Budget Development for Federal Grants

Principal investigators (PIs) seeking funding from federal sponsors should prepare budgets so that they fairly represent the full cost to Bates College of fulfilling the proposed activity, including appropriate allocated costs. Thus the OEG and accounting offices must review all grant proposal budgets prior to submission. Important cost factors and other considerations that should normally be part of a grant funding proposal are outlined below. Inclusion of these costs in budget proposals ensures that the College recovers all of the costs incurred in completing sponsored projects and that neither the College nor the funding sponsors are subsidized inappropriately.

Modest funds may be available to help defray page costs for articles published in refereed scholarly journals. Application for funding must be made in writing in advance to the dean of the faculty, accompanied by a copy of the accepted manuscript. The published article must be submitted with a later annual report.


FICA (Federal Insurance Contributions Act) or Social Security contributions are paid by both the employee and the employer, each currently paying 7.65% of employee wages. The College portion of FICA should be computed on faculty and/or student wages for that work done on sponsored projects which is in addition to the full-time academic workload: during periods, for example, when faculty are not teaching and students are not enrolled in classes (e.g., summer break). The College’s share of FICA should not be charged to a project if the fringe benefit rate (see below) is applicable, since the FICA charges are included in the fringe benefit rate.

For Bates College employees (including students) who are citizens or permanent residents of foreign countries, the applicability of the FICA liability is determined by the human resources office and may be affected by tax treaties (if any exist) between those countries and the United States. International students are also limited in the hours per week they may work.


Where allowable, fringe benefits should be included in cost proposals and computed on the wages paid for sponsored project for all part-time and full-time staff employees who:

a) are entitled to Bates College benefits, and

b) have sponsored project funding as either a full or partial component of the regular workload.

For fiscal year 2012, the fringe benefit rate is 35.7% of Bates College employee wages. This rate includes an allocation of the cost of benefits provided to employees, such as medical insurance; life insurance; vacation and sick time; holiday pay; payroll taxes, etc. The types of costs that can and cannot be reimbursed are defined by the Federal Cost Principles of Educational Institutions, OMB Circular A-21,and may be further defined by the funding sponsor.


Indirect costs associated with operating and maintaining the College as a viable educational institutional can be appropriately charged to most sponsored projects. The current rate, in effect through 30 June 2014, is 40% of all direct costs charged to the grant excluding capital expenditures over $5,000 (building alterations and renovations and individual items of equipment including set-up), and that portion of each sub-award and sub-contract in excess of $25,000.

The indirect cost rate includes an allocation of the cost of operating most of the administrative, operating, and maintenance departments of the College. As is the case with all grant expenditures, the types of costs that can and cannot be reimbursed may be defined by the funding sponsor in addition to the requirements of OMB Circular A-21 described below. If not specifically precluded, a calculation of the indirect cost portion of the grant should be included in the proposal.

If indirect costs are recovered on a grant at the rate of 40%, then the equivalent of 33.3% of total indirect costs is made available to the PI and credited to a fund in the PI’s name in support of research activities. If indirect costs are recovered at a lower rate, the PI’s portion of the indirect funds is adjusted accordingly.


The College works with faculty members to make available funds to match grants from outside sources, if terms of the grants require it. However, no matching funds are available unless application for the outside grant is approved by the dean of the faculty prior to its submission. Cost proposals that include matching of costs by the College must be reviewed and approved by the dean of faculty and the treasurer, or their designee, well prior to submission to the sponsoring agency. Proposals involving matching funds must be received by the dean of the faculty and treasurer for review at least two weeks before the grant is due. Identification and approval of matching cost sources, as early in the proposal process as possible, is beneficial to the PI.

OMB Circular A-21 delineates the principles for determining costs applicable to grants, contracts, and other agreements with educational institutions.

The sponsor may further define allowable direct and/or indirect costs on the grant or contract; it is the PI’s responsibility to ensure that appropriate direct costs and matching costs are charged to the grant.


Costs for computers, renovations, equipment and its maintenance, when appropriate as a direct cost on the grant and allowed by the federal sponsor, must also be included in the budget. A checklist has been developed to guide PIs through the steps of budget development. This checklist is available from the Office for External Grants.