Proposal Budget FAQs
Budget FAQ
What is the purpose of a budget?
I understand budgets are often cut. I’d like to estimate costs at 10% higher than I believe they will be so that, when my budget is cut, I’ll have what I need. Is that a fair number?
How do I estimate salary for the academic year?
How do I estimate salary for work done during the summer?
Is there a limit to the amount of summer time I can propose?
What is an “inflation factor?”
How do I estimate for graduate assistants?
How do I estimate for wage-payroll employees?
What are fringe benefits and do I have to include them?
What are indirect costs?
How do I include subcontractor costs in my budget?
Must I always budget for indirect costs?
Why do I have to include indirect costs in my budget?
Are fringe benefits and indirect costs the same thing?
Whom do I contact for help?
What is the purpose of a budget?
A proposal budget is the best-guess estimation of project costs, presented to a potential funder so that the funder knows how much the project they would be sponsoring will 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.
I understand budgets are often cut. I’d like to estimate costs at 10% higher than I believe they will be so that, when my budget is cut, I’ll have what I need. Is that a fair number?
No. That is not an acceptable practice, and is, in fact, 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 also 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.
How do I estimate salary for the academic year?
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. One course release per academic year for a faculty member on a 36-week contract is calculated at 12.5% of effort (based on a 3:3 teaching load). The actual percentage used may be more or less than that, depending on the amount of time the project is projected to take.
How do I estimate salary for work done during the summer?
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 3 percent, Penn State’s standard cost of living factor. That rate may go up or down, depending upon external economic conditions. Penn State’s Office of Sponsored Programs always has current rates available on its web page.
Is there a limit to the amount of summer time I can propose?
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. Faculty who commit to three summer months of a sponsored project are not allowed to do anything else during the summer but work on that project—there can be no days off, no vacations, no research on other projects, no writing about other projects, no conferences other than ones related to the sponsored project, and no time spent on 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.
What is an “inflation factor?”
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:
How do I estimate for graduate assistants?
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/gfug/appendices/APP05.html ) 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?”)
How do I estimate for wage-payroll employees?
Often projects require more work than a principal investigator and co-PI can do, given the additional requirements of teaching and service. Other times, the PI enlists the assistance of promising undergraduate 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.
What are fringe benefits and do I have to include them?
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.
What are indirect costs?
Indirect costs, also referred to as “Facilities and Administrative” are project costs that cannot be easily calculated. These costs, on a per-project basis, are small, but real nonetheless 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 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).
How do I include subcontractor costs in my budget?
A co-PI at another institution (outside Penn State) tasked with doing a defined portion of the proposed research is considered a subcontractor on Penn State’ budget. Your co-PI should develop his or her own budget in conjunction with—and approved by--his/her home institution. Because of the administrative burden of issuing and administering the subcontract, Penn State receives indirect costs on the first $25,000 of the subcontract budget. If the subcontract is for more than $25,000, no indirect costs are assessed on the remainder.
Must I always budget for indirect costs?
Unless specific project guidelines state otherwise, this 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; another option in this instance is to ask the grants manager to request a waiver from the Office of Sponsored Programs (research proposals) or the University Controller’s Office (continuing education or instruction).
Why do I have to include indirect costs in my budget?
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.
Are fringe benefits and indirect costs the same thing?
No, 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.
Whom do I contact for help?
The grant relations manager will do your budget for you, based on your input. That’s why it’s important to know what does—and can’t—go into a budget. To contact the grant relations manager, call 814-865-6014, or email: [email protected]