How to Get Started

How to Get Started; Developing a Research Proposal Budget 101 

Hi, I'm Dale Huls, the Director of the Office of Sponsored Programs at Montana State University. 

Welcome to our How to Get Started Training on Preparing a Budget for Your Research proposal, brought to you jointly by the Office of Sponsored Programs, OSP and the Office of Research Development, ORD. 

Guiding us through this material are Tracy Gatlin of ORD and Leslie Schmidt of OSP. ORD and OSP have staff who are experts in budget development across federal, state and private funding sources. 

You can work with either of these groups to get your budget developed. Our job is to make this process as straightforward and easy as possible. 

00: 43 

Let's start with some background on research. 

At MSU, we have seen a steady increase in research expenditures with $230 million last year, up from $200 million the year before. 

Our research projects and programs support the MSU Strategic plan, and we are also committed to enhancing student learning experiences through involvement in research. Last year, we had 850 undergraduates, 612 grad students and 53 postdocs supported by research funding. 

Our largest research sponsors are the federal agencies such as the Department of Defense, Department of Health and Human Services, National Science Foundation, and USDA. These greatly influence how we approach proposal budgets. 

1:23 

How to Get Started on Your Budget  

Let's move into the meat of the presentation today: How to Get Started on Your Budget for a research proposal grant. 

The budget is a financial element of your project or program. It is important to make sure that you have the financial resources to complete the work proposed. 

We've structured the training into two main sections, How to Get Started, which are the five bolded items you see on the slide and an optional appendix where we get more into the weeds of some of the terminology and category justifications. We structured it in this way so that you can consume the training you are ready for depending on where you are in the life cycle of your proposal. 

How to get started.  First is to use your resources, meet with the Office of Research Development, also called ORD, and your fiscal manager in the Office of Sponsored programs, OSP. Think of these teams as your cost consultants. You tell us your ideas and how you want to approach your project and we'll let you know the right questions to ask. 

You're going to be doing field work in rural Montana? We'll talk to you about how to budget for extended travel, what's allowable and what's not. 

Are you thinking about putting on a conference at MSU? Let's talk about the plan for using the SUB ballrooms and what other costs should be considered. 

Second, read your funding opportunity carefully for any restrictions or limitations or guidance. This means reading it more than once. It's so easy to overlook the details that are important. Things like restrictions on types of cost, guidance on budget approach, limits on what you can spend on specific categories, etcetera. 

Third is to start with this MSU simple budget. Your agency sponsor will have a specific form they'll want you to use for the budget proposal, but before you get into the specifics of that form, use the MSU Simple Budget to get a ballpark estimate and help you think through all the possible cost categories. It will also save you time with auto-calculated fields that allow you to refine your budget as it is developed. 

Eventually you'll go to the agency-specific forms with a specific budget category, rules and approaches. But get the overall cost picture down first and then dive into the detail of how the agency wants it presented. And take note, there are several funding mechanisms.Most of what we work with is grants, and that's what this presentation is focused on. But you may also have a contract or collaborative agreement that requires you to provide a different style of budget or more specific cost information. 

3:52 

Start with the big picture plan you have for your project. 

• What does the work entail? 
• Is it bench research? 
• Is it community engagement? 
• And who will be involved; MSU students and faculty? 
• Or will you be funding collaborators from other universities or organizations? 
• Are there large and expensive resources you will need to complete the work? 
• And who will you need to engage with? 
• Is it a specific community, for example, a tribal partner? 
• Think about other questions like will travel be required? 
• Will you need a few or a large quantity of supplies? 
• And what will dissemination of this project look like? 

4:31 

Now that you have an idea of what your project will need and you've read your funding opportunity looking for detail on the restrictions and unallowable expenses, let's get into how to use the MSU budget template. 

This flexible template will allow you to map out your expected cost and allow for flexibility of change, all while setting you up to easily transfer to an agency-specific format. 

The best place to start is with subawards. This category will need more time to determine than any other piece. When initially developing your budget, it might help to determine what dollar amount to ask a sub recipient to draft a detailed budget with. A few callouts on this tab. Required cost share? The answer is usually no. 

When initially developing a budget, you can enter an estimated cost into any column. When your sub recipient provides their detailed budget, actual numbers can be entered. 

ORD and OSP can also help with possibly locating indirect cost rates or fringe benefit rates for other institutions to apply these estimated amounts while developing a budget. 

5:44 

The next place to go is the Personnel tab. These are the salary dollars of specific people employed by or to be hired in MSU. Most federal sponsors require actual base salaries to be used, but you can estimate as a placeholder in your initial budget development. 

Use the drop-down in column A to select the personnel type. The options available are Faculty, Professional, Postdoc or Classified. This will auto-populate the institutional fringe rate estimates for the current fiscal year. 

To find actual costs of resources, you can work with your business operations manager, ORD, OSP or HR for actual salary amounts and appointment terms for specific individuals. 

There is also a link in line 21 for the HR Benefit Calculator tool. This will calculate fringe rate benefits based on the particular person's employment configurations when entered into column E. Lastly, to calculate personnel costs, fill in the effort using months for each year. Most budgets need only calendar months, but if you wish to split it out, you may use the academic and summer months instead. This is particularly useful for students. 

7:32 

There's flexibility in this template to use multiple lines for situations where you may want to have multiple fringe rates or whether or not to include the cost of living adjustment. The selection right now is set to 2% when it says yes, per historical authorizations from the Montana legislature.  

Both the Sub Award tab and the Personnel tab will automatically pull values into the Proposal Budget tab. Here you may find it useful to hide rows or columns that aren't being used. 

 

8:15 

The next thing to consider is what costs are going to be associated with the kinds of work that you want to do. Do you have travel? Again, you can use this template to help estimate cost to get an idea of the total project expenses and then adjust and refine to a specific dollar value. It's noted that you should not copy and paste from one cell to another. This will take the formula of the cell and mess with the automatic calculations. 

 

• Do you want to hold a conference? Talk to ORD and OSP about how to budget for that. 
• Are you planning on extended travel? Again, talk to ORD and OSP about mileage, rates and other considerations.  
• Will you be holding a focus group? Talk to ORD or OSP about what costs you'll incur.  
• If you have special equipment you want to buy for the project, again, talk to ORD and OSP about whether it's allowable. 

This is one of those areas where the experience of these teams can really help you. Tell us what methods you have in mind and we'll know the right questions to ask. 

 

9:22 

Lastly, F&A costs will calculate automatically with the defaulted MSU on campus research rate, But you can use the drop down menu and select other applicable rates or use the sponsor specific rates for situations like private industry that may limit these costs to specific percentage. Once again, ORD and OSP can be a valuable resource to help you get this right. 

 

Now you'll want to review all your costs to make sure it makes sense, you meet all the funding opportunity limits or restrictions and begin to draft your budget justification. 

 

The last step before submitting to OSP for budget approval is writing your budget justification or sometimes it's called a budget narrative. This is a critical step. 

 

Each area of your budget requires justification. This is an independent document you write and attach to your proposal submission. Think of it as a bridge between your expenses and the result you expect to achieve. Some guidance for you: Anticipate what the reviewer will ask about and answer it in the justification. Be brief but specific. It should be clear, concise, and correct. Explain the support requested for each and every budget category. But you do not need to list an actual dollar amount into the narrative. 

 

If you have variances from year to year, be sure to explain them and be sure to break down travel cost by category. These will be heavily scrutinized. 

 

11:07 

Here's a budget justification checklist. 

 

• Does the budget justification follow the same order as the budget? 
• Does it give an additional detail to explain the cost included in your budget? 
• Does it include only items that are allowable, reasonable, and allocable to this project? 
• Is it easy to read? 
• Is it concise? 
• And do the numbers in the budget justification match those in your budget? 

 

Bad justification examples. 

 

Here are some real-life examples to show you maybe what not to do. 

 

How about general office supplies? Office supplies must be both necessary and allocable to the project, so this just won't work. It's typically treated as an indirect cost. 

 

Flying first class is a more efficient use of my time. Imagine my surprise when I boarded the local plane and only to see that one of our PIs was flying first class. The PI explained to me that he was late with his final financial report, had purchased the laptop in the final days of the award, and then flew first class, as he explained to me, because it made him more efficient in completing his late report. 

 

How about my reputation justifies this cost? Hopefully that's clear that it just won't work. 

 

And finally, this expense will help me to live my best life. Sorry, but this just isn't going to work. 

The grant really isn't just about you, even though you are the PI. 

 

12:34 

The next step is to set up a time with ORD and OSP to review your cost. These teams will give you insights on your cost. 

 

• Is there anything that looks out of whack or generally lower than what they've seen? 
• What might you be forgetting? 
• Do they see any red flags? 
• And what are the areas in the budget that are likely to get more scrutiny with your agency? 

This is where decades of collective wisdom from working with federal agencies comes in. You don't want to miss this step. 

 

The last step is for approval of your budget by OSP. This is done by submitting the Electronic Proposal Clearance Form, also known as the EPCF, which queues your proposal for review and approval.It's very important and we have a separate training module on the form, how to submit it and what to expect as it goes through the approvals. 

 

So what are the red flags that ORD and OSP look for? Some expenses could receive more scrutiny or have more rules to consider. We'll explore these more in the upcoming appendix and in the department specific presentations that supplement this Budgeting 101 training. But here's a brief list of what these costs might be. 

 

13:40 

Let's roll through some common questions that we see at ORD and OSP. 

 

For example, can or will my budget change from what is submitted originally to the sponsor agency? Yes, it will more than likely change and it is likely to decrease as budgets rarely remain exactly the same as what was submitted on the proposal. 

 

Is it OK to contact an agency or sponsor Programs officer to discuss budget questions? Yes, but please try contacting ORD or OSP prior to contacting your program officer, as we may be able to answer your questions first.  

 

If the sponsor restricts the total budget amount,can I reduce the indirect costs? No. Reducing the F&A rate may set precedent for the institution and lock us into a lower rate than is allowed. Please contact ORD or OSP to assist with making changes to your budget. 

 

Who will pay for cost sharing if it's required? Cost sharing must be handled at the local level, so you, your department head and Dean should address any proposed cost sharing. 

 

Can I mention cost sharing in my budget narrative when it's not listed in the formal budget? We would prefer not, as a proposal is a binding offer, and it is MSU's policy to prohibit cost sharing unless it is an eligibility criteria for submitting your proposal. 

 

Can I submit my proposal or budget to two different agencies at the same time? Typically no, but there may be specific situations where this is allowed with a disclosure statement. Please check with ORD or OSP prior to submitting proposals to different agencies. 

 

Where can I get input or review of my proposal and budget prior to submitting? Resources for proposal and budget review are available at both ORD and OSP and we are happy to help. 

 

Can I rebudget any way that I need or want to once the formal budget is approved? Typically yes, depending on the sponsor and budget categories involved.Please check with OSP for guidance. 

 

15:50 

In this appendix we'll be providing some more detailed information on terminology and specific justification best practices. This information is best reviewed when you're getting started in drafting your proposal.  

 

Terminology to know: 

 

Direct costs and indirect costs are two broad categories that will typically be included in your budget and both are essential to your project. Direct costs are pretty much self-explanatory, those readily identified as necessary to conduct the project or program being proposed. Some good examples are salaries and benefits, travel, equipment, supplies, sub awards, rent and tuition for your students. Basically, the items that you need to get the project initiated and moving forward as opposed to indirect costs, also called facilities and administrative. These are costs that are also critically important to your project or program but are more difficult to easily assign specific costs to the project. Some examples include utilities to run your lab, buildings, equipment, depreciation, interest, and library expense. Think of these costs as the infrastructure costs needed to support your program. 

 

You will also need to know the terms indirect costs, facilities and administrative and overhead that are all used interchangeably. 

 

So you may see any of these terms referenced in your budget, but they're really referring to the same thing. Some folks like to believe that the IDC F&A costs are made-up or are just a tax or profit that goes to MSU. But I can assure you that IDC’s and FAA costs are real and are collected to reimburse MSU for the expenses of conducting and managing extramural funds on our campus and sponsors expect to see these costs included in your budget.  

 

Facilities and administrative IDC costs are the infrastructure costs needed to maintain your program. 

These costs represented as a percentage of direct costs and are based specifically on a fiscal year's expenditures at Montana State University. All the costs are operating the university are then broken down into functions such as research, instruction and student services. 

 

MSU prepares what is called an F&A rate study, which is then submitted to the Department of Health and Human Services for negotiation with that agency to establish the rates you see listed above. 

 

The OSP manages this process and we undergo this on a regular basis, so our rates can change at some point in the future. But these rates are current through June 30, 2024. 

 

18:18 

Here are also some examples of research rates at other institutions in our regions. So as you can see, MSU is at the lower end of the spectrum.  

 

Facilities and administrative - How to calculate 

 

This is specific to calculating the F&A cost using the MSU on campus research rate and is calculated using what is called the Modified Total Direct Cost as a base. 

 

We'll dive into that in a minute. By using the simple budget form that Tracy showed you earlier. We don't have to do this manually. The spreadsheet calculates this for you, so that's what I would highly recommend. 

 

But if you do opt to calculate manually, one of the more critically important items to note about the IDC F&A calculation is that the federal government doesn't allow institutions to assess F&A’s against all budget categories as they require that certain budget categories are removed prior to applying the appropriate F&A rate as shown above. 

 

Also be aware that some sponsors typically private sponsors or foundations may restrict the F&A rate or use a different base to calculate the F&A amount, but the single department template has options at the bottom of the form to assist you with this. 

 

This slide provides you an example of how to calculate the F&A’s with real numbers. 

So starting at the top, take the total direct cost of $100,000 in this example and then subtract the budget categories that the federal government doesn't allow inclusion in the F&A’s to be charged for so equipment and participant support costs in this example. Then take the modified base of 84,000 times the .45 which is our F&A rate for research to get the $37,800 F&A amount. Then take the total direct cost plus the F&A rate which you just calculated for total project costs. 

 

20:10 

Here are some of the basic budgeting terms that you will see used frequently and clarifying now makes it easier to refer to specific aspects of your budget. 

 

Budget Period. Typically most sponsors want to see these budgets broken into one year increments starting with the anticipated start date of your project. 

 

Project Period, also called Period of Performance, POP, also includes all the years of your project. 

For the National Science Foundation, this is typically three years. For the NIH, typically five years  

 

Authorized budget, The budget that ultimately gets approved by the project sponsor and maybe less than the amount you proposed. Be sure you still have enough funding to successfully complete the project.  

 

Cost sharing. Just reverse the words to understand. Basically MSU or another party is providing a portion of the funding in addition to the sponsor.  

 

Prior approval. Written permission from your sponsor to make some requested change. Tip: get this in writing to document approval. 

 

To add to the confusion, different agencies and sponsors can call budget and expenditures by different names. For example, the NIH calls an entity that handles a portion of the Programmatic Responsibility “Consortium Agreements”, whereas the NSF calls them “subawards”, but they are really the same. This can result in confusion if you begin preparing budgets for different sponsors and agencies. Check with the Funding Opportunity Announcement or the ORD or OSP for assistance if needed. 

 

21:40 

In this section, we're going to cover the budget justification best practices by budget category.  

 

Key senior personnel justification. Explain how much time you will need to complete the project and how your expertise will benefit the program. This includes other key personnel even if no salary is requested. How will their inclusion in this program improve the projected outcomes of the project? A tip here specific to the National Science Foundation is the 2/9th Salary Rule, which caps the amount of salary you can include in your budget to two ninths in any given 12 month period. 

 

If you're participating in the incentive program for researchers, the IPR at Montana State University, remember to include your salary and benefits. This is just a quick reminder of this program as there is a separate presentation covering the details  

Other personnel justification. Some things to think about in this section would be how will inclusion of students improve the project and what types of experience will they gain by working on the project? 

• Will they be running samples in the lab? 
• Do you need a lab tech or postdoc to get the daily work accomplished? 
• Explain what aspect of the project they will be responsible for. 

If you don't have a specific individual identified yet, it is OK to list the title and state to be determined later as part of the budget. Remember to include student tuition and fees in your budget, typically under the other cost budget category and if allowable by your sponsoring agency. But tuition is not paid to the students as salary.  

Travel justification. So when preparing your budget, try to anticipate any annual meetings you would like to attend, perhaps to share the results of your research and if you would like to include a student or two. Another example might be to include travel needed for you to visit a collaborators lab to learn a new skill or method that would enhance the outcomes of your project. Be aware now that travel will be one of the more heavily scrutinized budget categories in your budget. 

Benefits Justification. Sponsors expect to pay for benefits as part of the salaries paid to employees, so typically not much justification is needed other than to include the specific fringe benefit rates for each employee or student if requested by the sponsor. 

Equipment Justification. Describe how this specific piece of equipment is critical to complete the technical aspects of your program and how you will utilize it to accomplish goals as laid out in the proposal, and perhaps explain why it isn't already available for your use. Typically laptops, iPads, and desktop computers are a supply since they don't have an acquisition cost of $5000 or greater. However, if several computers are linked together as needed to run a piece of equipment and the total purchase cost is equal to or greater than the $5000 threshold, these will need to be placed in the equipment category. 

24:33 

Subcontractor Justification. Explain why Doctor Fantastico is critical for meeting the goals of the project, including which portions of the project Doctor Fantastico and his or her team will handle, why their expertise is needed to accomplish these tasks, and what makes their team unique and why they were selected. Things like prior work in this area specifically with you, the PI, their approach to data management, etcetera. Think in terms of how inclusion of this subcontractor will strengthen your program, especially in the eyes of proposal reviewers. It is very important to understand the differences between subcontractor versus contractors within your budget, as the levels of responsibility and treatment for F&A purposes vary greatly. 

Contracted services Justification. Explain why these services are needed to accomplish your goals. For example, you may need to hire a lab to run samples that you have collected for your research project that your lab is unable to handle due to the unique nature of the services or analysis that this specific lab provides. 

Note that the entire budget amount for contracted services is assessed F&A, whereas only the 1st, 25,000 of each subcontract is assessed F&A. 

Other costs: participants support costs. The intent of this budget category is to only include the cost for people brought in to participate in a conference or meeting. Participants are not MSU employees, the speaker for the conference. Human subjects are included in clinical trials. It is for the individuals attending the conference only. For any MSU employees attending this type of event, this will need to be budgeted under the travel budget category. 

Other cost justification. Explain specifically why a jail consultant is uniquely positioned to provide input to a specific aspect of your projects. Why is this person the one you want to hire and what will be his or her role as a consultant? You'll also want to include materials and supplies under the other cost justification.  

Awards justification. Tuition and fees are unanticipated budget category if you're planning to include students as part of your project. Typically sponsors like to see student involvement, which might also tie to your broader impact statement on your proposal. 

In closing, we would just like to say that if you get frustrated or hit a roadblock, please give us a call or reach out to us. Let the OSP and ORD professionals assist you with preparing your proposal.