NIH GUIDE, Volume 25, Number 8, March 15, 1996


P.T. 34


  Grants Administration/Policy+ 


National Institutes of Health


This notice supersedes the one that appeared in the NIH Guide for

Grants and Contracts, Vol. 24, No. 18, May 19, 1995, about the

compensation of graduate students with funds from National Institutes

of Health (NIH) research grants, and also one published by the

National Institute of General Medical Sciences (NIGMS) in the NIH

Guide, Vol. 25, No. 1, January 26, 1996.


In October 1994, the Department of Health and Human Services

Inspector General reported that three of the four universities

reviewed were using Federal research grant funds to support graduate

students at total compensation rates that were considered

unreasonably high.  The compensation levels were deemed unreasonable

because they exceeded amounts paid to first-year postdoctoral

employees who were performing comparable work.  Although the salary

and fringe benefits portions of the compensation were found to be

within these guidelines, the addition of tuition remission raised

some compensation rates to levels deemed unreasonable.


The Inspector General concluded that compensation paid to graduate

students at rates greater than those by which individuals with more

relevant skills and experience were paid were unreasonable.  The

findings of the audit were submitted to the Office of Management and

Budget (OMB) with the suggestion that OMB Circular A-21, Cost

Principles for Educational Institutions be revised to define

reasonable compensation for graduate students.  The Public Health

Service has instructed NIH to issue interim guidance on this matter.


There is a long-standing requirement in the cost principles that all

costs applicable to grants, contracts, and other Federal agreements

must be allowable, allocable, reasonable, necessary, and treated

consistently.  The May 19, 1995, notice in the NIH Guide did not

establish new policy, but attempted to define the limits of

reasonableness as required by existing policy.  Further, it was

expected that the guidelines would impact only those universities

where total compensation for graduate students was at an excessive

level.  The following points and implementation guidance should

assist those institutions where modifications to their compensation

policies are necessary.


o  In accordance with PHS policy, tuition remission is an allowable

cost when paid as a form of or in lieu of salary or wages to students

performing necessary work, provided that:


a.  there is a bona fide employer-employee relationship between the

student and the institution for the work performed;

b.  the tuition remission or other payments are reasonable

compensation for the work performed and are conditioned explicitly

upon the performance of necessary work; and

c.  it is the institution~s practice to similarly compensate students

in non-sponsored as well as sponsored activities.

o  Total compensation includes salary or wages, fringe benefits, and

tuition remission.


o  Consistent with OMB Circular A-21, costs that are unreasonable may

not be charged to a Federal award.


These guidelines apply to individuals who are employees of the

grantee institution, not to individuals in a training status.  NIH

has a separate appropriation under the authorization of the National

Research Service Act to award institutional research training grants

and individual fellowships to support research training.




NIH staff will review the compensation requested for graduate

students on competing grant and cooperative agreement applications

and those noncompeting applications for which a budget is submitted.

NIH will not request budgets for those applications submitted using

the streamlined noncompeting award process solely for the purpose of

reviewing graduate student compensation.  However, this does not

eliminate the requirement that institutions take immediate action to

ensure that reasonable rates of compensation are being charged to NIH

research grants.


When requesting support for a graduate student, the applicant

institution should provide in the budget justification section of the

application the basis for the compensation level.  If not provided,

this information will be obtained from the institution's business

office for any request that appears excessive.  NIH institutes and

centers will review the requested compensation level and, if it is

reasonable, will award the actual amount requested, up to a maximum

of $23,000.  Institutions may rebudget funds to charge more than

$23,000 to the grant award, provided it is in accordance with OMB

Circular A-21 requirements for reasonable compensation (e.g., does

not exceed the amount paid to a first-year postdoctoral employee at

the same institution performing comparable work).




These guidelines are effective immediately.  Questions about these

guidelines should be referred to the grants management specialist

identified on the notice of grant award.



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