A budget justification is the narrative explanation of the budget. Each line item in the budget should have a justification.  A good budget justification will help minimize a sponsor’s questions and avoid harmful budget cuts. It is a narrative explanation of the budget that helps the sponsor evaluate the reasonableness of the budget. It is required for all proposals. 

Purpose

The primary purpose of a justification is to provide support for the funds requested to ensure adequate funding. Experience has shown that including budget justifications in the proposal increases the likelihood that the sponsor will award the cost. The amount of detailed information in the budget justification should be tailored to sponsor-specific requirements and the specific project or activity. When costs are explicitly listed and justified in the sponsor-accepted budget, grant/contract administrators, auditors, and sponsoring agencies can easily understand the nature of the costs and their allowability under the regulations. 

For Vacation Disability and Sick Leave

For budget purposes, assume that the vacation earned and used will offset each other every year. Continue to budget only the full salary (not the vacation burden or the credit for vacation used). Do not budget additional expenses to cover vacation/disability sick leave expenses. Do explain that we charge the rate. View rates. 

Add this statement to the budget justification:

Stanford's agreement with the Office of Naval Research provides for xx% vacation accrual/disability sick leave (DSL) for exempt employees and yy% for non-exempt employees.  The vacation accrual/DSL rates will be charged at the time of the salary expenditure.  No salary will be charged to the award when the employee is on vacation.

Budget Justification for Administrative Charging

Write a budget justification for each administrator or clerical staff member included in the proposal budget. The purpose of the justification is to increase the likelihood that the sponsor will award the administrative cost and to ensure adequate funding.

An adequate budget justification helps administrators, auditors, and sponsoring agencies to easily understand the nature of the costs and why they are allowable under the regulations. 

The justification should include the following.

• A description of the administrator’s role tailored to sponsor specific requirements and the specific project or activity
• Why the activity qualifies as integral to the project
• How the administrator’s effort relates to and benefits the project
• The level of effort expressed as a percentage FTE or person months per sponsor instructions
• The time period(s) in which the person will be working
• Any other information that will aid the sponsor in evaluating and funding the proposed salary
• In addition, you must establish that the project being proposed meets the Stanford policy requirement for integral costs

NOTE: Although NIH modular grants or similar grant instruments do not require line-item justifications, the personnel, including administrative salaries, do need to be described in a modular budget justification. 

Sample Budget Justification

The PI has included effort for administrative salary that is integral to the project, and not for general support of the academic activities of the faculty or department.  Effort charged to this project can be specifically identified to the project.

Then you proceed to describe how the administrative role is integral to the project.....

Salaries make up the largest category of direct costs on a sponsored project. When preparing a budget, start by making a list of all Stanford personnel who will support the proposed statement of work. If a person will be hired once the award is funded, simply estimate their salary and percentage of effort and list them as TBD (to be determined).

Project personnel salaries budgeted as direct costs

Stanford employees: the PI, co-PIs, co-investigators, ASR (Academic Staff Researchers), technical support staff, graduate students, research assistants, and administrative support staff (working directly on a major project), Stanford employees acting as collaborators.

Project Personnel salaries NOT budgeted as direct costs

Stanford Hospital and VA employees are not budgeted in the personnel budget category. Stanford Hospital employees are budgeted in “Patient Care.” Check with your  RPM (Research Process Manager) in the School of Medicine or OSR for advice regarding VA employees. Other non-Stanford employees may be proposed as consultants or as the personnel in a subaward.

Salary information to include in the budget:

1. The person's role on the project (not job title) and the person's name 

Example: Rafael Nadal, Lead Protein Synthesizer not Rafael Nadal, Professional Tennis Player

2. The percentage of effort or person months devoted to the project

This includes all responsibilities (including teaching and research) together and may not exceed 100% FTE. The portion of salary charged to the project is based on the percentage of FTE committed to the project. Remember that any percentage of effort committed in a proposal and subsequently devoted, must be accounted for later as project expenditure (either a direct project charge or cost sharing).

Nominal contributions of effort “as needed” may be included and NOT quantified. In this case, where no % FTE is specified, no cost sharing is committed. A “part-time” commitment, on the other hand, implies a specified % FTE, and that amount should be quantified. If awarded, “part-time” effort must be either directly charged or cost shared.

View how to convert percent effort to person months.  

3.  The appointment type (academic, summer or calendar) 

Nine Month Appointment and Summer Effort A faculty member on a nine-month appointment can only be paid from sponsored projects up to 90% during any of the summer months. Salary charged to sponsored projects during the summer months must be consistent with effort expended during the same period.

Limits on Salary Amounts (Salary Caps)

NSF 

NSF limits salary compensation for senior project personnel to no more than two months of their regular salary in any one year from all NSF-funded grants. This effort must be documented in accordance with the applicable cost principles.

If anticipated, any compensation for such personnel in excess of two months must be disclosed in the proposal budget, justified in the budget justification, and must be specifically approved by NSF in the award.

NIH

NIH will not pay requested salary above the annual salary cap. If salary is requested above the salary cap, NIH will reduce that line item to the salary cap, resulting in a reduced total award amount.  When preparing a detailed budget, you must base your request on actual institutional base salaries (not the cap) so that NIH staff has the most current information in hand at the time of award and can apply the appropriate salary cap at that time.

The DHHS (department of Health and Human Service) salary cap limits the amount which can be charged to a DHHS project (or related cost sharing account) by limiting the maximum annual salary rate for a 100%, 12-month FTE. The rate is set annually and applies to all awards made that year.

DHHS establishes the funding limitation for salaries at the time that a competitive award is made. However, if subsequent (non-competing) funding is awarded during a year with a higher salary cap, NIH will allow existing funds to be re-budgeted to that level. Typically, no new funds will be awarded for this purpose. 

• DHHS salary cap may change annually
• DHHS funds salary up to the level of the cap in effect on the award date
• Use a special expenditure type to capture difference between actual pay & what can be charged to a DHHS award

View Salary Cap details

Other sponsors

Other sponsors such as Juvenile Diabetes Association may have salary caps. Read  the program announcement carefully to determine if a sponsor has a salary cap.

Proposal Preparation Costs

Proposal preparation costs (typically comprised of salary for the PI and/or others) may not be charged to sponsored projects unless the proposal is being prepared for submission to a current sponsor for a non-competing extension or continuation of its currently awarded project. In those circumstances, it is appropriate to charge those proposal preparation costs directly to current projects. Costs for development of proposals for submission to other sponsors, or for work that does not relate to ongoing projects, is not allocable to current projects and may not be charged to those projects.

While administrative salaries and expenses are normally charged through the F&A (Facilities & Administrative) cost rate, federal regulations describe when administrative and clerical salaries can be charged directly to federally sponsored projects.

You can propose charging administrative and clerical salaries to a federally sponsored project if ALL of the following conditions are met:

1. Administrative or clerical services are integral to a project or activity. The requirement that the cost is “integral” means the services are essential, vital, or fundamental to the project or activity
2. Individuals involved can be specifically identified with the project or activity
3. Such costs are explicitly included in the budget or have the prior written approval of the federal awarding agency
   • A budget justification must be included in the proposal
4. The cost are not also recovered as F&A costs

NIH modular grants or similar grant instruments do not require line-item budgets. (Note: Rebudgeting authority may be used to charge administrative expenses not included in the approved budget if specific rebudgeting authority for clerical and administrative expenses is allowed by award and sponsor rebudgeting guidelines. See, for example, NIH administrative requirements.)

All deans' office administrative activities must be consistently treated as F&A costs. Therefore, no deans' office administrative expenses shall be charged directly to sponsored awards . Deans' sponsored project activities are subject to RPH 15.4.3

Any other administrative costs that are required to perform the technical scope of work may be directly charged as long they provide technical benefit to the sponsored project.

Non-federally Sponsored Projects

Direct charging of administrative or clerical salaries to a non-federally sponsored project is appropriate if the services benefit the sponsored project. Some non-federal sponsors may have specific requirements for direct charging of administrative costs. Such requirements need to be addressed in proposals.

Read  RPH 15.4: Charging for Administrative and Technical Expenses

The TGP (Tuition Grant Program) Fringe Rate is assessed on regular benefits eligible salaries charged to all NON-government funded PTAs including sponsored projects, operating budgets, and auxiliary PTAs.

Regular benefits-eligible salaries charged to government-funded PTAs, academic service centers and sponsored project cost sharing PTAs are exempt from the TGP charge.

The TGP charge is subject to facilities and administrative costs (F&A) and infrastructure charges. The TGP fringe benefit rates can be found on the Rates page of this site. The TGP charge appears in expenditure type 51770 Fringe Benefits TGP.

If you have any questions or need more information about the application of the TGP Rate, please contact the University Budget Office or,Research Administration Policy and Compliance, at extension 3-9102.

View the TGP Rate

Unless otherwise specified by the sponsor terms and conditions, assets are defined as capital equipment by Stanford when the following three criteria are met.

1. Cost is $5,000 or greater
2. Useful life of more than one year, and
3. Individual, stand-alone, moveable, tangible item

Sponsor Terms and Conditions

Always read the award terms and conditions as sponsors may define equipment differently. Verify equipment ownership as well. Review the terms and conditions for required prior approvals and check for other management obligations. It is critical to use the correct Expenditure Types for purchases.

Include in the budget: type of equipment, manufacturer’s name or identifying mark, quantity, estimated cost, and basis for the estimate, vendor quote, and sales tax.

Budget for a specific item “or equivalent.” This will give you the flexibility to substitute something equivalent later for the same amount of money. 

Budget sales tax and freight if applicable.

Expenses included in the price of the equipment 

Expenses included in the price of the equipment are listed below. Although some expenses must be excluded from the purchase price they can and should be proposed if applicable. Include these types of expenses  in the "other" expense category.

Equipment Fabrication

“Equipment fabrication” is the building of a unique individual piece of equipment, or scientific instrument by Stanford personnel (not a vendor or subcontractor).

A fabrication must meet all of the following criteria:

1. The item has unique specifications and is described in the research proposal or award.  Details are specified in a dimensioned engineering drawing.  When design changes occur, the engineering drawing should be subsequently updated.
2. The total cost for acquired materials, supplies, and components must be $5,000 or greater. All items acquired for a fabrication must be permanently integrated into the resulting discrete item.
3. The completed fabrication has an estimated useful life of one (1) year or more.  (Note:  If the fabrication is owned or funded by NASA, the useful life must be two (2) years or more.)
4. When completed, the item will not be affixed permanently to a building or structure.
5. The fabrication results in a unique, stand-alone, tangible item capable of specific identification and continuous control through tagging and periodic physical inventory. Components should be designed to remain at one position in the fabrication; they are not to be removed and replaced throughout the useful life of the fabrication.
6. It must be completed in ample time to directly benefit the funding project and used for its intended purpose.  If it is a contract-deliverable item, it must be completed in time to meet the delivery schedule as outlined in the funding sponsored project.

General Purpose Equipment

General purpose (non-scientific) equipment budgeted in a proposal will require an especially careful budget justification. A similar type of justification is needed if you are proposing to purchase general purpose equipment. Office equipment is normally considered an indirect cost. 

Travel and its relation to the proposed activities must be specified, itemized and justified by destination and cost. Funds may be requested for field work, attendance at meetings and conferences, and other travel associated with the proposed work, including subsistence. In order to qualify for support, however, attendance at meetings or conferences must be necessary to accomplish proposal objectives, or disseminate its results. 

Summarize travel costs in the budget. Separate foreign and domestic travel.​In the Budget justification

Document how the travel benefits the sponsored project. It is important to note that federal sponsors require air travel on U.S.-owned air carriers. Include the following.

• Describe and list each trip separately
• Distinguish between foreign and domestic travel
• Person traveling, purpose, and duration of trip
• Transportation costs to and from destination
• Per diem costs or actual projection for room and board
• Ground transportation costs
• Other expenses as determined by the statement of work

 Federal sponsors require air travel on US owned air carriers. 

General Purpose Supplies 

You cannot directly charge general purpose or office supplies to federally sponsored awards unless the supplies provide technical benefit as described in the project SOW (statement of work). Example: Aluminum foil used to block light on a telescope.

You can directly charge general purpose supplies on non-federally sponsored awards that do not prohibit it as long as they directly benefit the project.

Technical Supplies

Technical supplies is a broad category of costs that contains the following.

• all non-capital items
• laboratory materials and supplies
• chemicals

The SOW (scope of work) drives what you can budget and spend in this cost category. The costs must benefit the project, and be specifically identifiable to the project. 

Computing Devices

Computing devices are defined as machines that cost less than $5,000 and are used to acquire, store, analyze, process, and publish data and other information electronically, including accessories or peripherals for printing, transmitting and receiving, or storing electronic information.

Stanford policy which reflects the Uniform Guidance defines computing devices as supplies that may be charged directly to federally and non-federally sponsored awards.

Federally Sponsored Awards

1. Charging computing devices as direct costs is allowable for devices that are essential and allocable (provide benefit), but are not solely dedicated, to the performance of a federal award.
2. Such devices are also allowable if solely dedicated to the performance of a federal award
3. Federal sponsors may impose requirements for these costs to be included in the proposal budget and may require a budget justification. Until the federal agencies release specific information, budget justifications may be used at the discretion of the principal investigator.  Requirements may be forthcoming from each sponsoring agency in fall 2014 or winter 2015.
4. Inventory tags may be affixed to computing devices at the discretion of the department; inventory tagging facilitates accountability, availability for reuse, and appropriate disposal.

Non-Federally Sponsored Awards

Direct charging of computing devices to a non-federally sponsored project is appropriate if the computing device benefits the sponsored project.  Some non-federal sponsors may have specific requirements for direct charging of computing devices.  Such requirements need to be addressed in proposals.

Stanford’s policy (RPH 15.4) on charging other technical expenses remains unchanged by the Uniform Guidance. 

Animal Costs 

There are two types of animal costs. You must budget the cost to purchase laboratory animals separately from the cost of animal care. Animal purchases are considered technical supplies. Full F&A costs apply.

The cost of  animal care provided by SVSC (Stanford Veterinary Services Center) should be budgeted as "other expenses" A special F&A rate applies to all SVSC animal care. If your budget includes lab animal costs, be alert to the need for an approved lab animal protocol.

If you plan to use a specialist who offers professional advice or service, include the following in the budget and budget justification.

• Name and title
• Daily salary rate
• Number of days engaged
• Other expenses (e.g., travel)

Stanford's policy is to apply the University's full negotiated Facilities & Administrative costs to all externally-sponsored projects.

In certain circumstances, the Vice Provost and Dean of Research may approve full or partial waivers of the F&A costs normally incurred by sponsored projects. However, such waivers will not be considered for projects where the sponsor is:

1.      A for-profit organization, whether US or international, or

2.     An office or agency of a foreign government, including organizations funded by that government.

F&A waivers or reductions are not granted to remedy incorrect classifications of costs. PIs may request supplemental funding from sponsors, but such requests are rarely granted.

Pre-Approved F&A Waiver Exceptions

Some programs or sponsors are pre-approved by Stanford for a waiver of a portion or all of our normal F&A cost recovery. In most cases, these programs or sponsors require such a waiver as a condition of the award.  View the Pre-approved F&A Waiver List here.

Publicly Available Policy on Overhead Expenses

Stanford recognizes that many non-profit foundations have their own policies regarding the use of their funds for overhead expenses. In the case where the foundation has an official written and publicly disclosed policy published on line that is applied on a consistent basis, or where a public solicitation for proposals defines a limit on indirect cost recovery as a condition of the program, Stanford will normally accept those requirements. The foundation's publicly available public policy statement or program solicitation should be submitted to the Office of Sponsored Research or the Research Management Group as an attachment to the Proposal Development & Routing Form (PDRF) as part of the completed proposal package.

No Publicly Available Policy on Overhead Expenses

Case-by-Case Exceptions

The Dean of Research will consider other requests for indirect cost waivers only in very limited circumstances.

Note: This approval authority is delegated to the Dean of the School of Medicine for projects to be administered within the School of Medicine. All requests must go to the Director of the Research Management Group.

Special requests are initiated by the PI and must be approved by the PI's department chair and school dean's office before being sent for approval to the Dean of Research. The decision whether to grant or deny an exception request is at the sole discretion of the Dean of Research, or of the Medical School Dean for projects in that school. In determining the institutional costs and benefits of such requests, the Dean of Research may take any or all of the following into consideration.

• The equity of granting the waiver when the projects of other faculty carry full overhead
• The total cost to Stanford
• The likelihood that an award would be seriously jeopardized without a waiver, and the potential effect of the loss on the faculty member's overall research program
• The benefit of the waiver to new or junior faculty members or in support of research efforts in new directions which otherwise might not be sufficiently developed to attract typical peer-reviewed awards
• The effect of a waiver to increase direct costs available for student support

Steps to Request Approval

The Dean of Research will consider requests for F&A cost waivers in very limited circumstances. The PI’s Research Administrator and the PI should initiate the request, and it must be approved by the PI and the PI’s school dean's office before being sent for approval to the Dean of Research.  This can be done electronically in SeRA on the budget page.  See: IDC Waiver User Guide.

For projects administered within the School of Medicine, the Research Administrator and the PI should coordinate the request with their Research Process Manager (RPM) in the Research Management Group.  The RPM will submit the request to the Director of the Research Management Group for review/approval where it will be reviewed and approved as appropriate.

For projects administered within the School of Engineering, the request must be sent to Engineering Research Administration prior to being routed to the school dean or Dean of Research. Please review the ERA Job Aid.

See the Research Policy Handbook Policy 15.2 Facilities and Administrative (Indirect Cost) Waivers for detailed information.