Developing Your Budget
As you begin to develop a budget for your research grant application and put all of the relevant costs down on paper, many questions may arise. Your best resources for answering these questions are the grants or sponsored programs office within your own institution, your departmental administrative officials, and your peers. They can answer questions such as:
- What should be considered a direct cost or indirect cost?
- What is the fringe benefit rate?
- What is the graduate student stipend rate?
- What Facilities and Administrative (F&A) costs rate should I use?
Below are some additional tips and reminders we have found to be helpful
for preparing a research grant application, mainly geared towards the SF424
application. (Note: these tips do not supersede the budget instructions
found in the relevant application instruction guides: http://grants.nih.gov/grants/forms.htm).
An applicant’s budget request is reviewed for compliance with the
governing cost principles and other requirements and policies applicable
to the type of recipient and the type of award. Any resulting award will
include a budget that is consistent with these requirements.
Information on the applicable cost principles and on allowable and unallowable
costs under NIH grants is provided in the NIH Grants Policy Statement
under Cost Considerations http://grants.nih.gov/grants/policy/nihgps_2012/nihgps_ch7.htm.
In general, NIH grant awards provide for reimbursement of actual, allowable
costs incurred and are subject to Federal cost principles http://grants.nih.gov/grants/policy/nihgps_2012/nihgps_ch7.htm#cost_principles
The cost principles address four tests that NIH follows in determining
the allowability of costs. Costs charged to awards must be allowable,
allocable, reasonable, necessary, and consistently applied regardless
of the source of funds. NIH may disallow the costs if it determines, through
audit or otherwise, that the costs do not meet the tests of allowability,
allocability, reasonableness, necessity, and consistency.
Budgets: Getting Started
- Know your limits! Carefully read the Funding Opportunity Announcement
(FOA) for budget criteria. You should look for limits on the types of
expenses (e.g. no construction allowed), spending caps on certain expenses
(e.g. travel limited to $10,000), and overall funding limits (e.g. total
costs cannot exceed $300,000 per year). Relevant FOA sections
- II.1 (Mechanism of Support),
- II.2 (Funds Available),
- III.2 (Cost Sharing or Matching), and
- IV.5 (Funding Restrictions).
- Identify all the costs that are necessary and reasonable to complete
the work described in your proposal.
- Throughout the budgeting process,
round to whole dollars and use only U.S. dollars.
- The best strategy is
to request a reasonable amount money to do the work, not more and not
- Reviewers look for reasonable costs and will judge whether
your request is justified by your aims and methods.
- Reviewers will
consider the person months you've listed for each of the senior/key
personnel and will judge whether the figures are in sync with reviewer
expectations, based on the research proposed.
- Significant over-
or under-estimating suggests you may not understand the scope of
- Despite popular myth, proposing a cost-sharing (matching)
arrangement where you only request that NIH support some of the
funding while your organization funds the remainder does not normally
impact the evaluation of your proposal. Only a few select programs
require cost-sharing, and these programs will address cost-sharing
in the FOA.
What is the difference between allowable direct costs and allowable facilities & administrative (F&A) costs?
Direct Costs: Costs that can be identified specifically with a particular
sponsored project, an instructional activity, or any other institutional
activity, or that can be directly assigned to such activities relatively
easily with a high degree of accuracy.
F&A Costs: Costs that are incurred by a grantee for common or joint
objectives and that, therefore, cannot be identified specifically with
a particular project or program. These costs also are known as “indirect
- The total costs requested in your budget will include allowable direct
costs (related to the performance of the grant) plus allowable F&A
costs. If awarded, each budget period of the Notice of Award will reflect
direct costs, applicable F&A, and in the case of SBIR or STTR awards,
a “profit” or fee.
- F&A costs are determined by applying your organization’s
negotiated F&A rate to your direct cost base. Most educational,
hospital, or non-profit organizations have negotiated their rates with
other Federal (cognizant) agencies such as the Department of Health
and Human Services or the Office of Naval Research. If you are a for-profit
organization, the F&A costs are negotiated by the Division
of Cost Allocation (DCA), Division
of Financial Advisory Services (DFAS) in the Office
of Acquisition Management and Policy, NIH.
- What is your direct
- For most institutions the negotiated F&A rate will use
a modified total direct cost (MTDC) base, which excludes items
such as: equipment, student tuition, research patient care costs,
rent, and sub-recipient charges (after the first $25,000). Check
with your sponsored programs office to find out your negotiated
- When calculating whether your direct cost per year is $500,000 or greater, do not include any sub-recipient F&A in the base but do include all other direct costs as well as any equipment costs. NOTE: Direct cost requests equal to or greater than $500,000 require prior approval from the NIH Institute/Center before application submission. For more information, see NIH Guide Notice NOT-OD-02-004.
- For many SBIR/STTR grantees, 40%
of modified total direct costs is a common F&A rate, although
rates at organizations may vary.
Modular versus Detailed Budgets
The NIH uses 2 different formats for budget submission depending on
the total direct costs requested and the activity code used.
The SF424 (R&R) Application Guide includes two
optional budget components—(1) R&R Budget Component requesting
detailed budget information; and, (2) the “simplified” PHS398
Modular Budget Component. Note: NIH applications will include either
the R&R Budget Component or the PHS398 Modular Budget Component,
but not both.
To determine whether to use a detailed versus modular budget for your
NIH application, see the flowchart below.
NIH uses a modular budget format (applicants request funds in lump sums
of $25,000 intervals) for some applications, rather than requiring a
full detailed budget. The modular budget format is not accepted for SBIR
and STTR grant applications. SBIR and STTR applicants must complete and
submit budget requests using the SF424 Research and Related (R&R)
Budget component. Applications from foreign (non-U.S.) institutions must
include only detailed (non-modular) budgets (see NIH Guide Notice NOT-OD-06-096).
- Creating a modular budget:
- Select the PHS398 Modular Budget Component
form for your submission package, and use the appropriate set of
instructions from the electronic application user’s guide. You do not need to submit the SF424
(R&R) Budget Component form if you submit the PHS398 Modular
- Consider creating a detailed budget for your own institution’s
use including salaries, equipment, supplies, graduate student tuition,
etc. for every year of funds requested. While the NIH will not ask for
these details, they are important for you to have on hand when calculating
your F&A costs base and writing your justification, and for audit
- In order to determine how many modules you should request,
subtract any consortium F&A from the total direct costs, and then
round to the nearest $25,000 increment.
- A modular budget justification should include:
- Personnel Justification: The Personnel Justification should include the name, role, and
number of person-months devoted to this project for every person on
the project. Do not include salary and fringe benefit rate in the
justification, but keep in mind the legislatively mandated salary
cap when calculating your budget. [When preparing a modular
budget, you are instructed to use the current cap when determining
the appropriate number of modules.]
- Consortium Justification: If you have a consortium/subcontract,
include the total costs (direct costs plus F&A costs), rounded
to the nearest $1,000, for each consortium/subcontract. Additionally,
any personnel should include their roles and person months; if
the consortium is foreign, that should be stated as well.
Narrative Justification: Additional justification should include
explanations for any variations in the number of modules requested
annually. Also, this section should describe any direct costs that
were excluded from the total direct costs (such as equipment, tuition
remission) and any work being conducted off-site, especially if it
involves a foreign study site or an off-site F&A rate.
Detailed Budget: Personnel (Sections A & B)
Personnel make up sections A and B of the SF424 (R&R) Budget form.
All personnel from the applicant organization dedicating effort to the
project should be listed on the personnel budget with their base salary
and effort, even if they are not requesting salary support.
- Effort: Effort must be reported in person months. For help converting
percent effort to person months, see: http://grants.nih.gov/grants/policy/person_months_faqs.htm.
- Salary Caps: NIH will not pay requested salary above the annual salary
cap, which can be found at http://grants.nih.gov/grants/policy/salcap_summary.htm.
If salary is requested above the salary cap, NIH will reduce that line
item to the salary cap, resulting in a reduced total award amount. In
future years, if the salary cap increases, grantees may rebudget to
pay investigator salaries up to the new salary cap, but NIH will not
increase the total award amount. If you are preparing a detailed budget,
you are instructed to base your request on actual institutional base
salaries (not the cap) so that NIH staff has the most current information
in hand at the time of award and can apply the appropriate salary cap
at that time.
- Fringe Benefits: The fringe benefits rate is based on your institution’s
policy; the NIH does not have a pre-set limit on fringe benefits. More
information on what is included as fringe benefits can be found in the
Grants Policy Statement at
If you have questions about what rate to use, consult your institution’s
sponsored programs office.
- Senior/Key Personnel: The Senior/Key Personnel section should include
any senior or key personnel from the applicant
organization who are
dedicating effort to this project. “Other Significant Contributors” who
dedicate negligible effort should not be included. Some common significant
contributors include: 1) CEOs of companies who provide overall leadership,
but no direct contribution to the research; and 2) mentors for K awardees,
who provide advice and guidance to the candidate but do not work on
the project. Likewise, any consultants or collaborators who are not
employed by the applicant organization should not be included in section
A, but rather should be included in section F.3 of the budget (for consultants)
or in section A of the consortium/subaward budget page (for collaborators).
- Postdoctoral Associates: Postdocs can be listed in either section
A or B depending on their level of involvement in project design and
execution. If listed in section B, include the individuals’ names
and level of effort in the budget justification section.
- Graduate Students: Graduate students can be listed in either section
A or B, but if listed in section B, include the individuals’ names
and level of effort in the budget justification section. Tuition remission
is included in section F.8 (not section A), but is included in the graduate
student compensation limits. For more about the graduate student compensation
limit, see: http://grants.nih.gov/grants/guide/notice-files/NOT-OD-02-017.html.
For current NRSA stipend levels, see the NRSA help page at: http://grants.nih.gov/training/nrsa.htm.
- Other Personnel: Other personnel can be listed by project role. If
multiple people share the same role such as “lab technician”,
indicate the number of personnel to the left of the role description,
add their person months together, and add their requested salaries together.
The salaries of secretarial/clerical staff should normally be treated
as F&A costs. Direct charging of these costs may be appropriate
where a major project or activity explicitly budgets for administrative
or clerical services and individuals involved can be specifically identified
with the project or activity [see Exhibit C of OMB Circular A-21 (relocated
to 2 CFR, Part 220)]. Be specific in your budget justifications when
describing other personnel’s
roles and responsibilities.
Detailed Budget: Equipment, Travel, and Trainee Costs (Sections C, D, and E)
- Equipment: Equipment is defined as an item of property that has an
acquisition cost of $5,000 or more (unless the organization has established
lower levels) and an expected service life of more than one year. Tips:
equipment is excluded from the F&A base, so if you
have something with a short service life (< 1 year), even if it
costs more than $5,000, you are better off including it under “supplies”.
- If you request equipment that is already available (listed in
the Facilities & Other Resources section, for example), the narrative
justification must explain why the current equipment is insufficient
to accomplish the proposed research and how the new equipment’s
use will be allocated specifically to the proposed research. Otherwise,
NIH may disallow this cost.
- General purpose equipment, such as desktop
computers and laptops, that will be used on multiple projects or
for personal use should not be listed as a direct cost but should
come out of the F&A
costs, unless primarily or exclusively used in the actual conduct
of the proposed scientific research.
- While the application does
not require you to have a price quote for new equipment, including
price quotes in your budget justification can aid in the evaluation
of the equipment cost to support the project.
- Travel: In the budget justification, include the destination, number
of people traveling and dates or duration of your stay for all anticipated
travel. As with the equipment justification, it is important that you
clearly state how the travel is directly related to your proposed research
(e.g. you can go to a conference to present your research, but not just
for the purpose of “staying current in your field”). You
should refer to your institution’s travel policy for guidance
on how you should arrange the travel, but if your institution lacks
a policy, it is expected that you will follow the U.S. federal government
policy found here: http://www.gsa.gov/federaltravelregulation.
- Trainee Costs: Leave this section blank unless otherwise stated in
the FOA. Graduate student tuition remission can be entered in section
Detailed Budget: Other Direct Costs (Section F)
- Materials and Supplies: In the budget justification, indicate general
categories such as glassware, chemicals, animal costs, including an
amount for each category. Categories that include costs less than $1,000
do not have to be itemized.
- Animal Costs: While included under “materials and supplies”,
it is often helpful to include more specific details about how you developed
your estimate for animal costs. Include the number of animals you expect
to use, the purchase price for the animals (if you need to purchase
any), and your animal facility’s per diem care rate, if available. Details
are especially helpful if your animal care costs are unusually large
or small. For example, if you plan to follow your animals for an abnormally
long time period and do not include per diem rates, the reviewers may
think you have budgeted too much for animal costs and may recommend
a budget cut.
- Publication Costs: You may include the costs associated with helping
you disseminate your research findings from the proposed research. If
this is a new application, you may want to delay publication costs until
the later budget periods, once you have actually obtained data to share.
Services: Consultants differ from Consortiums in that they may provide
advice, but should not be making decisions for the direction of the
research. Typically, consultants will charge a fixed rate for their
services that includes both their direct and F&A costs. You
do not need to report separate direct and F&A costs for consultants;
however, you should report how much of the total estimated costs will
be spent on travel. Consultants are not subject to the salary cap restriction;
however, any consultant charges should meet your institution’s
definition of “reasonableness”.
- ADP/Computer Services: The
services you include here should be research specific computer services-
such as reserving computing time on supercomputers or getting specialized
software to help run your statistics. This section should not include
your standard desktop office computer, laptop, or the standard tech
support provided by your institution. Those types of charges should
come out of the F&A costs.
- Alterations and Renovations (A&R): A&R does not include general
maintenance projects (normally handled under F&A) or projects exceeding
$500,000 (considered “construction” projects). A&R can
be used for projects such as altering a room to make space for a new
grant-related piece of equipment. If applicable:
- Justify basis for costs,
itemize by category.
- Enter the total funds requested for alterations
and renovations. Where applicable, provide the square footage and
- If A&R costs are in excess of $300,000 further limitations
apply and additional documentation will be required.
- Research Patient Care Costs: Few budgets contain patient care expenses,
however if inpatient and/or outpatient costs are requested, the following
information should be provided:
- The names of any hospitals and/or clinics
and the amounts requested for each.
- If both inpatient and outpatient
costs are requested, provide information for each separately.
cost breakdown, number of days, number of patients, costs of tests/treatments.
the costs associated with standard care or research care. (Note:
If these costs are associated with patient accrual, restrictions
may be justified in the Notice of Award.)
NIH Grants Policy Statement NIH Grants Policy Statement, Research Patient Care
- Tuition: In
your budget justification, for any graduate students on your project,
include what your school’s tuition rates are. You
may have to report both an in-state and out-of-state tuition rate. Depending
on your school stipend and tuition levels, you may have to budget less
than your school’s full tuition rate in order to meet the
graduate student compensation limit (equivalent to the NRSA zero-level
postdoctorate stipend level).
- Other: Some types of costs, such as entertainment costs, are not allowed
under federal grants. NIH has included a list of the most common questionable
items in the NIH Grants Policy Statement (http://grants.nih.gov/grants/policy/nihgps_2012/nihgps_ch7.htm#selected_cost_items).
If NIH discovers an unallowable cost in your budget, generally we will
discount that cost from your total award amount, so it is in your best
interest to avoid requesting unallowable costs. If you have any question
over whether a cost is allowable, contact your sponsored programs office
or the grants management specialist listed on the funding opportunity
If you are using the detailed budget format, each consortium you include
must have an independent budget form filled out.
- Direct costs:
- In the rare case of third tier subawards, section F.5 “subawards/consortium/contractual” costs
should include the total cost of the subaward, and the entire third
tier award is considered part of the direct costs of the consortium
for the purposes of calculating the primary applicant’s direct
- Cost Principles. Regardless of what cost principles apply to the
parent grantee, the consortium is held to the standards of their respective
set of cost principles.
- Consortium F&A costs are NOT included as part of the direct
cost base when determining whether the application can use the modular
format (direct costs < $250,000 per year), or determining whether
prior approval is needed to submit an application (direct costs $500,000 or more
for any year).
NOTE: This policy does not apply to applications submitted in response to RFAs or in response to other funding opportunity announcements including specific budgetary limits.
- F&A costs for the first $25,000 of each consortium may be included
in the modified total direct cost base, when calculating the overall
F&A rate, as long as your institution’s negotiated F&A
rate agreement does not express prohibit it.
- If the consortium is a foreign institution or international organization,
F&A for the consortium is limited to 8%.
- If the consortium is with a for-profit entity, such as a small business,
the organization must have a negotiated F&A rate before they can
charge F&A costs. The default small business rate of 40% is only
applicable to SBIR (R43 &R44) and STTR (R41 & R42)
applications. See the Division of Financial and Accounting Services
(DFAS) at NIH to set up a rate: http://oamp.od.nih.gov/dfas/IdCSubmission.asp
- Consortiums should each provide a budget justification
following their detailed budget. The justification should be separate
from the primary grantee’s
justification and address just those items that pertain to the consortium.
Understanding the Out Years
- We do not expect your budget to predict perfectly how you will spend
your money five years down the road. However, we do expect a reasonable
approximation of what you intend to spend. Be thorough enough to convince
the reviewers that you have a good sense of the overall costs.
- You may request an escalation factor for recurring costs in accordance
with your institution’s policy, depending on NIH’s budget
appropriation. NIH will generally provide up to a 3% escalation factor
for recurring costs each future year. Consistent with the FY 2009 appropriation,
the FY 2008 average cost of competing grants is allowed to increase
by 3 percent over FY 2008 (see NIH
Guide Notice NOT-OD-09-066). The adjustment on salaries cannot
exceed the salary cap.
- Any large year-to-year variation should be described in your budget
justification. For example, if you have money set aside for consultants
only in the final year of your budget, be sure to explain why in your
justification (e.g. the consultants are intended to help you with the
statistical interpretation of the data and therefore are not needed
before the final year).
- In general, NIH grantees are allowed a certain degree of latitude
to rebudget within and between budget categories to meet unanticipated
needs and to make other types of post-award changes. Some changes may
be made at the grantee’s discretion as long as they are within
the limits established by NIH. In other cases, NIH prior written approval
may be required before a grantee makes certain budget modifications
or undertakes particular activities (such as change in scope). See
NIH Grants Policy Statement - Changes in Project and Budget.
Other resources to help you create your budget