Budgeting Overview

Cost Principles

Federal regulations in 2 CFR 200 identify the Cost Principles that must be followed when budgeting for and spending on sponsored projects. All proposal budgets must follow the guidelines on the Cost Principles and Cost Accounting Standards page.

Basics of Proposal Budgeting

Proposal budgets are composed of two cost groups: Direct costs and Facilities & Administrative (F&A) costs.

Direct costs are those budget line items that are necessary for the performance of the specific scope of work proposed and are easily identifiable and allocable to the project. The Principal Investigator is responsible for spending the direct costs on reasonable, allowable costs such as project personnel salaries, associated fringe benefits, materials, supplies, travel, and equipment.
Facilities & Administrative (F&A) costs are expenditures are incurred for a common or joint purpose and therefore are not specifically allocated to one project. F&A costs are necessary for the performance of many projects and include broad categories of costs such as sponsored programs administration, research compliance, purchasing, accounting, libraries, custodial services, building depreciation, and utilities. F&A costs are budgeted and accrued as a percentage of the project’s direct costs.

When preparing your budget, all direct cost items are usually itemized first and totaled. The appropriate F&A cost percentage rate is then assessed against the appropriate base of the allowable direct costs.

Training on proposal budget development is available in course RSH203.

Sponsor’s Budget Forms and Formats

The sponsor’s forms and format for budget and budget narratives should always be used for the submission documents.

Pay attention to the sponsor’s guidelines. They provide information concerning budget limitations, specific cost considerations, requirements for cost sharing, and other special financial information. Failure to adhere to a sponsor’s budget or program guidelines may jeopardize funding for the proposal.

Budget Escalation Factors

For multi-year proposals, DSP recommends using up to a 3% escalation factor for those recurring direct costs found in each budget period, such as Salaries and Wages, Travel, Equipment, and Material and Supplies. For Tuition as part of a Graduate Student Research Assistant compensation, use the escalation factor found on the Graduate Student Salary & Tuition Costs page. Do not escalate Facilities & Administrative costs rates. The most currently approved and published rates at the time of proposal must be used.

Charging Costs Directly or Indirectly to Sponsored Projects

Any costs normally treated as F&A costs such as postage, office supplies or administrative support salaries must be clearly identified in your proposal budget and be properly justified. See Charging Costs Directly or Indirectly to Sponsored Projects for more information.

Federal Grant Budget Tips

Most federal grant applications are now submitted electronically through UFIRST to Grants.gov. These federal grant applications require the use of the standard form and format called the SF-424 Budget Information Forms. Below are links to the NIH and NSF Budget Tips and Reminder pages that are applicable to almost all federal agencies.

Last Updated 4/22/25