Budgetary Tips
Budgetary Strategies for University Administrators
Using grant budgets to maximize fundability and efficiency
Introduction
Faculty Salaries
Faculty Release and Salary Savings
Fringe Benefits
Indirect Cost
Matching, Cost Sharing, In-Kind Contributions
Strategic Points for Better Budgets
Introduction
Although it may seem as if a grant budget is the last aggravation you have to worry about, the way a budget is prepared is perhaps the most important feature of a grant application. An incorrect or unrealistic budget may:
- Leave an investigator with inadequate resources to successfully complete a project
- Rob the department, college or university of resources to which they are entitled
- Cause hardship and resentment as the department or college tries to cover up someone's mistake
- Convince a funding agency that you are inexperienced, naive, careless or just incompetent. This impression may be transferred to your colleagues
- Send someone to jail
On the other hand, I find the budgetary constraints imposed by a funding agency to be the foundation on which to build a project. I have also found that with just a little planning, more resources are never a bad thing. Everyone wins. Grant budgets are not particularly mysterious but they often cannot be accessed by common sense. They have this in common with university budgets. Most of the problems with grant budgets happen because they are more logical than university budgets. The largest single problem stems from the following proposition:
Funding agencies expect to pay investigators for the work they do!
This may not seem controversial but it conflicts with the academy. Universities assign periods of intense, structured activity (teaching), interspersed with periods of unstructured inactivity, during which faculty are to pursue research and service. Funded activities start at the beginning and end at the end. They are not respecters of academic years or fiscal years. This has profound implications for grant budgets.
Faculty Salaries
Most faculty are paid on nine month contracts. This fact is irrelevant to most public agencies and private foundations. Most grants are funded in one year increments and the funding agency is interested in how much of a faculty member's time will be expended on the grant throughout the year. Nothing is more important than committing an investigator's time in a realistic way. If too little time is committed, the agency will assume the job will not get done and reject the application. If too much time is committed, the agency will assume the investigator is a thief and reject the application. The work must also be done according to the grant time-line, not the academic calender. Therefore, in almost all cases salary needs to be calculated on a percent time full-time equivalency (FTE) basis.
This calculation can be illustrated easier than it can be explained. For a simple example, if a hypothetical faculty member needs to work on a project one day a week all year that would equal 20% FTE. If the faculty member received $50,000 on a nine-month contract, the budgeted salary be $50,000 X 12/9 (to get a full-time salary) = $66,666 x 20% = $13,333.
It is usually more complicated than this. If this project required the professor to work half time for five months the easiest way to calculate the budgeted salary would be $50,000/9 = $5,555 (to get a monthly salary x 5 (for five months) x 50% = $13,887. The calculation would be done this way even if the period of grant activity spans multiple semesters and summer or two fiscal years.
This method of salary calculation has some additional implications:
- For any given period of time a faculty member cannot be shown as working more than 100% FTE
- For any university fiscal year a faculty member cannot be paid more than 12/9 of their nine-month contract
- It is OK to juggle ones time commitment within the funding period. For example, within the hypothetical five month period one could legitimately work 40% FTE half the time and 60% the other half.
Faculty Release and Salary Savings
If a faculty member is awarded salary monies to work on a funded project it is necessary to release that faculty member from teaching duties so they are not working more than 100% FTE at any time. This is one of the most important ways universities benefit from funded projects. In large research universities departments are often able to carry extra faculty lines because at any given time some faculty are having their salary paid from external funds. While that is not likely at West Georgia, we still can benefit from the fact that a part-time temporary replacement costs much less than faculty salary.
For example, if our 50% FTE were receiving release for two, three hour semester courses he or she would receive $11,100 grant money to pay for the release, while replacements to teach these two courses may be $2,000, or $4,000 (salary savings = $7,100!). Customary practice is that the department keeps the salary savings unless a prior agreement has been made with the faculty member or the administration.
One frequent problem with faculty salary is that a grant may need a steady commitment throughout the project period while courses come in increments of 3, 4 or 5 hours. It may be necessary for a final report to show that the faculty member was released for approximately the FTE claimed in the application. Generally, the way to make it all come out in the wash is to move as much or as little salary to summer as is necessary.
There is also a potential problem with salary overlapping two university fiscal years. Granting agencies fund projects for a year of their choosing, e.g., October 1 to September 30. Although this may seem to be a complication, the discontinuity of funding periods actual is to the university's benefit. As the grant account remains open and can be expended in either fiscal year, this allows a department chair to partially balance lean years and fat years with grant money. Again, the prime directive is to be able to document that the faculty member dedicated the proper FTE to the project during the funding year, not the fiscal year.
Faculty raises are handled differently by different agencies. A rule that usually holds true is that the first year of funding must reflect the actual faculty salary, though salary may change before the application is processed.
For multi-year grants raises can be budgeted, usually @ 6% per year.
Occasionally positions are funded through a grant that are not presently filled. The safe way to budget these salaries is to submit an informal job description to Human Resources and request the position classification and salary range. Always budget the top of the range. There are two reasons for this: 1. Salaries are low at West Georgia and reviewers will likely view the top of the range as entirely reasonable; and, 2. While individuals rarely receive raises greater the 6% or 7%, positions can be reclassified with increases of 20%-40%.
One final caution about salaries; For a grant with a budget ceiling it is tempting to budget the cost of a temporary instructor rather than a faculty salary. This is almost never allowed. Most agencies will only fund the person actually doing the work on the project and expect the salary commitment to reflect the time commitment.
Fringe Benefits
Unlike some institutions West Georgia adds an encumbrance for fringe benefits automatically to salaries. Do not forget to add it to grant budgets. For nine-month contracts' fringe is calculated @ 24.1%. Summer a salary fringe is 19.46% (health insurance is prepaid). If you are budgeting a nine month faculty for twelve months, calculate it @22.9%. Do not forget to increase fringe benefits accordingly when future raises are budgeted.
Indirect Costs
Indirect costs are designed to reimburse the university for legitimate expenses that are incurred in performing the tasks associated with a grant. These include things like office space, utilities, accounting services, labs and libraries. For public agencies and many private funding sources, universities have an officially negotiated indirect cost rate derived from an audit done by the Department of Health and Human Services. West Georgia's is 50% of salary and wages not including fringe benefits. This is the maximum indirect costs we can charge. Many programs specify something less.
Most RFP's will include a statement about indirect costs that are allowable. If instructions are given about indirect costs, calculate them as per instruction (e.g., 8% of direct costs). If no mention is made of indirect costs, charge the negotiated rate. They are customarily justified by the simple statement; "As per DHHS agreement, 6/29/95". Indirect costs can (and should) also be charged to a subcontractor, such as another university.
Matching, Cost Sharing, In-Kind Contributions
Often a funding agency will only fund a project if some contribution is made by the grantee. This contribution can be as high as 100%. When thinking about cost sharing it is necessary to think in terms of "hard money" and "soft money". Hard money is university resources, not already allocated, that must be spent on the project and found in some budget line. Soft money is money that is already allocated that can be shifted to apply to a match, without having to actually spend additional university funds. Obviously, soft money is preferable to hard money.
Soft money generally comes from two sources. The most important is probably faculty salary. In a loose interpretation, a faculty workload will consist of four semester courses. There is also the expectation that there are additional expectations of research and service beyond that. Most universities overtly talk of 15 hours as equaling a 100% commitment. At West Georgia it is implied. It is perfectly acceptable to claim an in-kind contribution of 20% of a faculty member's salary (and fringe) if they are teaching four courses, or 40% if they are teaching three courses. This will only apply to the academic year and must be prorated on a 12-month FTE basis. This is not a problem for matching monies because only the dollar amount matters.
A second strategy is to request grant monies to release a faculty member for one course and release them for two. For our hypothetical faculty that would be $6,943 in grant money requested for one course, yet a temporary instructor could be hired for $4,000 for two courses, allowing the university to contribute $6,943 as match and still have $2,943 salary savings!
I realize this looks a little magical so I will explain it further. The faculty member is listed as contributing 40% FTE to the project, with 20% externally funded and 20% contributed. Since the $6,943 (requested for 20% FTE) is more than enough to provide release for the entire 40% the faculty in working on the project another 20% (of the faculty member's commitment) can be claimed as match. This is not just legal and ethical. It is what keeps Carnegie I institutions Carnegie I institutions.
Yet another source of a match is the clerical and support staff who will by necessity be contributing to the project. There will be an influx of purchase order's etc. that will be processed. A project may require tech support. While these contributions may be small, it is perfectly acceptable to claim 5% or 10% of their time. Similarly, budget these folks as a direct cost if your budget will bear it.
Strategic Points for Better Budgets
- Don't economize on personnel. More applications are rejected because the Principal Investigator does not demonstrate that he or she will have the time to be able to both conduct the research and administer the project than for any other reason
- Do economize on equipment. Now funding agencies view normal computing capability as part of a functional office. They will not fund PC's
- Do budget expendable supplies, postage, telephone, copying and printing. These costs can really add up and reviewers never strike them from a budget.
- Don't reject an opportunity because a large amount of cost sharing is involved until you have checked all your options
- Always look at the duration of the project and tie your budget to the project time-line. Reviewers expect the fiscal aspects of the project to be as carefully planned as the research. Tell them how much time is committed fall, winter, spring and summer and how you expect to get the work done.
- Always allow a couple of months for startup (hiring and training staff, buying supplies etc.) and a couple of months for analysis and write-up and shut-down. Reviewers know this realistic and will suspect you don't know what you are doing if you ignore it.
- Budget indirect costs if at all possible. That's where the PC's should come from.
- Be precise. Although it is unrealistic to exactly estimate costs, it is possible to project how many trips will be required and how many questionnaires you will print. The issue for reviewers is planning, not money.
- Do contact Sponsored Operations if you have any questions - the earlier in the budget process the better
