Budget Preparation

Budget Overview

Once you have identified a funding opportunity and submitted a Proposal Information Form to our office, you can begin work on a budget for your proposed project. Our pre-award team offers a variety of budgeting tools and spreadsheets for different types of projects, and we can also create new tools that are customized to fit the needs of your specific proposal.

While budgets vary widely from proposal to proposal, a few general guidelines apply when formulating your budget.

General Budgetary Guidelines

• Keep in mind that the budget is the financial expression of the proposal, and should be based on the anticipated needs of your proposed work. Costs should be realistic and aligned with the statement of work or proposal narrative. For example, projects that involve field work should have travel costs in the budget; projects that involve vertebrate animal research should include costs for animals and animal care in the budget.
• Make sure to consult program announcement and sponsor guidelines as part of the budget preparation process to ensure that all costs in the budget are allowable, and that the amount requested is within the sponsor’s guidelines.  Most funding opportunities will include a maximum budget amount, either in total costs or — most notably for NIH — in the total direct costs. 
• Include indirect costs — also referred to as F&A or overhead costs — at rates defined by Pitt’s current rate agreement in all proposal budgets (unless the sponsor has a published policy limiting or prohibiting them). 
• Determine if a waiver of indirect costs may be appropriate. Such requests should be initiated with your pre-award administrator and will ultimately be reviewed and approved/declined by Pitt’s Senior Vice Chancellor for Research.

Types of Costs – Direct vs. Indirect

As you are preparing your proposal, you may be wondering how direct costs differ from indirect costs. The federal government defines direct costs as “those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.” (Source: 2 CFR 200, also known as Uniform Guidance.)

Indirect costs, conversely, are costs incurred for common or joint purposes and cannot be specifically identified with a single project. The current rate for on-campus sponsored research at Pitt is 59% of the Modified Total Direct Costs (or MTDC). Projects conducted off-campus, and those involving non-research activities, have different rates. Full details on current rates can be found on the Pitt CFO’s Rate Info page.

• Most proposals will use the MTDC indirect cost base to calculate indirect costs. To obtain the MTDC base, you begin with the total direct cost amount and subtract costs that do not incur indirect costs. These costs include:
  • Graduate student tuition/fringe benefits
  • Equipment items over $5,000
  • Subcontract amounts in excess of $25,000
  • Participant support costs
  • Select internal cost centers

Off-Campus Indirect Cost Rates

Pitt’s indirect cost policy and rate agreement allow for the use of off-campus rates for projects that are performed entirely or partially at off-campus locations.  To meet the definition of off-campus, a location must be a facility or space that is…

• neither owned nor leased by the University; or
• leased by the University AND the lease is charged to the project in question. 

For projects that involve an off-campus component, in accordance with the above definition, a method based on the total Salaries and Wages (S&W) for each budget period is used to determine which rate(s) should be used.  We have developed a flowchart to guide you in making the correct determination.

• If the project is performed entirely at an off-campus location, use the off-campus rate for the entire project budget.
• If the project is performed entirely at an off-campus location for an individual year or budget period, use the off-campus rate for that entire budget period.
• If a project has both on- and off-campus components, analyze the S&W total for each budget period. 
  • If the S&W total is less than $100,000, use the on-campus rate for the entire budget period if 50% or more of the S&W are on-campus, or use the off-campus rate for the entire budget period if more than 50% of the S&W are off-campus.
  • If the S&W total is equal to or greater than $100,000, and the either the on-campus or off-campus portion comprises more than 75% of the total, use the on-campus rate for the entire budget period if more than 75% of the S&W are on-campus, or use the off-campus rate for the entire budget period if more than 75% of the S&W are off-campus.
  • If the S&W total is equal to or greater than $100,000, and either the on-campus or off-campus portion comprises between 25% and 75% of the total, costs should be apportioned between on-campus costs that incur the on-campus rate and off-campus costs that incur the off-campus rate.

Unallowable Costs

Keep in mind that there are certain unallowable costs for proposals. Examples include:

• Any cost prohibited by Pitt policy or by the terms of a sponsor’s program guidelines.
• Administrative Salaries: Except in very narrowly defined circumstances, administrative salaries are considered to be an indirect cost, and thus unallowable as a direct cost in a proposal budget.
• General Purpose Equipment: Items such as printers, photocopiers, etc. are generally considered indirect costs, and should not be included.
• General Office Supplies: Paper, pens, pencils, printer toner and other general office supplies are also considered indirect costs. Office supply costs associated with projects with unusual needs, such as surveys requiring excessive printing requirements, may be appropriate, and will be considered on a case-by-case basis.

Cost Sharing

Cost sharing occurs when any portion of the total cost of a sponsored project is paid by Pitt rather than the sponsor. Cost sharing may be included in a proposal budget if it is required by the sponsor, if the PI feels it will make the proposal more competitive, or if it is necessary to complete the project (i.e., the sponsor will only accept proposals up to $100,000, but a project requires $125,000 to be successful).

There are three variations of cost sharing:

• Mandatory: Required by the sponsor, in writing, as a condition of receiving an award
• Voluntary Committed: Cost-shared items included and quantified in the proposal in the absence of a sponsor requirement
• Voluntary Uncommitted: Costs to be borne by Pitt but not detailed in the proposal budget, and not in response to a sponsor requirement
   

Pitt Cost Sharing Policy

At an institutional level, Pitt discourages voluntary cost sharing for several reasons. First, it increases administrative burden and audit risk; funds committed as cost sharing become subject to the same guidelines and audit scrutiny as funds received from a sponsor. It also costs the university money, as it diverts funds from other school and departmental resources, as well as because cost-shared funds are not eligible for indirect cost recovery. And, lastly, cost sharing has a negative impact on the University's indirect cost rate negotiation.

Dietrich School Cost Sharing Policy

The Dietrich School has a specific cost sharing policy of its own, detailed in a memo issued by Dean Blee in October 2019. The policy states that the inclusion of voluntary committed cost sharing in proposals submitted by the Dietrich School requires the approval of the Dean. If you intend to include voluntary cost sharing in your proposal, please contact your pre-award administrator to initiate this process. After the request has been reviewed by the Office of the Dean, you will be notified of whether the proposal may move forward with the voluntary cost sharing commitment. Voluntary uncommitted cost sharing (i.e., cost sharing not detailed and quantified in the proposal submitted to the sponsor) does not require the dean’s approval.

Other Budget Considerations

As you are preparing your proposal’s budget, you will want to keep in mind certain specifics if you intend to submit to either the NIH or NSF.

• NIH Proposal Budgets
  • Since 1990, per congressional legislation, NIH has limited the amount of salary that individuals can charge to NIH-funded grants and cooperative agreements. Currently, the cap is $212,100 for a 12-month salary, prorated to $17,675 monthly.
  • Project personnel with salaries in excess of the cap may only request salary up to the level of the cap, and salary amounts exceeding the cap must be covered by University funds.
  • Some NIH funding mechanisms utilize Modular Budgets, in which the budget is reduced to “modules” of $25,000, and no detailed budget breakdown is submitted with the proposal. Generally, Modular Budgets are used for proposals that do not exceed $250,000 in direct costs in any single year (unless the program announcement contains contrary guidance on which budget form to use).
  • Modular Budgets do not require a full Budget Justification, but rather a Personnel Justification that only includes detail on budgeted personnel, their effort commitments, and their role on the proposed project. 
  • NIH proposals that exceed $500,000 in direct costs in any year must have written prior approval from the NIH program official at the institute to which the application is being submitted. 

 

• NSF Proposal Budgets
  • NSF limits the total salary compensation that can be requested for senior personnel from all NSF-funded awards in any single year to two months. This limitation does not apply to postdocs or students.  Pitt uses the academic year (9/1-8/31) for compliance with this clause.  The following language should be included in every NSF budget justification:  “[X] month(s) of salary is requested for [name PI here] in years [X], with one month being equal to 1/8 of [his/her] academic-year salary.  For the purposes of the NSF 2-month per year salary limitation, the University of Pittsburgh defines the term “year” as September 1-August 31, corresponding to its academic year.”
  • NSF prohibits voluntary cost sharing in all proposals. Some NSF programs have mandatory cost sharing requirements, and in these cases the requirement is clearly indicated in the program announcement. Proposals with voluntary cost sharing will be returned without review as non-compliant.
  • NSF defines Participant Support Costs differently than other sponsors. In NSF proposals, Participant Support Costs are not payments for research subjects or participants, but rather costs relating to trainees and participants in NSF-sponsored conferences or training activities. Speaker fees, honoraria, and other payments to non-trainees who may be participating in such programs are not considered Participant Support Costs and should not be budgeted as such. Participant Support Costs are excluded from the MTDC indirect cost base.