A proposal budget is the best-guess estimation of project costs, presented to a potential funder so that the funder knows how much the proposed project would cost. It is extremely important to capture all possible project costs so that the sponsor pays for them and not the University. As Penn State is supported primarily through tuition, it isn’t fair to Penn State students to ask them to support research or programming initiatives that do not relate directly to their educational experiences at Penn State.
No. That is a misrepresentation. When we submit a budget to the funder, we expect the funder to accept it as a good-faith estimation. That said, it is fair to project cost-of-living increases on such line items as salaries since salaries usually go up every year. Penn State has a standard cost of living percentage used in these cases; it is available on the Office of Sponsored Programs’ website. Bear in mind, however, that every line item must be justified and should be a real figure.
At Penn State, salary reimbursement for full-time personnel is calculated as percentage of effort as opposed to number of hours worked and the budget should reflect that.
To calculate based on percentage of effort, we provide, to the best of our ability, an honest estimate of the amount of time the project will consume. Be sure to have department approval if you plan to budget course release(s). The actual percentage used should be an accurate reflection of the amount of time the project is projected to take.
Faculty on a 36-week contract can also budget for work done in the summer. Summer salary reimbursement is calculated differently from time during the academic year. One summer month equals one-ninth of the faculty member’s academic year salary. Salary reimbursed after July 1 of any given year is inflated by an inflation factor set by the University. Penn State’s Office of Sponsored Programs has current rates available on its web page.
Faculty planning summer research should bear in mind that budgeting for three months of summer work, including summer salary reimbursement, is technically allowable, but is not the preferred practice, as it means the faculty member would be working on nothing but that project. Faculty who commit to three summer months of a sponsored project may do nothing during the summer but work on that project—there can be no days off, no research on other projects, no conferences other than ones related to the sponsored project, and no time spent preparing course notes or syllabi for the upcoming academic year. Faculty willing to abide by these strictures will be asked to prepare a memo to that effect for the project files.
When estimating a multi-year budget, it is reasonable to assume that salaries, wages and possibly other costs might increase over the years of the project. In order to establish consistency across the University, the Corporate Controller establishes standard percentages by which one can estimate future increases in tuition and other costs. That percentage is set at the start of the new fiscal year and is good for the entire fiscal year unless changed by the Corporate Controller’s office. The rate is available on the Office of Sponsored Programs’ website.
A table delineating graduate assistant stipends by appointment (two-semester, one-semester, monthly), grade and availability (quarter-time, half-time, three-quarter time) is found in GURU (https://guru.psu.edu/resources/rates-and-schedules/stipends-for-graduate-assistants) and is updated with the start of the University’s new fiscal year July 1. Graduate assistant stipends for multi-year proposals are also inflated by the University’s standard cost-of-living factor. (See answer to “What is an inflation factor?”)
Often projects require more work than a principal investigator and co-PI can do, given the additional requirements of teaching and service. The PI can enlist the assistance of promising students, using the opportunity of funded research to introduce these students to experiences that might trigger an interest in a graduate school and a career in the field.
There are no hard-and-fast rules for budgeting for wage-payroll (hourly) employees. A judicious estimate of the time required for the project should be based on the number of hours per week the PI will need assistance, multiplied by the number of weeks worked in each academic year; for summer work, the formula is simply number of hours per week multiplied by the number of weeks worked. There is also no set hourly wage but PIs should plan to pay above minimum wage so as to make the opportunity attractive to students who often use any extra time working to pay educational and personal costs.
Fringe benefits are the “extras” the University pays on our behalf (Social Security/Medicare, group insurance, workers’ compensation, retirement, etc.) Every classification of employee (full-time, wage/payroll, graduate student and undergraduate student) is reimbursed for some type of fringe benefit; because this is a real cost to the University, fringe benefits must be included in the budget to the sponsor. Fringe benefits are calculated as a percentage of the requested salary. The four different employee classifications each carry a different rate that changes with the new fiscal year. Current rates are published on the Office of Sponsored Programs’ website.
Indirect costs, also referred to as “Facilities and Administrative” costs are project costs that cannot be easily calculated because they are spread across projects. These are real costs and should be recouped from the sponsor and not from general funds (tuition). Included in indirect costs are percentages going toward utilities, space, salaries of Sponsored Programs and Research Accounting employees as well as salaries of staff assistants and administration, the library, office supplies and other general-use items. The indirect cost rate varies according to type of project (research, outreach or continuing education/instruction, on-campus or off-campus) and is calculated according to a precise formula mandated by the federal government. The rate, shown as a percentage of project costs, is negotiated with and approved by an agency of the federal government (in Penn State’s case, the Office of Naval Research).
Unless specific project guidelines state otherwise, the appropriate rate will be used on all proposals to federal agencies and on any budget going to a sponsor that is itself funded by a federal agency (what is known as federal flow-through). If a project is funded purely by Commonwealth of Pennsylvania monies, the rate is not applied, unless allowed by the guidelines. Proposals to agencies (including private foundations) without guidelines covering indirect cost reimbursement policy will need to include indirect costs in the budget unless a waiver is granted by the Office of Sponsored Programs (research proposals) or the University Controller’s Office (continuing education or instruction).
As mentioned above, indirect costs are real costs generated by a project. Since there are only two funding streams with which Penn State can pay those costs, the project funder or general funds (tuition), it is our responsibility to ensure Penn State students bear as little of the burden of the University’s research and programming costs as possible.
Fringe benefits and indirect costs are completely different and are calculated separately. The only attribute they share is that they are calculated as a percentage of something else—in the case of fringe benefits, it’s a percentage of salary or wages; in the case of indirect costs, as a percentage of direct costs. The two terms are never used interchangeably.
Key personnel at another institution (outside Penn State) tasked with doing a defined and significant portion of the proposed project scope of work is considered a subawardee on Penn State’s budget. The sub-awardee should develop their own budget in conjunction with—and approved by--their home institution. Because of the administrative burden of issuing and administering subawards, Penn State receives indirect costs on the first $50,000 of the subaward budget. If the subaward is for more than $50,000, no indirect costs are assessed on the remainder.
The Grant Relations Manager will help you to develop your budget, prepare your proposal and submit to the sponsor. Reach out to Judy Latta at [email protected] as soon as possible in the proposal development process.