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MSU Home :: Budget Development

4. Budget Development


The preparation of a budget is an important part of the proposal preparation process. Ideally, the budget should be considered as you are developing the project itself - not something to be hastily put together the day before the deadline. This is important for two reasons:

  1. Developing your budget alongside your narrative assures that the budget items are specifically related to activities described in the proposal.
  2. Reviewers often examine the budget in the context of the program narrative, evaluate whether sufficient and appropriate personnel to perform the work have been included, and match the overall budget to the work proposed.

Research expenses can be divided into direct costs, which are specific line items in a budget such as salaries and fringe benefits, equipment and travel, and indirect costs (also called Facilities and Administrative costs), which are broad costs incurred for common or joint objectives, such as building/equipment depreciation and general administrative costs. Indirect costs are paid as a percentage of direct costs, with the amount negotiated by the University and the sponsor.

Direct Costs

Morehead State University abides by the Office of Management and Budget (OMB) Circular A-21, which sets forth basic concepts relating to all direct costs. These concepts are applicable to all sponsored programs, federally funded or not.

A direct cost must be:


  • It serves a University business purpose, including instruction, research and public service
  • It is permissible according to both MSU policies and federal regulations
  • It is permissible according to the terms and conditions of the sponsored project


  • It is incurred solely to advance the work under the sponsored program
  • It benefits both the sponsored program and other work of the institution, in proportions that can be approximated through use of reasonable methods
  • It is necessary to overall operation of the institution and, in light of the principles provided in OMB Circular A-21, is deemed to be assignable in part to sponsored projects


  • The goods or services requested reflect actions that a prudent person would take under similar circumstances


  • Costs must always be treated similarly under like circumstances 
Major Categories of Direct Costs


The PI should consider who needs to be involved in the project, and how much effort each person will commit. “Effort” refers to the proportion of time spent on a sponsored program and is expressed as a percentage of the individual’s total available time. Morehead State’s personnel policy on faculty workloads is available here. The basic rule to keep in mind is to ensure that you have sufficient time available to fulfill the proposed effort commitment.

Salary - Staff (Administrative, Clerical)

Per OMB A-21 regulations, salary figures for staff are based on the individual’s annual salary.

Salary - Staff (Students)

Students (both graduate and undergraduate) frequently serve as Research Assistants on sponsored projects and can receive compensation. Typically, full time students are limited to working a maximum of 20 hours per week during the academic year and are paid minimum wage (although the PI can set the pay as he/she sees fit). Additionally, students can also receive tuition remission and other training expenses.

Salary - Faculty

Per OMB A-21 regulations, salary figures for faculty are based on the individual’s annual salary.

Subject to sponsor and University policy, faculty salary can be covered in a variety of ways:

  • Reassigned Time
    • Faculty can request that the agency pay for a reduced load in order to engage in sponsored programs. The provision of reassigned time is typically in the form of a course reduction, which will reduce the instructor's teaching load by a certain amount, depending on the needs of the project.
    • In some circumstances, when taking a course reduction is unfeasible, a small percentage of a faculty member's time can be requested of the funding source.
    • In either case, it is always best to request reassigned time from the funding source. When this is not possible, the University can sometimes cost share a portion or all of the requested effort.
  •  Summer Salary
    • Summer Salary is available to faculty with nine-month appointments for work on sponsored projects during the summer months. Faculty who receive summer salary must expend the effort associated with the summer salary during the summer period.
    • Per University regulations, the maximum amount of summer salary permissible is three-ninths of the faculty's regular academic year salary. In other words, in any year, the faculty member may receive no more than three months of summer salary. However, some agencies impose stricter limits on how much summer salary a PI can request.


Fringe benefit charges are assessed to cover costs such as retirement benefits, health insurance, FICA and Medicare taxes and unemployment compensation. Fringe benefits are calculated by multiplying the fringe benefit rate by the salary requested for each individual. When developing a budget that includes personnel, make sure to include the appropriate fringe benefit rate. The current University fringe benefit rate chart is available here.


According to OMB Circular A-110, which sets forth uniform administrative requirements for federal grants and agreements with institutions of higher education, the term “equipment” refers to “tangible personal property having a useful life of more than one year and a unit acquisition cost of $5,000 or more per unit.” Even though the University has different definitions for equipment, it is important to adhere to the federal definition when preparing a budget. All federal agencies (and many private ones) do not allow indirect costs to be charged on equipment.


Travel costs related to the sponsored program for the PI and project staff are allowable expenses. Refer to the University’s Travel Policies and Procedures Manual for specific information.


Materials and Supplies

Materials and supplies include variety of consumable items such as chemicals, glassware, small electronic components, computer software and more. General office supplies are considered to be part of the indirect costs of conducting a project, so they should not be charged as a direct cost on a federal award. However, just as in paying supplemental salary to staff, some extenuating circumstances would include:

  • If the purchase of these and similar products relate specifically to the technical substance of the project
  • If the nature of the work performed under a particular project requires an unusually high level of such costs


Any cost(s) associated with the publication of a research article based on your funded project, or dissemination of any results gained from the project.


Many sponsored projects necessitate the use of an external consultant for a variety of services. The University does not have a standard consultant rate. An individual may be paid according to the customary scale for a particular field and level of expertise. It is important to specifically name your consultant in the budget – doing so will simplify the process of paying the consultant should the proposal be funded.


Proposals may include work to be done at one or more other institutions. In these cases, the other participating institutions will be subrecipients under the University’s award. When a subaward has been prepared as part of a larger proposal, the total yearly cost for the subaward is included as a line item in MSU’s budget.



Similar to the overhead costs of a business, facilities and administrative costs (or “F&A,” as it is commonly called) are the basic expenses associated with carrying out sponsored projects but are difficult to quantify with respect to any given project. For example, heat, maintenance, building depreciation, administrative expenses and library use are all F&A costs.

F&A is recovered on proposals by multiplying the sponsor’s indirect cost rate by the appropriate direct cost base and including that figure in the total cost of the budget. Unless the potential funder has its own specific guidelines for F&A, all budgets will request the University’s federally-negotiated F&A rate, which is currently 24% of Modified Total Direct Costs (MTDC), which excludes equipment, tuition, and subcontracts beyond the first $25,000 of each individual contract from the base.

Funds accumulated through F&A are distributed according to a distribution plan developed cooperatively between the Office of Research and Sponsored Programs, the Office of the Provost and Executive Vice President for Academic Affairs, and the Office of the Vice President for Planning, Budgets and Technology. A copy of the distribution plan is available here.



Not to be overlooked is the budget justification (sometimes referred to as the budget narrative). The budget justification is the narrative in a proposal that provides additional detail on line items in the budget. Sections should be included for Personnel, Equipment, Travel and any other budget categories that may require explanation. If the budget includes costs of normally unallowable items, these must be justified explicitly. Equipment expenses also require careful delineation, since the sponsor approves individual line items in this category.

It is important to approach the budget justification in the same manner you would your proposal narrative – be clear, concise and provide rationale where needed.

Research and Sponsored Programs Calendar

Research News

      • The National Aeronautics and Space Administration (NASA) has awarded MSU's Space Science Center a $7.9 million contract as part of its Next Space Technologies for Exploration Partnerships (NextSTEP) to advance concept studies and technology development projects in the areas of advanced propulsion, habitation and small satellites. This contract is the largest sponsored research program award in the University's history. Click here for more information.
      • Morehead State University's 21st Century Education Enterprise has been awarded a $149,999 grant from the Kentucky Council on Postsecondary Education's Improving Educator Quality program for its project titled "Engineering Authentic Experiences in the Next Generation Science Classroom.” Click here for more information.
      • Dr. Alison Hruby, Assistant Professor of English, has been awarded a $2,000 grant from the Dollar General Literacy Foundation. Her project, titled "The effects of frequent reading on the reading comprehension abilities of tenth grade struggling readers in rural Kentucky," aims to improve the reading comprehension of tenth grade students placed in a remedial English class by increasing the students' reading time by at least 100 minutes per week. The outcome of the project will be measured using the students' reading scores on the Spring 2015 Measure of Academic Progress (MAP) test. For more information about the project, please contact Dr. Hruby at 606-783-2732 or via e-mail.
      • The National Institutes of Health has renewed the Kentucky IDeA Networks of Biomedical Research Excellence (KBRIN) Program. Headed by the University of Louisville, KBRIN aims to develop a network of support, infrastructure and capacity for biomedical researchers and educators within the Commonwealth. The total award to Morehead State University totals $463,845, which includes neuroscience laboratory renovations in Reed Hall. For additional information, please contact Dr. Bruce Mattingly, KBRIN Program Coordinator, at 606-783-2544 or via e-mail.
      • Dr. Kurt Gibbs, Assistant Professor of Biology, has received a $319,346 award from the National Institutes of Health Academic Research Enhancement Awards (AREA) program. Dr. Gibbs' proposal, titled "miRNA expression after spinal cord compression injury in Xenopus laevis," aims to determine how developmental changes in microRNA expression affect the ability of Xenopus frogs to regenerate their spinal cords, which in turn can increase understanding of the genetic regulation associated with recovery from spinal cord injury and generate new therapeutic targets to promote recovery in humans. For additional information, please contact Dr. Gibbs at 606-783-2932 or via e-mail.
      • Early Child, Elementary and Special Education Professor Edna Schack has been awarded more than $154,000 from the National Science Foundation's Improving Undergraduate STEM Education (IUSE) program for a collaborative project focused on developing prospective teachers' professional noticing skills with respect to children's mathematical thinking. The three-year project, titled "Collaborative Research: TECHNO: TECHnology-Centered Mathematical NOticing," is a collaboration with Dr. Jonathan Thomas (Northern Kentucky University), Dr. Molly Fisher (University of Kentucky), and Dr. Cindy Jong (University of Kentucky). The project builds upon previous work by further developing previously successful materials, and includes a new focus on early algebraic thought. For additional information, please contact Dr. Schack at 606-783-2501 or via e-mail.
      • The Appalachian Regional Commission has awarded MSU a $500,000 grant to continue the Appalachian Rural Dental Educational Program, an initiative started in 2011 with the University of Kentucky and the University of Pikeville to increase the number of practicing dentists in Appalachia, and provide a campus-based oral health awareness program. For more information, click here to view the official news release.




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