This document is intended to help individuals with the budgets for external grant proposals. Granting agencies may each have their own definitions and restrictions on the use of grant funds, so it’s important that applicants obtain and become familiar with the granting agency’s guidelines for preparation of the proposal and budget. This document provides general information—it is not intended to be comprehensive. When policies of the granting agency differ from the College’s, the more restrictive policies should be followed. Definitions for technical terms are included at the end of this document.
- Salaries and Wages
College employees receiving additional pay from a grant will be paid through payroll. Granting agencies may have restrictions on the amount and the individuals who may be paid by the grant; please check the granting agency’s guidelines carefully.
- Faculty at The College of Wooster are compensated for 9 months of work through their regular salaries, even if those salaries are paid out over 12 months.
- For multi-year grants, an annual increase of 3-4% for wages is usually assumed.
- Faculty – Federal Grants
- Pay from Federal grants may not be at a higher rate than the individual’s base pay.
- Faculty paid during the academic year: Federal grants may be charged a proportionate amount of the base salary. For example, if a faculty member spends 10% of their time during the academic year on a Federal grant, the grant may be charged up to 10% of the base salary. At the same time, the College would reduce its pay to the faculty member so the total amount paid to the individual does not exceed the base salary. (The time commitment would be shown in the budget as 0.9 academic person month (10% effort * 9 months)).
- Faculty paid in the summer: The rate of compensation may not exceed the rate the faculty member was paid with the base salary. For example, a faculty member paid $63,000 a year is earning $7,000 per month ($63,000 / 9). The faculty member may be paid up to $7,000 for one full month of work in the summer (1.0 summer person-month) from a Federal grant.
- NSF allows a maximum of 2 months pay in the summer.
- Pay for emeritus faculty working on grants may be calculated using their last base pay and assuming reasonable annual increases.
- Student employees are treated as hourly employees; they complete time cards and must be paid overtime for work in excess of 40 hours a week.
- The Department of Labor regulates when hourly employees should be paid for time while traveling and “on call”. If the grant project will include field work, please contact Human Resources for guidance on these regulations. The grant budget should include all overtime pay required for the project.
- Summer pay rates are usually: $14 – $16 per hour.
- Academic pay rates are minimum wage; the rates may change annually.
- NSF REU grants only permit U.S. citizens and permanent residents to participate.
When current employees receive pay from a grant that is above and beyond their base salary, the grant is only charged for benefits that increase in proportion to the additional pay:
- FICA: 7.65% of wages and salaries; this is not required during the academic year for students enrolled full-time;
- Workers’ Compensation: 0.25% of wages and salaries;
- TIAA-CREF: Employees who receive their base pay from the College and a stipend from a grant will only receive TIAA-CREF contributions for the stipend if the grant will pay the benefit; this cost should be shown in the budget or stated in the narrative. TIAA-CREF is an unallowable cost for Federal grants. When an employee’s entire wages or salary is paid through a grant (as with a new staff person), all of the benefits have to be paid by the grant or disclosed as matching costs.
- Health Insurance: This benefit is available for employees working more than 1,000 hours in a year. The College prepares a schedule annually showing the employer and employee premiums for health insurance, rates are based on annual pay levels and the number of people covered by insurance. The budget should include the highest possible cost for the level of pay (assume family coverage). Please check the health insurance rate tables for the current year and assume a 12% increase per year for multi-year grants.
- Life Insurance: This benefit is available for employees working more than 1,560 hours in a year. Please contact Human Resources to get the cost for the grant proposal budget. The rate depends on the amount paid and whether the individual is hourly or salaried.
- Long-term Disability: This benefit is available for employees working more than 1,560 hours in a year. Please contact Human Resources to get the cost for the grant proposal budget. The rate depends on the amount paid and whether the individual is hourly or salaried.
- Room and Board: Individuals are charged for room and board when they live on campus–employees and fellowship recipients may not be offered pay plus room and board. Instead, compensation should be calculated to include amounts intended to help with these living expenses.
- Other benefits include: unemployment insurance, tuition remission, dental insurance, vacation, holiday, sick leave, and other paid absences.
“Person-months” describes the amount of time an individual will devote to a project; it is used for Federal grants.
- Calendar: Work will be performed by someone with 12-month appointment. At Wooster this designation might be used for a lab assistant who works all year.
- Academic: Work will be performed by someone with an academic year appointment during that academic year. Faculty would use this designation if they intend to accept reduced pay from the College during the academic term so they can work on the grant project, and the grant will replace the salary that would have been part of their base pay from the College.
- Summer: Work will be performed in the summer by someone with an academic year appointment. Faculty applying for research support during the summer should use this designation.
To calculate person-months, multiply the percent effort for the project by the number of months that level of effort will be expended.
- 100% effort for 1 month = 1 person-month
- 50% effort for 2 months = 1 person-month
Students will be paid as employees most of the time when they are working on grants. This means that they will complete time cards and be subject to minimum wage and overtime rules.
There may be some projects, however, on which the payments qualify for scholarship/fellowship treatment. If the sponsored project meets all of the following criteria, scholarship/fellowship treatment may be an option:
- The purpose of the grant is primarily training—not research.
- Any benefit to the College is insignificant.
- The student is not helping the College meet the terms of a contract. If the granting agency requires a report on research findings, the student should be paid as an employee.
- There is no agreement for the student to provide past, present or future services.
- The student’s work is not subject to the direction or supervision of the College.
- Payment to the student is not contingent on the student completing the training, research, field work, etc. (although the student may be required to provide a report).
- The student is not required to work a certain number of hours per week.
- The student retains the rights for copyrights, patents, etc.
Payments to students from grants that were awarded to the College to support the research of the PI/PD should be treated as wages – the students are helping the College meet the conditions of the grant, which is a service. NSF RUI grants will not meet the criteria for scholarship/fellowship treatment. NSF REU grants are training grants but NSF allows the institution to decide whether the student should be paid as an employee or fellowship recipient – that decision depends on the criteria above.
Under U.S. tax law, it does not matter what a payment is called, how it is made, or how the people involved agree to treat it – the correct tax treatment depends on the true substance of the transaction. Unless both the PI/PD and the Business Office are certain that fellowship treatment is appropriate, student workers should be treated as employees. There are significant penalties for improperly reporting wages and for under-withholding, and students who receive fellowships are not covered by workers’ compensation. Treating payments as fellowships may greatly increase the liability for the College.
- Participant Support Costs on NSF Proposals
NSF proposals include a budget line for “participant support costs”; these have different definitions for RUI and REU grants. In both cases, written NSF approval is required before these budgets may be reallocated to other purposes, so the budget should not be overstated.
- RUI: Participant support costs are the costs for the grant to sponsor a conference, meeting, workshop, seminar, symposium, or training program. The budget should show the number of participants and a justification for the costs. Participant support costs may not include travel, pay, or other related costs for employees. (Costs for faculty and students to attend meetings and conventions of national associations should be shown on the budget as travel costs – not participant support costs.)
- REU: These grants are made primarily for the purpose of training students; all student costs should be reported as participant support costs, including wages, fellowships (if approved), benefits, and travel.
Travel may be associated with the research or project itself or with conferences for reporting results. Some grants may require that domestic and foreign travel be budgeted separately. When planning budgets for foreign travel on Federal grants, please be aware that there are limitations on the use of foreign carriers that may increase the cost for travel.
Each granting agency’s guidelines should be carefully checked for restrictions associated with purchases of equipment. “Equipment” is usually differentiated from “supplies” by cost; often items that cost more than $5,000 are considered “equipment”. College (and Federal) policy states that equipment should be purchased after soliciting bids, although both allow single-source purchases if there is a good reason and proper documentation. If the PI intends to use a single source for the purchase instead of requesting bids, the single-source purchase should be clearly disclosed and justified in detail in the grant proposal. If the PI has a good reason to prefer a specific brand or model of equipment but can purchase the equipment from a number of dealers, then the proposal should include a detailed justification for the brand or model with a statement that bids will be solicited from different dealers.
Most granting agencies will require that consultant be paid a “reasonable” rate; some will have limitations on the rate. The College recommends disclosing the rate of pay for consultants. If the granting agency sees the rate and approves the proposal, the College can show any auditors who question the rate that the granting agency thought it was reasonable.
- Other Costs
There are some costs that are normally treated as indirect costs but may be included as direct costs under certain circumstances. The direct/indirect cost treatment applies to all grants – not just Federal grants. When it is finalized, the College’s indirect cost policy will provide additional information. Some examples of indirect costs:
- Administrative support;
- Office supplies;
- Research Conducted with Other Institutions
The College may be included as a subrecipient on another entity’s proposal. For example, there have been a number of grants awarded to The Ohio State University from which some funds are passed through to us.
- Matching and In-Kind Costs
The Proposal Transmittal Form must show all costs the College will incur if awarded the grant that will be not be paid by the grant. Please think about and disclose:
- Additional travel and supplies;
- Additional personnel costs;
- Computers, software, supplies and equipment that the College does not currently have;
- Constructions costs that might be necessary for new equipment;
- Employee benefits required under College policies that the granting agency will not pay;
- Expected large increases in utilities;
- Maintenance agreements and/or training costs for equipment and software;
- Unreimbursed indirect costs.
When a granting agency requires that the College provide a match, expected matching costs will be described in the proposal. Matching costs must be considered allowable costs by the granting agency, and matching costs for Federal grants may not be paid from other Federal funds. All matching costs must be incurred after the grant is approved and within the grant’s operating period.
Matching costs promised in a grant proposal are subject to audit by the granting agency and must be documented by the principal investigator in the same way those costs are documented when directly charged to the grant. On a Federal grant, for example, this means that employee time included as a match will have to be reported on Time and Effort Reports. Other costs must have detailed receipts.
The College recommends that matching costs not be mentioned in a grant proposal unless they are required by the granting agency or will help win the grant award. Additional costs that the College will incur always have to be shown on the Proposal Transmittal Form, but by not promising the match to the granting agency, both the PI/PD and the Business Office can save time in documenting costs and working with auditors.
- Conflicts of Interest
The College requires the PI/PD and all senior personnel applying for government grants to complete or update a conflict of interest disclosure. If there are any potential conflicts of interest connected with a grant project, the College recommends disclosing the issue in the proposal. If the granting agency approves the proposal, the College has a way to show auditors who question the conflict of interest that the granting agency did not think it was a problem.
- Indirect Costs
- On campus rate: 54% of salaries and wages
- Off campus rate: 25% of salaries and wages
- Base: Wages and salaries (this includes wages for students, but does not include benefits and does not include payments to consultants or independent contractors)
Allocable costs are costs that directly benefit the grant project. If a cost benefits two or more projects, it should be allocated to all of the projects using some reasonable method. When the purchase of equipment or other capital expenditure is authorized under a sponsored project, the entire approved amount may be charged to the grant, even though the equipment will eventually be used for other purposes.
Allowable costs are:
- Allocable to the project;
- Consistently treated like other similar costs; and
- Permitted by the granting agency.
Collaborative Proposals are one method by which multiple institutions apply for joint grant projects. Each institution submits its own separate proposal, but the proposals refer to each other and are submitted together. After the grant is awarded, each institution is separately responsible for reporting to the granting agency and for their own audits. The College supports these types of proposals.
Direct Costs are those costs that can easily be identified with specific projects or activities.
- Wages and benefits paid for work that only benefits the grant;
- Travel for research supported by a grant; and
- Lab supplies used for the grant project.
Grants are awarded to the College for research, training, or some other project that does not directly benefit the granting agency. Grants may be referred to as “sponsored projects”, “contracts”, or “restricted gifts”. In accepting a grant the College is obligated to comply with the terms of the agreement (including the start and end dates and the types of activities and costs allowed).
Honorarium generally means a fee for professional services; however, it has no meaning for tax purposes – we must determine the nature of the relationship and activity to find the tax treatment. An honorarium paid to a faculty member for work above and beyond normal duties would be wages paid through payroll and reported on a W-2; an honorarium paid to a consultant for a lecture would be non-employee compensation reported on a Form 1099.
Indirect Costs, or Facilities and Administration (F&A) Costs, are costs that cannot easily be identified with a particular project or activity. Examples:
- Depreciation of buildings and equipment;
- Repairs and maintenance;
- Departmental administration;
- Business Office;
- Human Resources and Payroll Offices.
In-kind matching is provided using non-cash contributions. These may include:
- Time provided by administrators; and
- Facilities and equipment.
Matching refers to support for a grant project that is provided by the institution above and beyond the granting agency’s support. The College may meet matching requirements by making other funds available to the PI/PD or with in-kind (non-cash) support.
Principal Investigators (PI) and Project Directors (PD) are the people responsible for managing the grant project and for complying with the terms of the agreement.
Reasonable Costs: Costs are considered reasonable if, under the same circumstances, a prudent person would have purchased the same item at the same price. The purchase should be:
- Necessary for grant project;
- An arms-length transaction (the buyer and seller are not related and have no conflict of interest);
- Follow applicable laws and regulations and limitations imposed by the granting agency; and
- Be permitted by both the College’s and granting agency’s policies and procedures.
Stipends are generally understood to be fixed payments for some specific purpose. The term has no meaning, however, for tax purposes. For example, a stipend paid to a faculty member for a presentation above and beyond normal duties would be wages paid through payroll and reported on a W-2, a stipend paid to a non-employee for a lecture would be non-employee compensation reported on a Form 1099, and a stipend paid to a student to help with tuition would be a scholarship reported on Form 1098-T.
Subrecipients receive funding from another entity that received a grant award; they share responsibility for managing and carrying out the objectives of the grant project. This arrangement for joint grant projects makes the original recipient of the grant responsible for work performed by the subrecipient. For example, if The Ohio State University receives an NSF grant and then establishes a contract with the College to have the College conduct some of the research, the College would be considered a “sub recipient”.
Unallowable costs are costs that a granting agency (or College policy) does not permit to be charged to the grant. For Federal grants these include but are not limited to:
- Alcoholic beverages;
- Bad debts;
- Contributions, donations;
- Fines and penalties;
- Goods or services for personal use;
- Lobbying; and
Revised: August 21, 2014