Justification Nation Part 3: More on Budget Justifications for Personnel

moneyA KEY QUESTION AS YOU BEGIN TO DEVELOP YOUR BUDGET JUSTIFICATION: WHO ARE KEY PERSONNEL?

Every proposal will have key personnel, and you’ll need to budget and justify the effort for these individuals differently, depending on the requirements of the funding announcement, the agency requirements, your institution and the PI’s preference on the proposal. (In addition, the recently enacted Federal financial conflict of interest rules will impact how you administer key personnel on proposals.)  In general, you’ll need to keep in mind that key personnel are individuals who have a measurable level of effort on the project, and they contribute both to the scientific development and execution of the project on an ongoing basis in a substantive and measurable way. This is always the Principal Investigator and individuals that have scientific training and expertise that could not be replaced if they were to leave the project. (This is why the NIH and many other agencies have a rule that key personnel effort cannot drop on a project without notifying the agency.)

AN EFFORTLESS WAY TO UNDERSTAND PERSON MONTHS: WHAT ARE THEY, WHY DO WE USE THEM, AND HOW DO I CALCULATE THEM ANYWAY?

Most, but not all Federal agencies use person months to calculate the effort that is proposed for a faculty or staff member on a proposal. This is a shift from a number of years ago where the percent effort was requested – and it still causes some confusion.

Person months are a calculation of effort that takes into account the type of appointment an individual has at an organization, and it uses a base unit (the calendar year) that is universally accepted. There are three types of units that we can measure for effort: 12 months (CM) Academic Year – either 9 or 10 months (AM) or Summer -either 2 or 3 months (SM), and for the last two, you need to outline what your institution defines as the academic or summer months. Before, when a justification provided effort as 50%, and the justification did not provide the basis of the individual’s appointment, the agency could not verify the effort proposed. (50% of what?)

So you’re wondering now, with great anticipation:  how do I calculate these fabulous person months? It’s easy, and once you get the hang of it, you can impress your friends and family:

# of months of faculty appointment X percent effort on proposal = person months on proposal

You can easily calculate person months for a faculty member with a 12, 11, 10 or 9 month appointment; or for a faculty member giving effort for the summer only. Enter the base months, the percent effort on the proposal, and you have the person months.

  • 12 month appointment  X 30 percent = 3.6 CM
  • 9 month appointment X 40 percent = 3.6 AM
  • 3 summer months X 80 percent = 2.4 SM

MODULAR BUDGETS: THE $25,000 QUESTION

Modular budgets are only used by the NIH, which is too bad, because they are a great idea. They are a form of budget and justification that allows a principal investigator with a solid idea that has modest costs to submit a streamlined budget for review. The investigator budgets the total directs in terms of $25,000 modules, up to $250,000 per year, and submits a budget justification for the following items ONLY:

  • Personnel
  • Consortium/Subcontract Costs
  • Additional Narrative
    • Variations in modules from year to year
    • Justification for costs that are excluded in F&A base (equipment and tuition)
    • Describe work conducted off-site (which affects F&A base)

WHEN ARE PERSONNEL NOT PERSONNEL AT ALL? WHEN IT’S TIME TO USE A SUBCONTRACT, CONSULTING AGREEMENT, OR VENDOR CONTRACT.

An investigator can often present an array of individuals to be listed on a proposal, and wish to pay them as employees when they should be listed as a consultant, vendor or subcontractor. Before clarifying how to proceed, it is best to ask a few questions:

  1. What work is needed on the project? Will a specific individual perform the work or is it in fact a company?
  • Scenario A: A principal investigator needs a fancy schmancy lab test for his application that has to be sent out to LAB FS, Inc. He wants to put Dr. Fancy A. Schmancy on his proposal at 1% effort because he is the head of the lab. When you ask, you learn that Dr. Schmancy doesn’t actually perform the test. This is a good example of a vendor contract, and Dr. Schmancy shouldn’t be listed on the the proposal. (One would also want to ask if the test could be performed on campus at a Core Lab – and by checking if this is the case, could save on budget.)
  • Scenario B: A principal investigator in the School of Engineering would like to have a consultant from the same university in the School of Medicine perform work on a periodic basis – to review scans to assist on the medical device she is developing. The investigator would like to pay this consultant per scan read for the life of the project. This is acceptable because the consultant is providing his expertise, outside of regular work hours, and is not doing work that he is regularly paid to do (if audited, it would be easy to identify work he spent on this project). Usually, consultants though are individuals who work outside the prime institution.

2. Will a named consultant be using institutional resources, or working independently?

  • Scenario A: A principal investigator would like her colleague from Sunny West Coast University to be a consultant on her project. Our PI knows that the investigator from SWCU is reducing his academic commitment at the University and has some consulting time, and she knows he’s got the right expertise for her project. When you contact the investigator from SWCU, however, he quickly provides a consulting letter on University letter head, which mentions that he will contribute graduate student time, computer labs to help analyze data. In addition, he states that he doesn’t want to pay taxes on his consulting income.

This is a situation where you can help your PI gently inform her colleague that you’ll need to set up a subcontract, since he is still using his University resources (his office, students, labs) and that he is unwilling to establish the proper financial relationship as a consultant with the University.

We’ll review more about the differences between subcontractors and vendors in an upcoming post, and there are times that it is not easy to determine which is best to use. For now, it’s important to know that subcontractors are partners in the development and implementation of the scientific study, and are held to the terms of the award and compliance rules. A vendor implements a service or product that is needed to accomplish the study but does not influence its outcome and is not held accountable for anything other than its ability to meet its contracted services agreement.

ADDITIONAL RESOURCES FOR BUDGETING PERSONNEL ON PROPOSALS

National Institutes of Health: Developing Your Budget

National Science Foundation – Budget Preparation

Health and Human Services Grants Policy Guide

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