Financial Services - Preaward


Q & A
Budgets

Q: How do I estimate salaries and fringe benefits?
Salaries and fringe benefits increase over time. For your convenience, a worksheet is provided with instructions. Fringe benefits may be calculated in three different ways; the worksheet use Method #2. Whichever method is selected must be used throughout the entire proposed budget. If the amount estimated for salaries and fringe benefits does not prove to cover actual expenses incurred, it will be necessary to rebudget during the project. Note that some sponsors set a maximum annual salary above which they will not reimburse.

Q: How do I estimate patient care costs?
Patient care costs include the costs of routine and ancillary services provided by hospitals to individuals, including patients and volunteers, participating in research programs. “Routine services” include the regular room services, minor medical and surgical supplies, and the use of equipment and facilities for which a separate charge is not customarily made. “Ancillary services” are those special services for which charges are customarily made in addition to routine services, e.g. x-ray, operating room, laboratory, pharmacy, blood bank, and pathology. The following costs are not classified as patient care costs: items of personal expense reimbursement, such as patient travel; consulting physician fees; and any other direct payments to individuals, including inpatients, outpatients, subjects, volunteers, and donors. Such costs should be included in other categories of the budget.

Q: What is F&A and how do I calculate it?
F&A costs are actual costs that UNMHSC incurs that are not easily attributable to a specific project. Facility costs include utilities, maintenance, custodial costs, non-capital improvements, interest expense, library costs, building depreciation, and equipment depreciation. Administrative costs include student services, financial management and business services, and departmental administration. Costs that are readily attributable to a specific project are called Direct Costs. See UNM Business Policies and Procedures Manual, Policy #2425 – Recovery of Facilities and Administrative Costs.

To enable UNMHSC to pay F&A costs, each sponsor is required to reimburse F&A expenses as a percentage of the Direct Cost of a project. A set of F&A rates have been negotiated by UNM with federal and New Mexico state agencies. As the federal government is our most important sponsor, non-governmental sponsors are not offered a lower rate. At UNMHSC, our actual cost of F&A is over 54%.

The F&A Rate Base refers to the costs to which the rate is applied. Federal sponsors will not pay F&A costs on certain items, so the Base - called Modified Direct Total Cost - is the Total Direct Cost minus the costs of excluded items. For all other sponsors, the Base is Total Direct Cost. The amount of F&A cost is calculated as the Base multiplied by the F&A Rate. The Total Cost of a project is calculated as the Direct Cost plus the F&A cost.

Q: What kinds of costs are excluded when calculating Modified Total Direct Costs?
When calculating Modified Total Direct Costs, the cost of patient care, IRB fees, student tuition must be excluded. Equipment or computer hardware that costs over $5000 must be excluded. In addition, the cost of subawards must be excluded after the first $25,000. That is, only the first $25,000 of a subaward is included in the Base. For reference, the excluded categories of costs are colored yellow on the ABS form.

Q: What if the sponsor will not pay full F&A?
Not-for-profit foundations may have written guidelines that state they will not pay F&A costs or that they will pay only a reduced amount. Some federal agencies have special programs that mandate reduced F&A rates. For example, US Department of Education training grants allow only 8% of the modified total direct costs, and National Science Foundation REU (Research Experiences for Undergraduates) supplements allow only 25% of the student stipend amount. Projects with New Mexico state and local governments have traditionally been at a reduced rate. In order to submit a proposal with less than the full F&A rate, written approval is required. Send a request for waiver of F&A for signature to the Senior Dean of Research and include the signed request with your submission to Preaward.

Q: Are there limits on the kinds of items for which a federal agency will reimburse?
Federal agencies reimburse “allowable” expenses incurred by the project. To be “allowable,” the cost must be: Reasonable (a prudent business person would have purchased this item and paid this price), Allocable (it can be assigned to the project on some reasonable basis), and Consistently Treated (similar costs are handled the same way within the project and across projects). General purpose supplies, equipment, and computers that are not directly allocable to the project are not direct costs and may be allowable as an F&A cost. If allocable, allowable direct costs may include material and supplies, equipment, travel, communications, publications, animal care costs, human subjects costs, shop charges, maintenance/ service contracts/ photographic services, rental/ lease of facilities, and construction/ renovation costs. If you have a specific question regarding a particular expense, your Post-award Fiscal Monitor will be happy to assist you.

Q: Can I request funds for administrative or clerical salaries from a federal agency?
Yes, but only in rare cases when the clerical or secretarial services are directly required for the conduct of the project. Under OMB Circular A-21 (Cost Principles for Educational Institutions), "the salaries of administrative and clerical staff are normally be treated as indirect 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 are specifically assigned to the project or activity. Examples of a major activity are those that involve extensive data entry, preparation of manuals or large reports, multiple investigator coordination and/or travel, or geographically inaccessible project locations. Any request for secretarial/clerical salaries made to a federal agency must include a detailed justification.

Q: Can I request food or alcohol on a proposal to a federal agency?
Yes, but only in rare cases when directly required for the conduct of the project. Alcohol and tobacco expenses may be justified for research about the effects of such substances, but probably not otherwise. Any request for food made to a federal agency must include a detailed justification.

Q: What is cost sharing?
Cost sharing is the portion of the cost of a project that is not funded by the sponsor. Other terms for cost sharing are matching funds, institutional commitment, or in-kind contributions. A cost sharing commitment is often met with employee services valued at regular pay plus fringe benefits, but may also be met with cash (unrestricted accounts), third party contributions, unrecovered F&A costs, services or property valued with applicable cost principles, volunteer services, donated supplies at reasonable and fair market value. In any case, federal accounting requirements state that all such costs must be allowable and documented. Proposals with cost sharing must include a completed Cost Share Commitment form along with the PDS. The form lists the specific sources of funding for the cost sharing and must be signed by the authorized signature for each account being committed.

Q: What is program income?
Program income is income received as a result of conducting the sponsored project. Examples include conference fees, sale of materials such as videos, books, proceedings, and software. Most contract and grant awards have regulations or guidelines related to the treatment of program income. Federal agencies allow recipients to retain and use program income to further the project objectives by either adding to the award or deducting from the costs charged to the sponsor. Typically program income will be additive until $25,000 is earned then deductive thereafter. There is no obligation to the federal government for program income earned after the end of the project, such as from license fees and royalties.