NIH: Preparing Budgets for National Institutes of Health Proposals

NIH - Preparing Budgets for National Institutes of Health Proposals 

 
Hi, I'm Dale Huls, Director of the Office of Sponsored Programs.Welcome to our training on preparing a budget for your NIH research proposal, brought to you jointly by the Office of Sponsored Programs or OSP, and the Office of Research Development or ORD. 

 
Guiding us through this material will be Leslie Schmidt of OSP. MSU ORD and OSP have staff who are experts in budget development across federal, state and private funding sources.You can work with either or both of these groups to get your budget developed.Our job is to make this process as straightforward and easy as possible. 

 
Let's start with some background on research at MSU.We've seen a steady increase in research expenditures at MSU.We are up to $230 million last year 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 858 undergraduates, 612 graduate students and 53 postdocs supported by research dollars. 

 
Our largest research sponsors are the federal agencies, with the Department of Health and Human Services being one of our largest sponsors, of which NIH is a piece. 

NIH is a huge federal agency composed of 27 different institutes and centers that each focus on a different health research area and are the second largest sponsor of extramural funds at MSU. 

 
The good news is that in our experience at OSP, NIH is fairly easy to work with. 

There is another online module that is a prerequisite to this course called “How to Get Started Developing a Research Proposal”.You want to complete that module before this one because it provides general budget guidance as a precursor to this training, which is specific to NIH in more detail. 

 
Now I'll turn the session over to Leslie to take us through the content. 

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The NIH adheres to the federal cost reimbursable document called the Uniform Guidance (UG), and that's where MSU personnel go when determining whether a specific expense can be paid for with federal funds. 

Within this document are the overarching rules of allowability, allocability, reasonableness and consistent treatment for similar costs.And there are standards that MSU is held to when audits are performed on our campus. 

At the end of the day, a quick frame of reference when analyzing whether you can include a cost in your NIH budget is whether the expenditure will directly benefit the project. 

However, there are few budget categories listed here that we would like to draw your attention to so we can avoid any issues or concerns with your budget now and in the future. 

 
2:42 
Graduate student appointments, tuition, scholarships, and fellowships. 

There are specific limits to the total dollar amount allowed in the compensation package which changes annually and the OSEOSP can help you find. 

The 2023 NIH salary cap is $212,100. 

Good for you to know consortium agreements or subawards versus contracted services.These need to be differentiated appropriately and upfront in your budget. 

 
Foreign travel always a carefully monitored area by the federal government and auditors, as well  

Food.This is generally an unallowable cost from federal funds, especially except for our specially approved for awards to host conferences. 

 
Additional compensation will be included in the MSU IPR program, and we'll talk about that later. 

And cost sharing really not allowed unless it's a requirement for funding. 

 
It is important to carefully follow all instructions laid out by the specific Funding Opportunity Announcement, such as the Funding Opportunity Announcement, Broad Agency Announcement, or Request for Proposal Specific for the NIH Institute or Center that you are submitting a proposal to. 

This is good advice for any agency you are working with, but it is particularly true for NIH because of all the written guidance, policies and statements they have linked to their opportunity announcements. 

Note that it is OK to contact an NIH program officer if you have a specific programmatic question for them, but please try to work with the MSU ORD or OSP before asking basic budgeting questions. 

 
Because MSU is already registered in grants.gov, there is no need for you to complete this section of the proposal. 

Please note that if your budget is more than $500,000 for annual direct costs, it will require a prior approval unless it is waived by the Funding Opportunity Announcement.It is wise to stay under this limit if possible.If not, please talk to OSP or ORD about what approvals will be required by the NIH. 

This will require at least six-plus weeks of notice before submitting your proposal. This is an FYI. 

 
4:54 
On carry forward balances it is important for NIH projects to understand carry forward allowances. 

Rules are different on this topic if the project is under SNAP, which is called streamlined non competing award process, or not. 

Even for SNAP NO11 prior approvals are required and how to properly calculate the unobligated balance is vital.OSP can help you with this.  

And a couple of important internal notes:Please submit your proposal to OSP for review 72 hours before it's due, to make sure we have enough time to review it and when an authorized organizational representative is required. That's the Vice President of Research, not the PI. 

Your proposal to the NIH will include one of two budget forms, typically depending on the total dollar amount of direct costs requested for each budget year. 

Often, the opportunity will let you choose which form to use depending on your proposal.For most research projects, the modular budget form, called PHS 398, is utilized.This form is condensed, and you will be requesting modules in the amounts of $25,000 each, rounding up or down as appropriate.It is used for most requests up to $250,000 of annual direct costs. 

This should include personnel and consortium justification as well as other relevant justifications. 

 
6:18 
When direct costs are greater than the $250,000, a more detailed budget form is often required: the R&R Research and related budget form. 

You will always want to review your funding opportunity in detail to determine which budget template is required or if you are allowed to choose which one. But we recommend starting with the MSU Simple Budget Worksheet as a first step worksheet for budget development. 

If you are collaborating with another institution, typically called a consortium or subaward, a separate budget will need to be attached for each that is approved by the subaward partner for either budget template. 

From what we have seen in the OSP, significant over or under estimating suggests you may not understand the scope of your work, so this strategy is not suggested. 

 
This decision tree is taken directly from the NIH website and it helps you understand when different budgets are used because it's not only the total direct cost that determine which budget form to use.As you can see, there are also other factors.Use this decision tree to help guide you on which budget form is appropriate if you are given the option to use either form, and if you need additional help, please feel free to contact the ORD or OSP for assistance. 

We'll spend our time on the two most common budget templates at NIH, but there are two other budget templates that are in very rare instances used for NIH proposals that we want to make you aware of: 

• The PHS 398 detailed budget is sometimes required for sub projects or subawards. 
• The PHS 398 training budget form is only used in cases where the grant is specifically for a training program. 

 
These rarely come into play, but do follow the same general principles as the other NIH forms discussed today. 

 
8:06 
Let's dive into the PHS 398 modular budget form.It's a simple, one-page budget form calculated in increments of $25,000 known as modules.For projects using this form, NIH will offer a maximum of five years of support.Typically the same number of modules are used for each budget period.If not, you'll want to explain the variances in your budget justification.  

When preparing this form Section A is for MSU direct costs only plus subaward indirect costs.The most confusing part of this is that the total can be higher than the maximum direct cost limit if there is a subaward. 

Section B is for MSU's indirect costs only.You’ll want to reference MSU's information page on the OSP website to check for the most current rate.At the time of this training it was 45%, but it's smart to ensure that that's still current. 

 
Section C is simply the total of Section A&B.  

Moving down to the Cumulative Budget Information. Section 1 is the total cost and will be calculated automatically on the form Section 2.In this section you'll include all your justification documents as individual PDF files.This will include personnel subaward justifications if needed, and any additional narrative justification that makes sense. 

There is a second, more detailed budget form used at NIH, the R&R Budget, which is the research and related budget.This is the one used for larger projects and some other very specific cases. 

Section A is for salaries and benefits, which are typically the largest budget category.This section should only include personnel from MSU who are dedicating effort to this project, other significant contributors or collaborators.Non-MSU should not be included in this section.Include all personnel even if not requesting any salary and be realistic about the amount of time you need to complete your project. 

 
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NIH requires that effort be listed in person months to the 10th of a month. 

 
At the end of this presentation, the URL for assisting with a conversion to person months is available. 
It is important to know that on effort committed API cannot decrease their effort by more than 25 percent, as it is committed in the budget without prior approval except in a no cost extension situation.However, effort can be increased without approval. 

NIH will also be looking very carefully at the effort across the investigators current and pending other support.NIH will not pay above the $212,100 salary cap. Note, that's the 2023 limit. 

And finally, NIH does not allow cost of living adjustments (COLA). 

You should know that NIH may also ask about personnel in your annual research Performance progress report RPPR, so also be aware of this when budgeting in Section B. 

Other personnel include postdocs and graduate student names and level of effort in the budget justification. 

If you don't yet know who will be on the project, to be determined (TBD) is OK, but known individuals are stronger to demonstrate you won't be underperforming if you can't hire. 

Tuition reimbursement goes into section FA, not in this section. 

For multiple people in the same role, just change the quantity in the first column. 

Unless you have an extremely large or complex project, administrative and clerical costs are typically not part of the budget. 

If you have questions about how the MSU HR might categorize a person based on their role and scope, please reach out. It is better to understand the differences, as F&A and fringe benefit calculations may be different.  

In both sections A&B, you'll enter the fringe benefits percentage. 

You can find estimates in the OSP information sheet on our website.Again, this can change annually. 

Also, these are estimates for budgeting purposes only and actual percentages may vary by employee. 

 
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Typically equipment is a fairly straightforward budget category, but if there are extenuating circumstances or details, please use a budget narrative to explain and add to that year's budget. 
Module. Equipment is for any items that are greater than $5000 in value at the time of purchase and have more than a one year life expectancy. This category does not include general equipment and supplies which are not dedicated to the project. 

F&A is not calculated on equipment.Please note, if you're planning to fabricate a piece of equipment and the total value will ultimately exceed the $5000 threshold, it will still need to be included in the equipment budget category. 

 
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The travel budget category is one of the most highly scrutinized. 

Auditors and state legislators sometimes latch on to travel as if it's some type of vacation, so it is really important to clearly map out and document anticipated travel costs carefully. 

Key points here: use reasonable estimates. And to answer a recent question about airfare, seat upgrades on flights are not allowed to be funded unless there is a documented medical need. 

Federal regulations for travel default to the state of Montana's rules, not the federal government rates, even though these are federal funds. 

We have lodging and meal per diem rates available on the OSP information sheet. 

We must choose US carriers or foreign air carriers who have code sharing agreements. 

The bottom line is we must travel on the cheapest available ticket, usually basic economy, and the burden of proof for this purchase is on MSU.  

In section F, subawards consortium and Contractual costs. 

This is one of the most confusing budget categories to differentiate, but it is critical to do so at the proposal budget stage. 

 
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One of the most important criteria for determining whether an expense is a contractor versus a consortium subaward arrangement is whether the other entity is going to assume a portion of the programmatic aspects of the project. 

Contractors and consultants typically only advise. Consortium subawardees typically have specific outcomes and deliverables that are critical to the success of the project and named specifically at the proposal stage.They have programmatic responsibilities for the project. 

Each subaward and consortium will need an independent budget form filled out for which they will include both direct and indirect costs. F&As for foreign collaborators is limited to 8 percent. 

Reviewers for your proposal may want to see who and what other institutions are involved in the budget and how much their share of the work will cost. 

 
FandAs/IDCs are applied very differently depending on which category is appropriate for the expense. 
For contractor consultants, MSU's full F&A rate is applied, whereas for Consortium and Subawards or F&A rate is only applied to the first $25,000 of each subaward. 

Participant/Trainee Support; This is another sensitive budget category that is very rarely used at NIH, so you should leave this section blank unless otherwise stated in the Funding Opportunity Announcement. When it is used, it is highly scrutinized by auditors, so if you have any questions about whether your project involves this budget category, please reach out to the ORD or OSP. 

If allowed, this refers to direct costs such as stipends or subsistence allowances, travel and registration fees paid on behalf of participants or trainees in connection with conferences or training projects. 

Stack and payments are intended to offset living expenses and usually involve a training type of experience.They are typically associated with a fellowship award to a student and are not meant to be compensation for services rendered or work on a project. 

Participant support costs are not charged F&A, and can't be moved out of this category unless you have explicit approval from the NIH.  

So what is not considered participant support? This section is not for employees or employed students.These costs are budgeted under salary and fringe benefits.Also, human subjects are not participant for budgeting.These costs belong under supplies. 

 
This budget category, other direct costs, is a sort of catch all for all expenses that are not called out in the above budget categories.For example, this might include publication costs but can't occur more than 120 days past the grant end date. 

This section will include any consultant services because consultants charge a fixed rate for their services that includes their F&A, so you don't need to worry about separating these out in your budget.Consultants are not subject to the salary cap, but any consultant services must meet the reasonableness standard for federal cost reimbursement.  

Laptops, iPads, etcetera are typically a supply since the purchase price is less than $5000, but must show a specific benefit to the project. 

Warranties and use agreements cannot exceed the period of performance for the award. 

Entertainment costs are not allowed. 

Other common other direct costs include animal costs, human subject payments, sequencing or contracted costs for analysis, core service fees, things like that. 

 
17:28 
Let's stop for a moment and share a few things we've seen with NIH proposals that may be good for you to know. 

 
We had one case where the COLA was accidentally included in the proposal.Since some agencies do allow it and it was not allowed, the budget was cut accordingly. 

We had a case where a request was submitted for funding of administrative support because it wasn't specifically justified for the project and was perceived as a general support cost.The budget was also cut accordingly. 

And lastly, even if you submit several names of key personnel, NIH will only consider the PI and Co-PI as key personnel on the grant. 

 
Subawards, also known as consortium agreements, can be tricky.So let's revisit some of the best practices and key items.There's a lot here to unpack. 

 
MSU OSP has a subaward team available to assist you with establishing and managing your subaward, but can also answer questions at the proposal stage, as can your OSP Fiscal officer. 

You'll want to review the subawards budget, since you'll be responsible for monitoring all compliance aspects of your subawards and approve all invoices which will be processed by OSP. 

When subawards create their own budgets, they will use their own F&A costs and direct costs. 

If you happen to be working with an entity that doesn't have a negotiated rate with the federal government, the Feds do allow it to minimize rate that can be applied. 

NIH requires specific written approval by the Grants Management Officer to re-budget into or out of the subaward the budget category. F&A is assessed against only the first $25,000 of the subaward total. MSU will use different account codes for the expenses beyond the initial 25,000. 

 
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When you are completing the budget form, you will need to include the subaward, unique entity ID number (UEI), and a subaward agreement signed by our Vice President for Research, our authorized organizational representative. 

 
Multiple subawards can be issued to the same institution, but to each subaward requires its own statement of work, budget and associated F&As. 

 
Indirect costs / F&As. These terms are used interchangeably by most people in the industry.  
It was indirect costs (IDCs) for most years until the federal government decided that Facilities and Administrative (F&As) was more descriptive.But the term never really caught on. 

 
MSU utilizes a process with one federal agency, the Department of Health and Human Services, on a regular basis to negotiate the applicable rate for each program type, research, public service, or other institutional activities and instruction. 

These rates are based on the specific fiscal year of MSU's actual expenses and that's why each institution has a different rate.MSU's rates, including research, are fairly low.The highest research rate I could find is 89% and the lowest rate I could find was 41%. 

The PI determines which program and resulting rate is most appropriate for their project, but typically the research rate is utilized. 

Some budget categories are exempt from F&As/IDCs, including equipment subawards greater than $25,000, tuition and fees, rental costs, participants support costs, and scholarships and fellowships.This is called the Modified Total Direct Cost Base, which most institutions of higher education must adhere to. 

Equipment grants like the Major Research Instrumentation Awards may not have any F&As or IDCs, since this budget category is exempted from this calculation. 

There is also an off campus rate that can be utilized as appropriate. 

For contractors and consultants, the entire cost will be charged MSU’sfull F&A IDC rate. 

MSU doesn't have responsibility or liability for the contractor or consultants products or deliverables. 

Before we leave this direct cost budget category, there are a couple of items to note. 

1. There is no budget category for Contingencies, so it is important to budget as accurately as possible at the proposal stage. 

1. Human subjects are not participants.Please budget these under supplies. 

MSU's policy is that cost sharing is not permitted unless an eligibility criteria require it.So don't offer up any additional resources in your proposal, because MSU will be required to provide and document this as well as being audited on these expenses. 

22:01 

Last but not least, budget justification best practices. 

Your budget justification document should thoroughly explain and support the aim and goals of your project.Clearly tying each of the expenses to the objectives in each category of your budget.You'll want to explain any year-to-year variances. 

Your subawards and consortiums should also provide their own justification to support their own detailed budget. 

It will be different than yours, and should only address the items that pertain to the subaward, not the larger budget proposal that you are submitting. 

 
Last but not least, Budget Justification Best Practices in the Modular Budget. 

 
There are three sections you'll create to justify your budget request. 

These are personnel where you'll include the name, role, and effort, but not salary dollars or fringe benefit rates. 

If you don't split out key or non key personnel and sub recipients are included here.  

In the consortium justification, you'll include the total cost to the nearest $1000 whether the consortium partner is domestic or international, and you'll list effort, but again, no salary dollars. 

And the third category is additional narrative, which is where you'll explain everything else, including annual variances and other costs that require some explanation. 

The justification narrative for the detailed R&R budget is different than the justification narrative for the modular budget.Let me show you two examples to illustrate. 

 
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Push pause on this presentation and read through the paragraphs that support the personnel expenses and the detailed R&R budget on the left of the screen. 

In the narrative you'll see an overview of expertise and role that will be played in the project.At the end of each paragraph you'll see an explanation for the specific calculation of salary and fringe benefit amounts which are clearly stated. 

Further down is the justification for the Consortium subaward, where you'll see a reference to the scope of work and a specific budget amount with an explanation of the indirect cost calculations. 

Here's an example of a consortium/subaward justification narrative, not the mention of the total cost and also the year by year expenses in total. 

Please push pause again and read through the examples to become familiar with the examples. 

In contrast, here are Personnel and Consortium Subaward justifications that would be suitable for a modular budget in the Personnel area. 

The personnel at MSU as well as the personnel at the subaward recipient, the University, are discussed.The expertise, role, and effort is listed, but no specific dollar amounts for either salary or fringe benefits. 

Please pause and take a moment to review these paragraphs and understand the differences. 

This is a final reminder of the sensitive budget and expense areas, allowable and unallowable costs for federal cost reimbursement, graduate student appointments, tuition and fees, scholarships and fellowships, the NIH salary cap, consortium agreements and subawards versus contracted services, foreign travel, food, additional compensation and cost sharing. To this list, I'll add the reminder that COLAs are not allowed at the NIH. 

 
We've compiled a list of resources for you related to NIH budgets and applications. There are lots of resources here that can provide detail on virtually all the topics we've discussed. 

MSU has created an incentive program to reward your research efforts.The IPR program provides incentives for faculty to secure externally funded research grants and contracts and is in addition to and complements existing academic year and fiscal year faculty salaries.Faculty members may be paid up to 25% of their institutional based salary.Participation in the program requires eligible faculty to charge a portion of his or her institutional based salary and fringe benefits to a grant or contract award. 

The faculty member will draw a salary from the grant or contract proportionate to his or her effort devoted to the project, creating funds for this incentive program due to the salary savings on the instructional budget side.Check on the IPR Policy and Procedures website for details of this program if you're interested in participating. 

 
And in closing, we wanted to let you know that the MSU Office of Research Development and Office of Sponsored Programs are ready and happy to assist you with the preparation of your budget.So please don't hesitate to reach out to our offices. It's our job to help.