The Mysteries of Grant Budgeting

May 24, 2005

"Debarment and suspension certification." "Modified total direct costs." "Standard Form LLL found in the PHS 5161-1."

Examining the risk to human health from biotoxins is complicated enough without all the red tape that goes into getting a grant. Should you really bother to submit an application?

Relax. You should find plenty of support on your campus for completing the budget-and-forms part of a grant application. Because there are legal and financial implications to those forms, your institution has a vested interest in seeing that they are done right.

Creating a budget for a research project is the process of putting price tags on the activities you promised in the proposal narrative. I discussed what goes into drafting that narrative in a previous column. My goal in this one is not to teach you the intricacies of federal cost-accounting principles and administrative requirements. Those are described in detail in two circulars from the federal Office of Management and Budget that together constitute the bible of federal-grant administration. Professionals in your grants office spend years mastering those rules. When they say you can't do something on your grant budget, it's usually because the rules prohibit it.

What I'd like to do here is give you enough information to understand what is going on when your university reviews your budget.

Person, Place, or Thing

Expenses in a grant-proposal budget can generally be divided into people and things. (There is another category -- facilities and administrative costs -- which I will discuss last.) Let's start with people, because figuring personnel costs is probably less familiar to most investigators than obtaining the cost of an electron microscope or some other piece of scientific equipment.

You will need to list in your budget all the people who will be paid for working on your project. You don't necessarily need to have specific names yet, but you need to know the nature of the work they will do.

I will assume you are the principal investigator -- that is, the person responsible for the scientific direction of the project. What help will you need? Will you need the expertise of a postdoc? A computer technician? A graduate student? List those jobs in your budget. Then think about how much time each person will devote in a given year to working on your project. That may be expressed as a couple of months of summer salary for someone with an academic-year appointment, or a percentage of effort for a person with a calendar-year appointment (perhaps 20 percent of his or her time).

Next you must determine how much it will cost to employ those people. Contact the sponsored-projects office on your campus to determine the compensation of, say, a computer technician with basic skills. You're not allowed to pluck a number out of the air or to dole out hefty paychecks to people because they're your friends.

Compensation includes salary and fringe benefits. Your sponsored-projects office can help you to calculate the cost of benefits as a percentage of salary. Once you know the hours that team members will work and what they will be paid, you can calculate the cost of each employee for a given year.

Determining the cost of things is usually simpler than figuring out the price tag for personnel, but beware of the federal government's definitions.

For example, under the government's definitions, "equipment" is any piece of property that costs $5,000 or more, with an expected useful life of more than two years. That means the average personal computer doesn't qualify. It's considered "a supply," and unless you're using the PC primarily to conduct scientific research, it's not eligible for support. You will have to hit up your dean if you need a new general-purpose PC for your office.

For expensive pieces of equipment, try to include a price quote if the agency will allow you to do so. It can help to assuage concerns about whether the cost is realistic.

Travel costs can be included in your budget if the activities are part of the project. Examples include fieldwork and attendance at academic meetings. Travel expenses usually are calculated on a per-person basis and cover transportation (economy class), lodging, and meals. It is wise to contact your sponsored-projects office for information on relevant travel policies.

Death, Taxes, and Overhead

You have now calculated the cost of people and things. Those are your "direct costs," which you can easily trace to your specific project. But you probably are performing that project in a university-owned laboratory or similar facility, and there is no magic in how that building is paid for and maintained. There are very real costs such as keeping the lights and heat on, keeping your department stocked with paper and clerical support, and, yes, keeping your sponsored-projects office staffed.

All of those are facilities and administrative (F&A) costs, also known as "indirect costs," "overhead," and a number of other less-savory terms.

The cost of operation, maintenance, and administration of the facility where you do your work is figured as a percentage of the direct costs of your project. (For the sake of simplicity, I am not delving into the details of modified total direct costs, or "MTDC" as they say on the forms.) At my institution, the rate for on-campus organized research for a federal grant is 44 percent. While investigators sometimes think that is steep, it's typical. The rate is negotiated with the federal government, and its calculation must adhere to extensive federal regulations.

The rationale for indirect costs also explains why you can't charge all supplies to your grant. Because the government pays facilities and administrative costs, you can't use the grant to pick up routine expenses such as photocopies and secretarial support, unless your project involves extraordinary amounts of those and you can justify them.

That's the theory. In practice, many investigators say recovered facilities and administrative costs never make their way back to the department, leaving them scrambling to pay for paper and clerical help. That is a thorny issue that probably will be resolved at the same time that chronic campus-parking shortages are alleviated.

Once your sponsored-projects office has approved your completed budget, you're in the home stretch. Your "Authorized Organizational Representative" will deal with the assurance and certification forms. Those forms spell out various policies with which your institution must comply to receive federal money. They can include certification of a drug-free workplace, compliance with rules regarding lobbying, and assurance that the institution has a process for the management of financial conflicts of interest.

You are now free to return to examining the risks of biotoxins to human health.

Karen M. Markin is director of research development at the University of Rhode Island's research office.