Key Guidelines

  • Most funding agencies require a budget that estimates the total cost of the project (direct and F&A) with a breakdown of cost per year. OSR Policy 300.5
  • When preparing the budget, the PI must ensure that all costs meet University as well as Sponsor cost principles including:
    • a particular sponsor’s cost restrictions outlined in the program announcement
    • the Office of Management and Budget (OMB) Circular A-21 for educational institutions
    • the appropriate Facilities & Administrative (F&A) rate OSR Policy 300.9



Definition: Compensation received by any person through UNC-CH’s payroll system. (view examples)

  • Verify PI eligibility in accordance with the OSR Policy 200.2 : the PI must be a full-time permanent EPA employee.
  • Proposed salary should be based on the Institutional Base Salary of the individual which can be verified in FRS.
    • Factor in (escalate) any projected legislative increase that may occur prior to the start date of the grant (3-5%)
    • Salaries for “to be determined” (TBD) personnel should be based on the Institutional Base Salary of the proposed position.
  • Some Agencies impose a salary cap (such as NIH). Check the Information Sheet to verify the most current information is being used.
  • Unless otherwise directed by the sponsor, proposed salary is based on the percent of effort the employee will work on the project.
  • If effort is proposed for personnel without proposing salary, it may constitute cost sharing.

Salary is estimated in the following manner:

  1. 12-month Salary:
    1. # months effort ÷ 12 months * 100 = % of effort
    2. % of effort * Institutional Base Salary = Proposed Salary
  2. 9-month Salary:
    1. # months effort ÷ 9 months * 100 = % of effort
    2. % of effort * Institutional Base Salary = Proposed Salary
  3. Summer Salary:
    1. # months effort ÷ 3 months * 100 = % of effort
    2. Institutional Base Salary ÷ 9 months * 3 months = Summer Salary
    3. % of effort * Summer Salary = Proposed Summer Salary


Definition: The cost that may be added to proposal budgets in consideration of the effects of price/cost inflation on current year costs. (view examples)

  • Escalation rates may be limited by the sponsor. Read the sponsor’s guidelines or ask the appropriate OSR Contract Specialist what rate is generally accepted by the sponsor.
  • Generally, labor costs are escalated most frequently in research administration.
  • Escalation should be added to all of the future year budgets.

Escalation is estimated in the following manner:

Institutional Base Salary * Escalation Rate = Escalated Institutional Base Salary

Fringe Benefits

Definition: Fringe Benefits are expenses directly associated with employment such as workers compensation, social security and retirement benefits. When projecting these costs it is generally most appropriate to apply a combined rate for fringe benefits and other costs related to compensation. (view examples)

UNC-CH calculates fringe benefits using the following two components:

  1. Fringe Benefit percentage rate for Social Security, Workers Compensation, Severance Pay, State Retirement, Disability and Unemployment. (see Fringe Benefits)
    1. Fringe benefits are calculated as follows: Institutional Base Salary Requested * Fringe Benefit % = Fringe Dollars
    2. Review the UNC-CH Policy and type of award to determine if social security costs apply to Post Doc’s and Grad students.
    3. Determine fringe benefits paid to Foreign Nationals.
  2. Health Insurance dollar rate prorated for % of employee effort. The rate differs depending on the classification of the employee (see Health Insurance section).

Health Insurance

Definition: Health Insurance benefits represent the premium amount paid by the employer for an employee’s individual health insurance coverage. It is a separate component of the fringe benefit calculation since it is dependent on the classification of the employee. (view examples)

  • Health Insurance costs are based on the percentage of effort each employee will work on the project.
  • It is calculated as follows: % of employee effort * Health Insurance Annual Rate = Health Insurance Dollars
  • Current rates: Information Sheet
  • No Health insurance is charged for a 9-month employee working in the summer. Therefore, the annual health insurance rate should be used in the calculation rather than the monthly rate.

Physicians and Associates Supplement

Definition: Physicians & Associates (P&A) Supplement are costs that apply to Clinical Faculty members who are properly licensed to practice medicine in the state of North Carolina or who provide other clinical functions and have a full-time position of 50% or greater provided appropriate approvals have been completed by UNC P&A. These benefits include costs for Life Insurance, Accidental Death and Disability, Long-term Disability, Retirement, Dental and additional Medical coverage. The School of Medicine provides guidelines for applying the appropriate supplemental benefits. (view examples)

  • For qualified Clinical Faculty members, P&A supplemental costs should be added to the appropriate fringe benefit percentage rate and added to the appropriate health insurance cost rate based on their percent of effort on the project.
  • Current rates: Information Sheet


Definition: Capitalized equipment, for the purpose of the university’s Asset Management system, is defined as an item with an acquisition cost of $5,000 or more. A detailed description is found at Material and Distribution Services. Equipment generally has the following characteristics: (view examples)

  • Acquisition cost of $5000
  • Life span of one year or more
  • Non-expendable material
  • Not a consumable item
  • Group of items that cost less than $5,000 each, when combined, make up one functional unit (cannot stand alone) with a combined cost of $5,000 or greater
    • For example a computing cluster fabricated from multiple Personal Computers (PCs) is considered equipment as long as each individual PC does not contain its own hard disk storage (therefore it is not capable of being operated independently)
  • The acquisition cost of the item includes tax, installation and freight charges.
  • In the budget, separately list all qualifying equipment to ensure materials and supplies are not being combined in the equipment cost.


Definition: Travel can be either domestic (within the U.S.) or foreign (outside the U.S.). The UNC-CH Travel Policy details what is allowable when traveling as an employee. Sponsor regulations may differ from the university policy and in such cases, the sponsor regulations take precedence. (view examples)

  • Select a method for estimating travel using either the UNC-CH Travel Policy or the Federal Travel Regulation issued by the General Services Administration (GSA). The selected method must be used throughout the proposal; policies cannot be mixed and matched.
  • Refer to the sponsor guidelines to determine how travel is to be presented in the proposal. Generally it is recorded as a line item within the budget with details provided in the budget justification.
  • If the proposal is for a federal grant or a federal flowdown, travelers are required to ‘Fly American’.
  • Current Travel Rates:


Definition: A subcontract represents any portion of the research project that is performed by another organization (i.e., outgoing subcontract) or by UNC-CH (i.e., incoming subcontract). All associated subcontract costs must be identified and justified in incoming as well as outgoing proposal budgets. (view examples)

  • Some sponsors have specific guidelines regarding what is considered a subcontract.
  • The total cost for an outgoing subcontract (direct salaries, other direct costs, and F&A costs) is considered a direct line item cost on the UNC-CH budget and should be shown as such.
  • For outgoing subcontracts, another organization’s proposal package must include:
    • Subcontractor’s statement of work
    • Subcontractor’s budget
    • Subcontractor’s budget justification
    • Subcontractor Commitment Letter (outgoing) or Subcontractor Commitment Letter (incoming)
    • If NIH is the Sponsor Agency, 398 and 2590 face page, budget pages for initial and out-years, budget justification, checklist, and Subcontractor Commitment Letter
    • If NIH is not the Sponsor Agency, a Subcontractor Commitment Letter
    • Additional items may be required depending upon the Sponsor Agency. Please consult proposal specific guidelines.
  • Once the grant is awarded to UNC-CH, OSR requires a copy of the subcontractor’s F&A agreement.
  • For incoming subcontracts, when UNC-CH is committing to subcontract to another organization, the UNC proposal package must include:
    • UNC-CH’s statement of work
    • UNC-CH’s budget
    • UNC-CH’s budget justification
    • If NIH is the Sponsor Agency, 398 and 2590 face page, budget pages for initial and out-years, budget justification, checklist, and UNC Subcontract Commitment Letter
    • If NIH is not the Sponsor Agency, a UNC Subcontract Commitment Letter
    • Additional items may be required depending upon the Sponsor Agency. Please consult proposal specific guidelines.


Definition: A consultant is an independent contractor, not affiliated with the University for a limited period of time to provide specific services. (view examples)

  • Compensation should be based on the consultant’s salary/rate history for comparable services. Refer to the funding agency guidelines for caps on consultant rates. It can be expressed as a daily rate or a fixed, set amount for the services to be provided.
  • Consultants do not receive fringe benefits and are not provided with supplies, administrative support or other standard business items.
  • Consultants can receive reimbursement for travel expenses.

Other Direct Costs

Definition: Other Direct Costs (ODC) are the remaining costs that are directly related to the project such as materials, supplies, publications, computer services, animal costs, telecommunication, postage, leases, maintenance contracts and tuition. (view examples)

  • ODC must be described in detail in the budget justification to adequately describe and support the amount of costs in the proposal.
  • Sponsor guidelines may categorize ODC differently. Some may break them out separately and some may lump them together in a single category marked ODC. See OMB Circular A21 for a discussion of allowable costs.
  • Tuition should be included for eligible graduate students in accordance with the Graduate School’s Guidelines for tuition remission. The UNC-CH Graduate School describes the eligibility requirements.
  • Apply the tuition rate (link to OSR’s Student/Fellowship/Postdoctoral Information page) for the appropriate graduate program.
  • Tuition is proposed based on the percentage of effort the employee will work on the project. It is calculated as follows: % of effort * Tuition Cost = Tuition Cost per employee
  • Usually ODC does not include expenses for clerical and administrative salaries, memberships, postage, subscriptions, telephone line (local) charges, and office supplies. These are treated as facilities and administrative costs. Circumstances occasionally arise when these costs have such a specific relationship to the research being performed that treatment as a direct cost may be considered an allowable exception. Please refer to CAS Exemption Request.

Facilities and Administrative (F&A) Costs

Definition: F&A is defined as the expenses essential to the conduct of sponsored research activities that cannot be readily attributed and directly charged to specific individual projects. The University negotiates rates that are applied to different types of research activities.

  • To determine which F&A rate to apply to the budget proposal, first identify if the project is sponsored research, instruction, other sponsored activities or a clinical trial.
  • Second, identify if the project will be performed on or off campus. The definition for off campus is:
    • For all activities performed in facilities not owned by the institution and to which rent is directly allocated to the project(s), the off campus rate will apply. Grants or contracts will not be subject to more than one F&A cost rate. If more than 50% of a project (project is defined as the UNC-CH effort) is performed off campus, the off campus rate will apply to the entire project.
  • Third, determine the appropriate costing method to apply by reading the RFA/RFP. Generally, sponsors require the F&A rate to be applied to a Modified Total Direct Costs (MTDC) amount. Whereas, some sponsors (such as industry funded clinical trials) allow the F&A rate to be applied to Total Direct Costs (TDC) or the sponsor may limit the amount of F&A accepted on a proposal.
  • MTDC are costs that have been modified to exclude certain direct costs from the F&A base. To calculate MTDC, subtract the following costs from the Total Direct Costs:
    • equipment (an item costing $5,000 or greater)
    • capital expenditures
    • rental costs of off-site facilities
    • charges for patient care
    • tuition remission
    • scholarships, and fellowships
    • the portion of each subgrant and subcontract in excess of $25,000
  • Fourth, apply the appropriate F&A rate. Current F&A rates.
  • If the sponsor limits the F&A rate, include a copy of the program announcement along with the applicable F&A Rate Reduction Request Form so that OSR can verify and accept the lower rate.
  • View examples

Budget Information for a Clinical Trial

For information regarding the preparation of budgets for a clinical trial please refer to the Financial Tool Kit developed by the Office of Clinical Trials.