: Sum of all direct costs
MTDC:
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PI: $60,000/9 x 2 = $13,333
GRA: $20,000 x 2 = $40,000
Fringes:
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$53,333
$18,346
$2,000
$20,000
$40,000
$138,407
$138,407 – 18,346 – 20,000 – 40,000 + 25,000 = $85,061
F&A: $85,061 x 44.5% =
Total Cost: TDC + F&A
$37,852
$176,259
Budget Problem 7
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A sponsor limits the project budget total to
$100,000 and will pay our full federally
negotiated F&A rate of 44.5% MTDC. The
project budgets nothing that would be
excluded for F&A purposes (tuition,
equipment, etc). How much money is
available in direct costs?
Solution 7
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Available Direct Costs:
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$100,000/1.445 = $69,204 in direct costs
Calculation check:
$69,204 x 44.5% = $30,796
$69,204 + 30,796 = $100,000
Budgeting backwards
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Really just algebra!
D = Direct Costs
D + (D x 44.5%) = 100,000
1D + 0.445D = 100,000
1.445D = 100,000
1.445𝐷
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1.445
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=
100,000
1.445
D = 100,000 / 1.445
Budget Problem 8
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Starting with the available direct costs
($69,204) in the previous problem, assume we
need $5,000 for travel and $5,000 for printing
and the rest is for salary and fringe for faculty
and professional staff. What would be
allocated now to both salary and fringe?
Solution 8
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Available Direct Costs:
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$69,204 − 5,000 − 5,000 = $59,204 (for
salary/fringe)
Salary (backwards budgeting again):
$59,204
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1.3318
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= $44,454
Fringes will be the difference
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$59,204 − 44,454 = $14,750
Questions?
Tina Cunningham
662-325-7395
[email protected]