Developing Your Budget
The project budget is the financial blueprint for how the project objectives will be achieved. Budget details often reveal whether or not a proposed project has been carefully planned and even if it may be feasible.
The budget should be complete - it should include all the costs of any personnel, supplies, and activities required by the project. If major cost areas are omitted or underestimated, the project as proposed will not be considered feasible.
The budget should be reasonable - it should be based upon actual costs when possible. Reviewers are often familiar with costs that are common to many projects, such as special equipment, travel, and consultant expenses. Cost items in the budget do not usually need to be based upon formal price quotes. Nonetheless, all costs should be based upon available price information.
Some funding agencies provide their own budget forms that they will require be completed. Some funders may specify the budget categories that they will approve. The following budget categories are commonly used:
- Personnel. The project director, research associates, student workers, administrative support, and technicians. Staffing should be sufficient and appropriate to the needs of the project. Often, the wages of student workers are placed in a separate category because they receive different employee benefits.
- Employee Benefits. All benefits provided to project personnel that are paid by the project, including FICA, vacation leave, sick leave, and health insurance.
- Office Supplies. This commonly refers to general office supplies that may be needed and can be calculated based on a monthly average expense. If there are any special items that will be consumed by the project, such as chemicals or videotape, for example, these items should be listed separately and based upon current prices.
- Copying. Estimate the number of photocopies to be made by the project and compute the cost based upon the current Saint Mary’s College charge for copying.
- Printing. Estimates for printing project materials should be obtained from the Printing Services Office in the Student Center.
- Postage. Estimate the number of items to be sent by first class and/or bulk rate and compute the expected cost.
- Telephone. Estimate the cost of regular telephone service for project offices, obtain the current costs for each instrument and line. For long distance telephone costs, estimate the number of calls and the average length and cost of each call.
- Travel. All travel needs to be itemized, such as specific trips to conferences and conventions or field trips. Current airfare rates and College-approved per diem and mileage reimbursement rates should be used to determine expected transportation costs. Additional costs for items such as tips, taxi, parking, and conference rooms should be included.
- Foreign Travel. Any international travel using Federal or State funds must be itemized in the budget and requires specific written prior approval from the funding agency.
- Equipment. All equipment purchases must be itemized with current market prices listed. Some funding organizations do not allow the purchase of equipment. Some require specific approval for equipment purchases. Circular A-21 requires prior agency approval for general use equipment purchases over $5,000. Some agencies permit the rental of equipment. However, any rental of Saint Mary’s College equipment must be based on the actual costs of use and maintenance of the equipment.
- Consultant or Professional Services. Each individual consultant or company must be itemized along with the consulting rates and duration of each professional service to be purchased by the project.
- Indirect Costs. Saint Mary's College has secured an indirect cost rate. Indirect Cost Rates are negotiated between the Business Office at Saint Mary’s College and the U.S. Department of Health and Human Services on a periodic basis, and the negotiated rate is applied to all eligible external grants received by the College. The U.S. Department of Health and Human Services (DHHS) is the cognizant agency that negotiates the F&A rates for most colleges and universities because DHHS provides the largest portion of federal grant funds to colleges and universities.
- Total Project Cost. The sum of the direct costs and the indirect costs.
Most granting agencies will require that a budget justification (or budget narrative) be included in the application. Refer to the Budget Justification page for detail and examples.
Most budgets are composed of two kinds of costs: direct costs and indirect costs.
Direct costs are those expenditures that are incurred by the project and are directly allocable to the project. These include expenditures for project-related personnel salaries, benefits, supplies, travel, equipment, telephones, printing, etc. All direct cost items must be included in the budget.
Indirect costs are expenditures that cannot be allocated to a specific project. These include the costs of accounting, custodial services, maintenance, and utilities. These are also known as "Facilities and Administrative" (F&A) costs. For example, if a project coordinator is hired for a grant, Human Resources must spend time and effort processing new hire paperwork. If work is to take place in a campus space, there will be costs associated with lighting, maintenance, etc. Rather than account for each of these items individually within a grant budget, most funding agencies allow applicants to request F&A costs based on a negotiated rate (aka Indirect Cost Rate). Requesting F&A costs does not impact whether the proposal receives funding.
When cost sharing or matching is required by a funding agency or offered by the Saint Mary’s College, the sources of the matching must be itemized and based upon current market prices. When projects are audited, cost sharing items are examined along with other expenditures.
There are basically two kinds of matching: cash and in-kind. All items that require the exchange of money are regarded as a cash match. These include the costs of any salaries and wages, supplies, or travel which are to be charged to an operating account. Any items that do not involve the transfer of money are classified as an in-kind match.
Many corporate and foundation funding agencies will not accept requests for F&A costs, but will consider these costs as part of the Saint Mary’s Cost Share. It is helpful to outline Saint Mary’s contributions on corporate or foundation funding requests, whether or not a Cost Share is required. If a government agency does not require a cost share, then none should be listed in the budget.
Granting agencies require that a proposed budget be based upon a good faith estimate of the anticipated costs. The Principal Investigator must make a conscientious effort to obtain reasonable and comparable cost information in preparing a budget.
All federal agencies and most state and local government agencies have adopted cost principles that are required of all projects they fund. For federal agencies, these regulations are defined in OMB Circular A-21 (Cost Principles for Educational Institutions). Some federal agencies have adopted additional regulations for managing grants (e.g. U.S. Department of Education, National Science Foundation, National Institutes of Health).
OMB Circular A-21 uses three basic tests to judge whether project costs are appropriate - allowable, reasonable, and necessary. A cost is allowable if it is within the applicable regulations or has been approved by the funding agency. In A-21, a cost is reasonable if "the nature of the goods or services acquired and the amount involved therefore, reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made.” A cost is considered necessary if it is required to successfully and satisfactorily complete the project. Any costs that are not allowable, reasonable, or necessary should not be included in the proposed budget.
Contact the CFR Director or the Business Office for guidance with your budget preparation.