Angie Templeton & Nicole Cobb

Grants & Contracts Administrators

Sponsored Programs Administration

Overview: Building Your Budget

OMB Circular A-21 General Principles

Direct vs Indirect Costs

Allowability of Costs

Mechanics of Building a Budget

Sample Problems

Overview

Provides allowability principles for the reimbursement of costs associated with federally sponsored projects

Provides guidance for determining direct and indirect costs

http://www.whitehouse.gov/omb/circulars_a021_2004

*Note: Circular A-21 will be included in the OMB Uniform Guidance that will take effect on December 26, 2014, so the references at A-21 in this presentation will likely be different when that begins.

OMB Circular A-21

Direct vs Indirect Costs

DIRECTOMB A-21 D.1.Can be identified

specifically with a particular project

Can be directly assigned to projects relatively easily with a high degree of accuracy

INDIRECTOMB A-21 E.1.aka “F&A” or

“Overhead”Incurred for

common or joint objectives

Cannot be identified readily and specifically with a particular project

SalariesFringeTravel

Commodities/SuppliesContractuals/Services/Subcontracts

Equipment

Direct Costs

Indirect Costs (F&A/Overhead)

FacilitiesDepreciation and Use

AllowancesInterest of Debt

associated with certain buildings

Equipment and Capital Improvements

Operation and Maintenance Expenses

Library Expenses

AdministrativeGeneral Administration

and ExpensesDepartmental

AdministrationPresident’s OfficeGeneral CounselProvostBudget & PlanningProcurementCompliance

Sponsored Programs Administration

Basic Costing PrinciplesOMB A-21, C.2. (a.b.c.d.)

ReasonableAllocable

ConsistentAllowable

REASONABLE“Prudent Person Test”Determining Reasonableness:

Necessary to the projectComplies with Federal and State Laws

and RegulationsDid the individuals make good

judgements?Were the actions taken consistent with

institutional policies and procedures?

Basic Costing Principles (cont’d)

ALLOCABLEExpenses are incurred solely for the project

OR

Expenses benefit both the project and other work in a proportion that can be approximatedSplit purchases are allowed, and are often the most

appropriate way to allocate expenses to projects

Basic Costing Principles (cont’d)

CONSISTENTCost Accounting Standard (CAS) 502 requires

consistent allocation of costsIncurred for the same purpose, in like

circumstances, and are either only direct costs or only indirect costs

REMEMBER:Cannot charge the same cost both directly and

indirectly when it is incurred for the same purpose and circumstance

Basic Costing Principles (cont’d)

ALLOWABLEMust follow requirements from:

OMB Circulars (soon to be Uniform Guidance)Sponsor GuidelinesAward DocumentInstitutional Policies

Applies to both direct and indirect costsCertain costs may only be allowable as indirect

Example: Sponsored Programs expenses are not allowable as a direct costs, but are allowable as indirect

Basic Costing Principles (cont’d)

Costs must be treated consistently as either direct costs or indirect costs, when in like circumstances

“Like costs in like manner”Disclosure Statement (DS-2) also provides

guidance:http://www.controller.msstate.edu/cas/cdst/ Example:

Travel costs incurred while performing the function of general university activity such as travel by executive officers meeting with the State Board of Trustees to discuss general university business would be classified as indirect costs.

Travel by a university employee related to carrying out the functions of a specific contract or grant would be classified as a direct charge to that contract or grant.

Basic Costing Principles (cont’d)

Can I charge a computer to my project?IT DEPENDS!

Yes, if being used in a programmatic wayComputer needed to be connected to a scientific

piece of equipment for data collectionComputer needed to run simulations, analyze data,

etc

No, if being used in a general wayCheck email, browse internet,

word processing, etc

Allowability as a Direct Cost

Can I charge office supplies to my project?Typically no, due to lack of allocability

OMB A-21 F.6.b.(3).- normally treated as Indirect Costs

Allowable in unlike circumstancesUsed in programmatic way (conference materials,

pamphlets, etc)

Allowability as a Direct Cost

Can I charge my administrative assistant to my project?Typically no, due to lack of allocability

OMB A-21 F.6.b.(2).- salaries of administrative and clerical staff normally treated as Indirect Costs

Appropriate on a “Major Project”OMB A-21 Exhibit C

Allowability as a Direct Cost

Anything necessary for the completion of the project that is not paid for by the sponsor

Source of funds is irrelevant:MSU- E&G (Educational and General) FundsMSU- Designated FundsThird Party ContributionOther

Cost Share

Cost Share CategoriesCommitted

Must be tracked

Required by sponsorNot required, but

committed in proposal

Not required, but implied through regulation

UncommittedDoesn’t need to be

tracked

Typically after the fact “volunteering” of MSU resources

As a PI, do I have to charge my time to the project?No- BUT your time will be considered cost

share, and some portion of it must be committed and trackedDoing so will require division approval on the IAS

in the Cost Share portionOMB Memo 01-06

http://www.whitehouse.gov/omb/memoranda_m01-06/

All projects must have some committed effort, and therefore must be tracked

Note: we do not encourage cost sharing if it is not required by the sponsor

Cost Share

To be allowable as a cost share expense, it must be allowable as a direct costMust be incurred during project periodCan only be used as cost share onceCannot be already charged to the feds (F&A

costs)

Allowability of Cost Share

The sponsor does not allow me to charge F&A on the project. Can I use this unrecovered F&A to meet my cost share requirement?Only if you have prior approval of the Federal awarding

agency (see OMB A-110 C.23.(b).)

If I have two related federal projects, can I use my NSF funds as cost share for my USDA project?No- unless authorized by federal statute to be used

as cost share (very rare to happen)- OMB A-110 C.23.(a).(5).

**Cannot cost share Federal funds with Federal funds.**

Allowability of Cost Share

I bought a piece of equipment a few years ago that I plan to use on this project. Can I use that as cost share?

1- Was it purchased with Federal funds?2- Are the feds already paying for this (as F&A)? Is it in the F&A pool?3- Is it fully depreciated?

If you answer “no” to all of these, then you could use the depreciation value as cost share.

Questions to Ask About Cost Share

Budget MechanicsBasic Principles

All costs must follow the principles we’ve discussed:Reasonable, Allocable,

Allowable, and ConsistentProperly budgeted as Direct

or Indirect Costs

All costs should be viewed in relation to the project’s needs

Specific RFP’s may prohibit or require certain classes of expenses- be sure to read carefully!

PersonnelPI, Project Team, Students

Establish this section first to help determine expenses for other categories

Calculations:% effort or person months

Person Months recommended

9 mo. Vs 12 mo. employeesUse current salaries-

escalations allowed for future budget periods

Sometimes sponsors (particularly industries) will ask for an hourly rate.

Hourly Rate for 12 month: Salary / 2,080 Hourly Rate for 9 month: Salary / 1,560

Because MSU uses level of effort percentage instead, hourly rates are not auditable.

We can provide these rates if required, but we need to add a disclaimer. SPA can work with the PI on what verbiage to use.

Hourly Rates vs Effort Percentage

Budget MechanicsFringe Benefits

Treated as a Direct Cost

Effective August 31, 2014

CalculationsRates are applied to

budgeted salariesFaculty/Staff (based on $40,000 average salary)

Enrolled Students

Retirees Other Intermittent Employees and Non-Enrolled Students

36.09% 0.73% 24.23% 8.48%

Graduate Student Tuition Calculation is based on student’s budgeted

effort

Note: Effective Fall 2015 (FY16), all GRA’s will have the 100% rate charged in budgets. GTA’s and GSA’s will remain at 71%. (Kevin Edelblute)

Budget Mechanics

Budget MechanicsTravel

Project related conferences, meetings, data collection, etc

For budgeted personnel

Per Diemhttp://www.travel.m

sstate.edu/hcma/plhcma.php $41/day (min) $46/day (max)

Mileagehttp://www.travel.m

sstate.edu/mileage/mileage.pdf

$.56/mile if State owned vehicle not available

$.235/mile if State owned vehicle available

EquipmentNon-expendableTangibleUseful life of more than

one yearAcquisition cost of

$5,000 or more per unit

Note: just because it can be inventoried, does not necessarily make it equipment for budgeting purposes

Budget Mechanics

Commodities/Materials and Supplies

Items to be used for the project

Examples: Molecular Biology Supplies (enzymes, tubes, etc) to be used for DNA sequencing

Contractuals/Subcontracts

Services to be performed by another entity to complete the project

Example: Third-party vendor will perform DNA sequencing samples

Participant CostsBroad definition:

Support provided when a sponsor funds a project or activity in connection with formal meetings, conferences, or training programs

Specific definition:Costs paid to (or on behalf of) participants in such

eventsTreatment of participant costs vary from

sponsor to sponsor- check the RFP and sponsor requirements!

Budget Mechanics

Facilities and Administrative Costs (F&A)

Research45.5% MTDC On Campus26% MTDC Off Campus

Instruction50% MTDC On Campus26% MTDC Off Campus

Public Service/Other27.2% MTDC On Campus22.8% MTDC Off Campus

(MTDC = Modified Total Direct Costs)

Budget Mechanics

*Current Federally-

negotiated rates, effective:

July 1, 2014-June 30, 2017

Modified Total Direct Cost (MTDC)

Exclusions:TuitionEquipmentPatient CareOff-site RentalsScholarships/

FellowshipsAll Subaward Costs

Exceeding $25,000

Sponsor may further restrict the F&A Rate

The maximum that can be charged is our federally negotiated rate

Total Direct Costs

ExclusionsModified

Total Direct Costs

Sample Problems

Angie Templeton: 5-2346atempleton@spa.msstate.edu

Nicole Cobb: 5-4775ncobb@spa.msstate.edu

Sponsored Programs Administration133 Etheredge Hall

325-7404

QUESTIONS?