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Budget Writing

Budgets play a key role in winning a PHS grant. With your budget, you justify the cost to accomplish your study aims. Some grant mechanisms have caps on how much can be requested, and others have suggested levels of funding. For example, there is a big difference between requesting funding for an RO3 ($50,000 cap on direct costs for two years) and requesting funding for an RO1 (up to $500,000 in direct costs per year). Make sure you know what the direct caps on funding are for your type of submission.

It is never too early to start drafting the budget once you decide on what funding mechanism to use. If the study will include primary data collection, budgeting will be very different from a study that consists only of secondary analysis or evaluation. Primary data collection activities often include some type of incentive or patient reimbursement, while secondary analyses or evaluations are based heavily on labor charges by the investigators.

If you are working for a large institution (e.g., a university), you will need additional information before you can complete your budget. For example, each institution negotiates a standard indirect-cost rate with the Department of Health and Human Services. You will need to include this rate in your budget estimations. In addition, each institution's fringe benefits rate differs and must be factored into all budgetary calculations for proposed personnel costs. There may also be other budgetary issues that must be approved by your institution's financial offices, so make sure that you allot time for budget review.

The PHS application is self explanatory, but many problems arise. Below are some common mistakes on each of the three critical budget components and other areas that are important to remember.

The three critical budget components are:

  • the initial direct budget


  • the direct budget for the proposed period of performance


  • the budget justification.

Completing Budget Forms

The PHS 398 application package gives specific instructions for completing budget forms. Be sure to read these instructions carefully before submitting your budgets.

**Note: The forms described below are commonly used in applications for 'R' and 'K' series awards. Applications for NRSA awards use different budget forms. Read the instructions carefully before submitting any NIH award application to determine which forms must be completed before submission.

The Initial Direct Budget

The initial direct budget typically covers the first year of the project period. You must use Form Page 4 (DD) to submit this budget.**

As explained in the PHS application, the initial budget period requires greater descriptions and detail than the remaining budget.

Below is a list of common problems found in Application budgets:

  • Personnel. A common problem in this section is incorrect calculation of an individual's percent of effort on the project. Since some academics may not have a full 12 month appointment at their institution or university, their time must be calculated differently for different segments of the year. For example, a researcher may have a 50% commitment to the university during the academic year (9 months) but no commitment during the summer (3 months). This may mean they can commit 50% time to your project during the academic year, and 100% during the summer. In this case, their total percent commitment to your project would be 62.5%. The calculation is as follows:


  • 9 months at 50% effort =

    4.5 months

    3 months at 100% effort =

    3 months

     

    7.5 months (out of 12), or 62.5%

  • Consultant Costs. As a new investigator, you may want senior consultants to support your research. Often this may involve an in-kind contribution (no charge to the grant) or they may be willing to work for the government's standard consulting rate (which is generally lower than consultants' salary rate). Keep in mind that reviewers may view unpaid consultants as less committed to your project than paid ones. Some Universities have budgetary policies regarding consultant costs. Check with your university's budget office for institutional regulations on consultant costs.


  • There is a rumor floating around that says consultant costs may not exceed $250 per day. This is NOT TRUE. While your university may impose their own restrictions on consultant costs, the NIH does not have a specific per diem limit for consultants.

  • Equipment & Supplies. Itemize what is needed that fits the study. Asking for a computer and printer is not unreasonable, but requesting a great deal of equipment may make the application suspect. Expenses which are often contained in this category include: telephone/long-distance charges, Internet access, software upgrades, paper/copying charges relevant to data collection (e.g., questionnaires), and specimen cups/tests.


  • Travel. As a new investigator, travel would be appropriate for a meeting with the project officer, training, presentations, or attending scientific meetings. Also include any local travel for data collection purposes. Make sure that all travel requests the first year are well justified, and appropriate.


  • Other. Carefully review the guidelines for patient and other costs. Remember to include any contractual costs, both direct and indirect, in your overall indirect budget.

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Direct Budget for the Remaining Project Period

You must use form page Form Page 5 (EE) to submit this budget.**

This form shows the overall picture of your proposal's direct costs. Make sure that the budget does not increase more than 10% each year. Although data collection years are generally more costly, try to split these costs across the years. The last phase of the proposal is usually analysis, with the costs decreasing.

Make sure the figures on this budget match the Checklist (II) and items 6-8 on the Face Page.

Budget Justifications

Then you must begin the Budget Justification on Form Page 5, or begin on a clean page and title it "Budget Justification."

The budget justification should be the monetary rationale for the study, and it should explain why you will need funding for the period requested. Since there is no limit to how much you can write, use the opportunity, but do not overwhelm your reviewer! You can view a sample budget justification here.

(Note: There is no limit on budget justifications using the PHS 398 application. Other applications may impose page limits on budget justifications.)

The next section after the introduction -- personnel -- is the most important. This section can include as many paragraphs as needed to present the expertise of each investigator and other key staff. It can also be useful to include an organizational chart in this section if several parties are involved (e.g., other institutions, various sites). Common problems include the following: the percent of effort of personnel is not consistent with what is written in the budget; there is no explanation of the role each person is to play on the proposed project; and an individual's percent of effort is only given for the first year. To address these problems, include descriptions of each person's responsibilities and main tasks/contributions to the proposed study. It should be obvious after reading the Budget Justification what each person is supposed to do AND why the specified percentage of effort each is proposed to devote to the study is appropriate and necessary.

Remember that reviewers can (and will!) recommend budget cuts when they think expenses are overly high or unwarranted.It is often helpful to go through each and every line of your budget and then provide a convincing explanation and rationale for each and every expense listed. Reviewers need to know why the PI is only working 30% (for example) while the co-PI is needed 50% of the time, or why urine tests are needed each week, or why literature retrieval costs are important at the amounts budgeted. Remember that reviewers can (and will!) recommend budget cuts when they think expenses are overly high or unwarranted.

Other problems common to budget justifications include inadequate explanation of other costs and travel. If you do not include a timeline in your text, include one here. Also include any other charts or tables that could explain a more complicated data collection process, including follow-up rates. Other important additions to the budget justification should include the fringe benefit rate, other indirect costs, and a modest percentage for salary increases over the length the study(standard rate for salary increases is 3%, but check with your institution's financial offices for details, as this rate often varies from institution to institution).

In writing your justification, give the committee a reason NOT to cut your budget. Don't be afraid to use terms like: "We understand that there might be less expensive printers than the one we have requested, but we are purchasing this with the University discount. In our experience, the cheaper ones require more money in the long run because they have less memory and they require more service." This will show them that you have tried to keep costs down.

Points to remember overall !!

  • Make sure that all sections parallel each other.


  • The budget must accurately reflect the plan for data collection, data clean-up, data analysis, and data write-up.


  • The timeline must accurately represent what was planned for the proposal and in the budget from start to finish.


  • The consultant/contractual agreements in section "h" & "i" must match the budget.

  

Common Budget Terms:

Direct Costs: Includes personnel salaries, consultant and subcontractor costs, travel, incentives, equipment, and other expenses necessary to carry out a research application. Some grants impose a cap on direct costs only.

Indirect Costs: Includes overhead and fixed fees. The amount of indirect cost awarded is usually derived from the "indirect-cost rate," a prearranged, negotiated percentage of the direct cost award. Separate rates are negotiated with each institution. Not all research grant mechanisms are eligible for indirect cost reimbursement.

Total Costs: Direct costs + Indirect costs = Total costs

Note: Some items in this section are available for downloading in Adobe Acrobat (PDF) format which allows the document to be downloaded, viewed, and printed with all of its original formatting. To view files in this format you must first download a copy of the Adobe Acrobat Reader and follow the instructions for installation.

 

  

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Last updated: August 12, 2003.