Guidelines for Preparing an NIH Budget Lindy-Ann Wright, M.A Financial Manager, MU-JHU Johns Hopkins University Nov. 3, 2010

Disclaimer ! The following are general guidelines for most NIH proposals. Some NIH programs and funding opportunity announcements may have different requirements and conditions that supersede the information presented here. Be sure to check that you are following the correct procedures for the competition to which you are applying. Different non-NIH sponsors may likely have specific templates and guidelines different to those presented. Preparation of the budget is, for many researchers, the most difficult task involved in proposal development.

Carefully read the Request for Application (RFA) or Program Announcement (PA) for important budget limits and guidelines. The SF 424 and PHS 398 grant application kit gives you guidelines on ° Budget for initial budget period ° Budget for entire proposed period ° Budget Justification

BUDGET TIPS ! Complete the budget section after you have written your research plan and have a good idea of costs. Request only enough money to do the work. Significant over or underestimating suggests that you may not understand the scope of the proposed work. Which will be a disadvantage to your application

Which Budget Format Should I Use? NIH competing applications generally use two types of budget formats, Modular Budget or Detailed Budget format.

Budget Format A Modular Budget is used for applications requesting a maximum of $250,000 per year in Total Direct Costs. Budgets are simplified, and do not require submission of detailed budget information to NIH. A Detailed Budget format is required for all applications requesting more than $250,000 per project year

Detailed Budgets Over $500K • Applications for more than $500,000 Direct Costs per project year must obtain prior approval from the NIH supporting institute or center. • NIH recommends the approval process is initiated by calling or e-mailing one of the program officers at least six weeks prior to the submission deadline. (not including indirect or F&A costs on any subawards or subcontracts) for Direct Cost

Budget for Foreign Applications Foreign applicants must provide, Detailed Budget Forms with the proposal even if $250,000 or less is requested Modular Budgets are not accepted from foreign applicants Receiving detailed budget forms from f.applicants allows NIH staff to assist the applicant with applicable regulatory and policy requirements for grant funding expenditures

Can requests for funding be made in foreign currency? All requests for funds, including the budget contained in the application, must be stated in U.S. Dollars ($). Once an award is made, NIH will not compensate foreign grantees for currency exchange fluctuations through the issuance of supplemental awards. Any fluctuations will need to be supported from your direct cost funds

DETAILED BUDGET FORMS, PHS 398 For applications submitted manually, use the NIH PHS 398 Budget Pages Download the most current PHS 398 forms and instructions from the NIH website: http://grants.nih.gov/grants/forms.htm If you have downloaded these pages in a previous submission, please do not assume that you have the most current version

EXPENSE CATEGORIES, PHS 398 • Personnel •Consultants • Equipment • Travel • Supplies •Patient Care Costs •Alteration and Renovations • Other Expenses • Consortium/Subcontract (Direct Costs) • Total Direct Costs Initial & Proposed Budget Periods • Consortium /Subcontract Facilities & Administrative Costs •Total Costs •Budget Justification We will look at the details of some of the more common categories

DETAILED BUDGET FORMS, SF 424 Proposals submitted electronically must use the SF 424 (Research and Related) Budget Pages Forms can be located at the NIH site http://grants.nih.gov/grants/forms.htm Determine where electronic forms can be taken

EXPENSE CATEGORIES, SF 424 Total Direct Costs Indirects ( F &A) Total Costs Fee Budget Justification (pdf versions only) Senior / Key Personnel Other Personnel Equipment Travel Participant /Trainee Support Costs Other Direct Costs All files uploaded on the SF 424 format must be in the pdf format

Personnel – Salaries & Wages • Personnel effort on NIH proposals must be reported in person months • For frequently asked questions/ answers on person months visit the NIH website: http://grants.nih.gov/grants/policy/person_months_faqs.htm Lets look at some of the more familiar budget categories

What is the definition of person months? “Person months” is the metric for expressing the effort (amount of time) for PI(s) and other personnel devote to a specific project. The effort is based on the type of appointment of the individual with the organization: Calendar year (CY) 12 months Academic year (AY) and/or Summer term (SM) 3 months Some institutions may define the AY appointment differently. If you look on the budget pages, SF or 398 you can observe the abbreviations for budgeting the effort Academic year may be 9 or 10 months. However I believe you may be familiar with the calendar year appointments

How do I calculate person months? Multiply the % of effort associated with the project by the number of months of the appointment. For example: 25% of a 9 month academic year appointment = 2.25 (AY) person months (9 x .25= 2.25) 10% of a 12 month calendar appointment = 1.2 (CY) person months (12 x .10 = 1.2) 35% of a 3 month summer term appointment equals 1.05 (SM) person months (3 x .35= 1.05) Calculation of person months is straightforward

How do I calculate person months? Salary Requested is then: Number of paid "Person Months" by 1/12 of the Institutional Base Salary - which is $36,000 for this example: 1.2 (CY) x $36,000 (1/12) = $3,600 $3,600 is included in the Salary Requested column of the budget form

Key Personnel The PI and other individuals who contribute to the scientific development or execution of a project in a substantive, measurable way, whether or not they receive salaries or compensation under the grant. Typically these individuals have doctoral or other professional degrees. Consultants also may be considered key personnel if they meet this definition. Who are key/Senior Personnel

Key Personnel Key Personnel listed under the Personnel category of the budget form can only be your institution’s employees. DO NOT list non-institution collaborators in this budget category Non –institution collaborators are either Consultants or are funded under Sub-recipient Agreements, also known as Subcontracts. They have separate budget categories and forms

Personnel • Calculate the salary of the Principal Investigator (PI) and other Key Personnel taking into account the NIH salary cap. • Salary is capped annually at the level set for a federal employee in the Executive Level I salary range • Effective January 1, 2010, this cap is $199,700 /yr Verify that NIH allows for less than 100% effort for PI Get salary cap website

Other Personnel All other non- Key Personnel Example: Research Technicians Health Visitors Nurses Graduates Students Undergraduate Students

BUDGET TIP - salaries For multi-year projects, the budget should take into consideration any possible salary increases. NIH allows for cost of living increases to 3% annually

Fringe Benefits Fringe Benefits costs are the expense to an institution to provide medical, dental, tuition reimbursement and other staff benefits NIH follows your institution’s policy with regard to fringe benefits, and does not have a pre-set limit for these costs

Fringe Benefits The rate your institution uses to calculate Fringe Benefits cost may change annually It is important to get the best estimated rate from the Research or Finance Department for the proposed start date of your project Apply the projected rate (s) to Salaries Requested on the budget to calculate Fringe Benefit costs

Calculating Fringe Benefits To calculate the fringe benefits costs multiply the Salary Requested (SR) by the fringe rate $20,500 (SR) x 35% fringe rate = $7,175 Add fringe benefit cost to (SR) for the Total Salary (TS) column of the budget page $20,500 (SR) + $7,175 (fringe) = $27, 675 (TS)

CONSULTANTS Consultant services, when required to carry out the proposed work, are allowable on NIH budgets. Consultants are not subject to the salary cap restriction, but consultant costs must be reasonable and allowable by NIH standards Identify in the budget the proposed consultant by name, type of service, indicate the number of days of work, pay rate Normally, consultants are paid a consulting fee plus travel expenses.

BUDGET TIP - Consultants If your institution allows employees to be consultants on the proposal list the expenses under Personnel, including fringe benefits costs. An employee with the role of consultant cannot be listed in the consultant category of the budget

Equipment As defined by NIH, "equipment" means "an item of property that has an acquisition cost of $5,000 or more , and an expected useful service life of more than 1 year. Equipment to be purchased should be itemized on the budget page Examples are, vehicles, lab machinery Some instituitions have different cost value for equipment

Equipment Capital items costing less than $5,000 should be budgeted under Material and Supplies This category includes items such as televisions, dvd players, computers and other small electronics costing less than $5,000.

BUDGET TIP -Equipment Avoid requesting expensive equipment unless you absolutely need it, and justify it well Don't request funds for equipment already listed in the resources section, unless you can provide an adequate explanation Reviewers look for any "discrepancies" and will delete funds for equipment that should be available to you.

SUPPLIES Normally, a research project will consume supplies such as laboratory items, teaching aids, computer software, and other research supplies. Itemize by category all expenses over $1,000 on the budget page.

TRAVEL Travel is expected for attending pertinent meetings in your field, to meet with collaborators, and to present data. Local travel is expected to collect data; transport and follow up of participants ; other project related transportation.

TRAVEL If travel is anticipated, the detailed budget for the trip(s) should be provided in the budget page and justified. For foreign travel, Principal Investigators should review their federal awards for requirements related to the Fly America Act Fly America Act, federal regulation that requires the use of U.S. carriers for travel that will be reimbursed from federal grants and contracts. This act requires that american carriers or associated airlines should be used, whenever possible for travel when using federal funds

TRAVEL Travel expenses can be requested for lodging, meals, ground transport and incidentals. Maximum Foreign Per Diem Rates are available at, http://aoprals.state.gov/web920/per_diem.asp Costs for trips must include a detailed justification Charges for staying with friends or relatives are not reimbursable expenses!

Alterations and Renovations Major Alterations &Renovations (>$500,000). Unallowable under foreign grants and domestic grants with foreign components. Minor Alterations & Renovations (<$500,000). Generally allowable on grants made to foreign organizations or to the foreign component of a domestic grant, unless prohibited by program regulations. Minor A&R Costs may be included and justified in any detailed budget of a competing application.

OTHER EXPENSES Long distance telephone calls Contracted Services Animals Animal Care Expenses Lab Costs and Fees Tuition Remission for Graduate Students Participants Stipend Equipment Maintenance Long distance telephone calls Postage Publications Copying Reference Books Miscellaneous Expenses

Consortium /Subcontract A sub-recipient relationship is appropriate when the Principal Investigator contemplates a funded collaboration with a colleague at another institution. The collaborating institution should provide a statement of work, detailed budget and budget justification, signed by the collaborator's Authorized Institutional Representative

SUBCONTRACT ON THE BUDGET All subcontracts must include a separate PHS 398 or SF 424 (R&R) budget pages Include the Direct and F&A subcontract costs into the prime/main budget category Note where to include this

BASE COST / Modified Total Direct Cost Base cost is what the Facilities and Administrative rate is applied to for calculating the F&A costs on the budget. Most NIH institutions allow for specific direct costs categories to be excluded to be excluded from the Base Cost For Foreign Applicants only equipment is excluded from the Base Cost Can foreign applicants exclude anything other than equipment?

Calculating Base Cost A budget has the following expenses: Total Direct Costs = $350,000 Equipment Costs = $32,000 (exempt) Base Cost = $350,000 - $32,000 = $318,000 The F&A Rate is applied only to $318,000

Facilities and Administrative (F&A) Facilities and Administrative (F&A)costs, are costs which are necessary to support research and other sponsored projects, but which cannot be readily assigned to individual projects. F&A costs must be included in proposal budget unless the sponsor has a written policy on F&A rates for the competing grant.

F&A Rate for International Applicants NIH provides limited F&A costs to foreign institutions and international organizations to support the costs of compliance with NIH requirements F&A rate is maximum 8 % of Total Direct Costs less Equipment Costs Foreign or International applicants do not need to negotiate an F&A rate to receive the 8% from NIH This includes expenses for IRB, audits, HS Research

Calculating F&A Costs (1) Sum all direct costs = Total Direct Costs (TDC) TDC = salaries + benefits + supplies + equipment etc (2) Calculate the allowable Base Costs: For foreign applications: TDC – Equipment costs = Base Cost

Calculating F&A Costs (3) Multiply the correct F&A rate against the Base Cost to calculate the F&A costs for the project Base Cost x F&A rate (8%) = F&A Cost (4) Add TDC to F&A Cost to calculate the Total Project Costs. TDC + F&A Costs = Total Project Costs (TC)

Budget Justification Follow your budget forms with a detailed budget justification. Explain in detail the projected expenses in personnel and each budget category. Edit thoroughly to ensure the figures on the budget forms match those on the justification pages.

Common Mistakes in Budgeting a Grant Un-anticipated salary increases for Personnel Under-estimated need for Research Supplies Exclusion of costs for expensive necessary equipment Un-anticipated cost of living annual increases in expenses over the life of the project.

Solutions to Common Mistakes Fortunately, the NIH by expanded authority, allows for the re-budgeting of 25% of any budget year Total Costs without having to contact them.

References Foreign Grants Information http://grants.nih.gov/grants/foreign/index.htm Foreign Grants – Budgets http://grants.nih.gov/grants/foreign/budgets.htm Fly America Act http://www.tvlon.com/resources/FlyAct.html Foreign Grants – NIH Policy Statement http://grants.nih.gov/grants/foreign/grants_policy_statement.htm Office of Management and Budget, A -21 Circular http://www.whitehouse.gov/omb/circulars_a021_2004

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