The Uniform Guidance (2 CFR 200) outlines key cost principles in budgeting for and spending on federal grants. A cost must be “necessary” (), “allocable” (), “afforded consistent treatment” (), and “reasonable” () in order to be considered allowable on a grant. For a cost to be necessary, it must be integral to the scope of work of the project. The cost must also be allocable, meaning that it must be charged in proportion to how the item is used for the project, especially in the case of shared equipment or space rentals. Items or services charged to a grant must be consistently treated by the institution as direct or indirect costs. Finally, a cost is reasonable if it “does not exceed an amount that a prudent person would incur under the circumstances” ().

But what does it look like in practice to be reasonable? This standard is particularly flexible and context-dependent. Some key guidelines for determining reasonable costs within your budget include aligning with industry standards and justifying an expense with scientific reason or precedent. When it is programmatically necessary to purchase a more expensive piece of equipment for technical reasons, previous work or studies can provide a precedent to guide you internally as you create your budget. Defining the market by establishing an average cost for the item or service, as well as comparing vendors at different price points, can help create a framework for reasonableness as well.

Let’s examine a few case studies to assess the reasonableness of different items in a pre-award budget.

Case Study #1

Dr. Pierre Moreau is a professor of Psychology, conducting a study assessing object permanence in children of various ages. He hopes to understand more about how children react when a toy is hidden from them, as well as where they first look for it. He finds a grant from the National Science Foundation that he hopes to apply for.

As he budgets for his proposal, he carefully considers what toys he will use during the study. A colleague suggests that all that is necessary is a small bouncy ball for $0.50 that can be hidden beneath a plastic cup. However, toys like this can pose a choking hazard to the age group that Pierre hopes to study. Additionally, Pierre has read in some prior studies that if a child is not engaged or excited by the toy, they may demonstrate indifference to it. This could invalidate the results of the data, which require the child to be invested in the toy’s whereabouts. For these reasons, Pierre chooses to budget for a more expensive toy for $16 with a bright pattern that crinkles upon touching it. These aspects, which appeal to sight, sound, and touch, are more likely to engage the child, which is critical for the validity of the research. He can justify this using prior studies as examples, so the upgraded toys can be considered a reasonable expense.

When it comes to equipment or other program-specific supplies, the programmatic justification is critical. What is reasonable for one study may be deemed unreasonable for another, simply based on the context: oftentimes, context understood primarily by the researcher.

Case Study #2

Dr. Amelia Jackson is a professor of environmental science seeking to budget for a statistician to analyze data collected in her fieldwork related to water quality. She reaches out to several individuals for quotes. Hubert, who has recently graduated from his Ph.D. program with limited experience in statistical consulting, would charge $100/hour for an estimated 40 hours. Jack, another colleague with much more experience, would charge $200/hour but estimates that the work will only take him 30 hours. Finally, Patricia, a statistical consultant by trade, would charge $450/hour and estimates that the work will take her 20 hours.

Amelia has the best relationship with Jack, whom she’s known since graduate school. She knows that he will be communicative and professional in his work, although he would charge more than Hubert. Patricia was recommended to her from a colleague at another institution, but the rate seemed far above the typical market value for a statistician for this type of work. Additionally, although Patricia’s estimate of the hours was lower than the other two, Amelia would be taking on a significant financial risk if the work took the 30 or 40 hours that Jack and Hubert had predicted. She decided that hiring Patricia would be unreasonable.

After completing the rest of her budget, Amelia realized that she had a little bit over $5,000 left to fill the consulting role before reaching the proposal’s budget limit. She trusted the quality of Jack’s more so than Hubert’s, and his rate would be within her budget if she could negotiate it down a little bit. She asked Jack if he would consider lowering his rate to $175/hour, and he agreed. Amelia marked the budget accordingly.

Assessing the market value of a skill or an item can help whittle down the possible options. Having adequate documentation from professionals in the field about their usual rates and experience level can provide additional insight into what is standard for any given service. A certain number of quotes may also be required by procurement at the time of hiring, depending on the price threshold. Finally, the budget itself may put constraints on the price thresholds that make sense for any given item or service when there are multiple reasonable options available.

Overall, reasonableness is extremely context-dependent on the project needs and current market. This is why allowability does not stop at the pre-award stage. When a federal agency awards a grant and approves the budget, that agency is essentially deeming the budget reasonable. By the time of award, though, prices may have changed, warranting some adjustment of expenses. With any budget revision, departmental and central sponsored programs administrators can help guide investigators on staying in line with the financial terms of the grant. Some sponsors may not require prior approval for budget changes, but the institution can still be at risk of audit findings or non-payment for expenses that are deemed unallowable. Following the principles of reasonable, allocable, and necessary expenditures minimizes risk for both the investigator and the institution.

By: Samantha Tassillo

is a federal code of broad regulations that all grantors and grantees must follow. It defines basic administrative requirements, cost principles, and audit requirements for federal awards. Uniform Guidance is the framework that federal agencies like NSF use to define their agency-specific regulations. These rules typically inform what actions require prior approval (special permission from the sponsor) and how to request it. Beyond this, individual funding opportunities at these agencies may contain their own program specifications relating to individual program matters, such as the amount of funds allowed to be charged for participant support or travel. If there is a subaward on the project, the subawardees may have to comply with subaward terms and conditions imposed by the pass-through entity, in addition to all the federal and sponsor regulations that “flow down.” At the grantee level, institutional policies dictate how grant activities are implemented or charged on a day-to-day basis. Finally, federal, state, and local laws serve as the foundation for Uniform Guidance and minimize risk to individuals and communities.

Agency-specific regulations and program specifications can be found in grant documents in plain text or be incorporated by reference. Many federal agencies post their agency-specific regulations on their website, like the National Science Foundation does with their . However, it is also critical to read through the funding opportunity announcement, since these can contain important information and restrictions on the project as well. Agency regulations and program specifications should not conflict with Uniform Guidance, but they may impose narrower requirements that need to be followed. With so many levels of regulations, the most specific regulation takes precedence.

To explain how these regulations can overlap, let’s take a hypothetical case study:

Dr. Ben Windlass is a biology professor at Montclair who wants to apply for an NSF MRI (Major Research Instrumentation Program) grant to purchase equipment. He plans to buy a DNA sequencer for $50,000, and he will budget an additional $5,000 for a technician to come in and perform routine washes and calibrations for the equipment every month for the first year. He is a co-Principal Investigator on another NSF grant where he is contributing one month on researching migration patterns of the invasive spotted lanternfly. He asks the Pre-Award Specialist in OSP if he can budget for one additional month of effort on the NSF MRI grant in order to test out the DNA sequencer and run some preliminary analysis on specimens already in his lab to form a basis for his future research. Can he do this?

There are several layers of terms and conditions to examine before making a final determination, and several questions that we have to ask. Can Principal Investigators charge salary to a grant? If so, how much? Does this particular agency have any limits on who can charge effort to grants, how much, and why? How about the program, or the institution? Finally, if it is allowable, is there money in the budget to support this? 

Please see the table below for the full analysis.

On the broadest level, Uniform Guidance does allow investigators to charge salary to their grants for work performed. More narrowly, the agency-specific regulations of the National Science Foundation limit senior personnel from requesting over two months of effort on all NSF grants combined (with few exceptions requiring detailed justification). Dr. Windlass has committed one month on another NSF grant, so requesting one additional month here would so far be allowable, since that would equate to two months of the year.

However, this particular NSF MRI program listing puts yet another restriction on budgeting for salary. For this funding opportunity, the only allowable salary and fringe costs are for individuals providing maintenance or training for the equipment, not doing research. Because Dr. Windlass would be using his effort for research, this is considered unallowable as per the program specifications, so he cannot be paid from the grant for this purpose. Although it does not conflict with the broader federal and agency regulations and he has money in his budget for it, the narrower regulation takes precedence. The technician’s salary is still supported, as per the funding opportunity guidelines.

It can be complicated to pinpoint what is considered allowable for federal awards because there are so many layers of regulations. These directives intersect with federal, state, and local laws, as well as institutional policies, to prevent research misconduct, ensure legal compliance, and help the institution maintain a strong reputation as grantee. Oversights early in the process can lead to additional complications later on, for Principal Investigators and for the central offices. If these terms are not followed, grantees may face increased scrutiny from grant officials, termination of the award, or an institutional label of “high-risk grantee,” leading to more difficulty securing funding or collaborations. The pre-award specialists and post-award officers in the Office of Sponsored Programs have the administrative and regulatory expertise to navigate the many layers of administrative policy involved in federal funding work to ensure that all grants remain in compliance–and to allow researchers the time and freedom to focus on the heart of their projects.

By: Samantha Tassillo

When subcontracting to another university, the “rules of engagement” are fairly well understood between each university’s respective Office of Sponsored Programs. The process is generally smoother when collaborating with a university than with another organization that might not have as much grant experience.

For example, let’s say you want to collaborate with a colleague at a small non-profit, but you’re not sure how to engage with them from a “paperwork” perspective. It can be overwhelming, particularly if there are multiple partnering organizations. Not to worry, because your assigned OSP pre-award specialist or college grant manager will know exactly what’s needed.��

Regardless of the type of organization we are subcontracting with, as a general rule, we’ll request the following documents from the subcontracting partner as far in advance of the proposal deadline as possible:

• Statement of Work
• Detailed Budget and Detailed Budget Justification
• Proposal/Project Specific Requirements
• Copy of Federally Negotiated Indirect Cost Rate Agreement (if applicable)

We ask that we receive the above items at least seven days prior to the sponsor’s deadline. Where multiple collaborators are involved, it only becomes more important to process and review them well in advance, particularly if any of the organizations are international.

There are important reasons why we need all of this documentation at the proposal stage, and each has a distinct purpose.��

First, the subrecipient commitment form is an “industry standard” document that requests information that is often needed in a federal submission, such as the university’s “Unique Entity Identifier” that may be required, the address of the partnering organization, congressional district, and additional compliance information that is asked to assess the entity’s ability to manage a potential award in compliance with federal guidelines.��

The Statement of Work (SOW) is a brief description of the work that the subcontracting entity will perform should the project be funded. In other words, it outlines the key “deliverables” for the organization. It should identify the co-investigator and other senior/key personnel and specify tasks/deliverables expected during the project. It sets the “ground rules” for the relationship and, as such, is a very important document. If issues arise where there is confusion or disagreement on the work being performed, the SOW becomes critical to resolve the dispute because it contains the original project goals and direction.

Next, let’s take the budget and proposal materials. Most funders require detailed budgets not just for the lead institution, but for the subcontracting institutions as well. This also includes details about fringe rates and indirect cost rates. Simply noting that “Organization X” will get a subcontract for $100,00 over 3 years won’t be sufficient in most cases. For smaller organizations that have little to no experience with budgeting, OSP can offer a “generic” budget template to assist with the process. With the budget, we will need any additional project-specific materials that are required for submission to the prime sponsor. These will be listed in the funding opportunity, and could include a CV/Biographical Sketch, Current and Pending Support, or other supporting documents.��

Often, we will also need a copy of the organization’s federally negotiated indirect cost rate agreement. Organizations that do not have a federally negotiated indirect cost rate can use the updated federal de minimis rate of 15% of Modified Total Direct Costs for applications to federal sponsors. Most private sponsors will prescribe a mandated rate.��

Upon award, the OSP’s non-financial post-award team will reach out to the subcontracting partner to initiate the contract negotiation process. Like the proposal stage, this process is typically smoother if two universities with prior grants experience are involved. It is further simplified and made more efficient by using the popular .��

If you’re unsure about any of this, or need clarification, please reach out to your assigned OSP pre-award specialist, or college grants manager where applicable.

By: Ted Russo

There are two main types of collaborators: “subrecipients” and “contractors.” These two categories are budgeted for differently, reported on differently, and have contrasting levels of input on the project.��

What is a Subrecipient?

A subrecipient (also called a “subawardee”) is an institutional collaborator on a grant that provides programmatic direction on the project, significantly helping to shape the methodology or interpret the results. The subrecipient’s objective is to contribute to the aims of the grant in an open-ended way, rather than providing one specific good or service. They are subject to more rigorous scrutiny and have different budgeting and reporting requirements than contractors do. The researcher applying for federal funding will decide in the proposal stage if they want to add a subrecipient onto the project. When the sponsor awards the grant, that researcher’s institution is placed in charge of distributing a portion of those funds to the agreed-upon subrecipient via a “subaward agreement.” 

Let’s take an example. You’re a faculty member at ��Ʒ���˸������� University with a specialization in neuroscience, and you’re applying for an NSF grant to study the effects of different kinds of music on brain activity. You have a colleague at Vanderbilt University who has a particular niche in music psychology–she has robust experience in different instrumentations and music theory and has applied these concepts to behavioral studies. You have experience working with EEGs and other relevant equipment, as well as comprehensive knowledge of the brain. She would bring unique insights to the table about the kinds of music that could be compelling to measure. In this way, you would both significantly contribute to the design and direction of your project. Which party becomes the “lead institution” and which becomes the “subrecipient” is up for debate. Since you are the more experienced investigator and ��Ʒ���˸������� University has the relevant equipment to conduct the study on campus, you mutually agree that Montclair will be the lead institution. You apply to NSF with the clear intention of adding Vanderbilt University as a subrecipient to your project, and when the funds are awarded, ��Ʒ���˸������� University will distribute the agreed-upon amount to Vanderbilt.

In this case, NSF is the sponsor, awarding funds to ��Ʒ���˸������� University (the recipient). Vanderbilt would be considered the subrecipient. From Vanderbilt’s perspective, ��Ʒ���˸������� University would be considered a “lead institution” or “pass-through entity,” since the funds are being distributed to them from NSF through Montclair.��

What is a Contractor?

A contractor (also referred to as a “vendor” or “supplier”) is an individual or entity that provides a good or service to the grant recipient. They operate in a competitive environment, meaning that there are multiple options for potential suppliers. Most often, the contractor provides this deliverable to many different clients as a part of their business. The contract is made out to an individual or a business entity, unlike subaward agreements, which are generally awarded to institutions. Their services are delivered through a contract with the recipient, and they are not bound by the same regulations as subrecipients.

Let’s again turn to the example above. Vanderbilt University has entered into a subaward agreement with ��Ʒ���˸������� University to complete this research project. You’ve collaborated with the PI at Vanderbilt to design a study where you will measure participants’ brain activity through an EEG in response to live music versus recorded music. The music you’re using is a famous string quartet piece, but you need people to play it. There are many instrumentalists in your area who would be willing to do it (competitive environment), and most are career musicians (they have provided this service before and do so for their business). You’re requesting specific deliverables: a recording of the piece and a live performance of the piece to 3 groups of participants over the course of a week. You are budgeting a flat fee to pay them. They are not shaping the direction of the project, just providing a service. For these reasons, they are contractors.��

Who Decides?

Sometimes, this distinction becomes blurred. Ultimately, Uniform Guidance gives the power to the pass-through entity, or the lead institution, to decide. Tools like this Subrecipient vs. Contractor Determination Checklist can help guide the decision-making process.��

There are significant ramifications involved in this decision. It’s not difficult to release a contractor, but there is no such thing as simply “firing” a subrecipient institution. They are granted additional protections because they are operating under Uniform Guidance and the terms and conditions of the award, just like the lead institution. This means that the relationship you have with your subrecipient is critical.��

From the start, it’s important to conduct a “risk assessment” on the potential subrecipient to inform how to proceed moving forward. If the subrecipient has prior experience with similar subawards, is audited regularly with no findings, and has long-tenured administrators and systems, they will likely be considered a “low-risk” entity, meaning that they have a low likelihood of misusing the funds or disobeying federal or agency regulations. An institution like this may not need any additional “subrecipient monitoring plans.” 

For a medium-risk or high-risk entity, OSP may implement a plan to help ensure that the institution is spending funds on allowable purchases, keeping careful track of their expenses, and obeying all other compliance requirements. This plan may involve having the subrecipient submit invoices and expense reports more frequently to OSP (monthly instead of quarterly, for instance) or turning in financial and programmatic reports early for a comprehensive review. This gives ��Ʒ���˸������� University an opportunity to ensure that expenses are being recorded properly and that the subrecipient is operating fully in alignment with award terms and conditions. Contractors come and go, but subrecipients are here to stay. Picking the right one can add layers of depth and intrigue to your project, but they must be chosen with thought and care.

By: Samantha Tassillo