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Budget Preparation

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Basics of Proposal Budgeting

Sponsor guidelines should always be consulted for specific directives on budget preparation. The following represents general guidance.


The budget is the financial plan for the project or program. It includes both the sponsor and non-sponsor share of the total project cost. Proposed project costs are comprised of allowable direct costs, facilities and administrative (F&A) costs, and cost sharing (when mandatory). Allowable costs are those that are reasonable and allocable to the sponsored project and allowable under University and sponsor policy.

The budget should be subdivided into periods of twelve month duration (unless partial year funding is anticipated). If cost sharing is included, each budget period should include columns for both Sponsor and University costs.

A budget justification (Narrative) should be prepared to explain how the budgeted costs relate to the project. The Narrative should provide sufficient detail to allow the sponsor to determine whether the proposed costs are reasonable and appropriate. Key elements to include in the Narrative are:

  • A detailed justification of the expense or service
  • How the expense relates to and benefits the project
  • The anticipated cost
  • The time period in which it will be utilized
  • Other information that will aid the sponsor in evaluating the proposed item


Facilities and Administrative and Fringe Benefits Rates (Urbana Campus)

Facilities and Administrative rates, also known as Indirect Costs must be included in all budgets unless the sponsor has written policy in the guidelines or their website, that states Indirect Costs are not allowable. The most current University rates may be found at the Office of Government Costing. When projects involve partners located in Research Park, see this Matrix for guidance on the appropriate Facilities and Administrative Rates.

Budget Templates

Budget Template includes the following worksheets:

  • General template for Research, Instruction, and Other Sponsored Activity
  • State of Illinois
  • USDA Cap template - 30%, 22%, and 15% cap
  • General with cost share
  • Research or instruction with UIC component
  • Location tool for determining on-campus or off-campus

FY18 Budget Template also still available only for Other Sponsored Activities beginning prior to 7/1/18

Personnel Expenses

Effort Calculator: This chart is provided by NIH and is helpful in calculating person months/effort.


  • The salary category should include the names of all individuals who will be involved in the project, if known, otherwise use To Be Named (TBN) and job classification. Dependent upon specific sponsored guidelines either the percent effort or person months that will be applied to the project should also be shown. Depending upon agency limitations, an appropriate inflation rate (e.g., 3%) should be used to determine salary requirements beyond the first fiscal year.
  • Guidelines should be consulted for agency-specific salary caps.
  • The salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs. Direct charging of these costs may be appropriate only if all of the following conditions are met: (1) Administrative or clerical services are integral to a project or activity; (2) Individuals involved can be specifically identified with the project or activity; (3) Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency; and (4) The costs are not also recovered as indirect costs.

Fringe Benefits:

  • Fringe benefits are charged as direct costs to the project.
  • The most current fringe benefit rates should be used.
  • The most current University rates may be found at the Office of Government Costing.

Non-Personnel Expenses

Consumable Materials and Supplies:

  • Consumable supplies (with life expectancy of one year or less) are items used exclusively in support of project objectives.
  • It is generally acceptable to sponsors to provide a breakdown of materials and supplies by broad categories as opposed to the detailed listing of individual items.
  • When supply items are purchased to support the multiple activities of project personnel, they are considered to be indirect costs and cannot be charged directly to sponsored project funds. Such items would include University stationery, toner, pens, tablets, file folders, staples, paper clips, etc. (office supplies).


  • Costs for travel should be budgeted either on an actual cost basis (e.g., airfare, lodging) or per diem or mileage basis (e.g., subsistence, personal vehicle travel).
  • Charges incurred by employees for travel, lodging and other subsistence should be reasonable and allowable only to the extent of University policy.
  • The Narrative should provide information regarding destination and names of conferences, if known, number of travelers, duration of travel and estimated total cost.
  • Foreign and domestic travel should be itemized and justified separately.
  • Sponsor guidelines should be consulted to verify the allowability of travel costs.


  • Major items of equipment ($5,000 or more) proposed for acquisition should be itemized by descriptive name and estimated cost, and an adequate justification should be provided in the budget narrative.
  • Items with a useful life of more than one year and costing $500 or more, but less than $5,000, normally should be included and justified under "Materials and Supplies."
  • Equipment purchases should not be allocated between sponsor-provided and University-provided funds because of potential future points of contention associated with ownership of the equipment. If equipment is wholly pledged as cost sharing it must be purchased during the project’s period of performance. 


  • Should be clearly identified in the text of the proposal.
  • Should be included as a line item in the budget.
  • A formal proposal from the subawardee, including a statement of work, budget, budget justification, and letter of administrative approval from the subawardee’s institution should be provided when the proposal is submitted to OSP.
  • In the event the subawardee’s proposal is not available at proposal submission it must be provided to OSP and approved by the sponsor prior to the subaward being issued.

For guidance on distinguishing between subawardees and vendors:



Performs part of the “scope” of the research project and has its performance measured against such

Provides goods and services to many different purchasers

Uses the funds to carry out a portion of the scope of work of the University’s research project

Provides goods and services that are ancillary to the operation of the research project

Selected for intellectual merits or related research

Operates in a competitive market

Responsible for compliance and flow down reporting requirements of the prime award

Not subject to compliance issues (monitoring) or reporting requirements of the prime award

Has input into the decision making process regarding the direction of the research project

Responds to specifications

Authors or co-authors publications

Not applicable

May present papers/results of research at conferences

Not applicable

May seek patent protection for inventions

Not applicable

Retains title to Intellectual Property Rights

Work for Hire – Rights belong to Buyer



Computing Services

  • Network costs, including the hardware, software, personnel services, public access sites, and other related costs required to enable University personnel to share software or data or to communicate electronically with other individuals, are considered to be part of the physical infrastructure of the University and are classified as indirect costs. Charges for computing services may be budgeted only when these costs are justified as providing a direct benefit to the project. 

Professional Services

  • Consultants
  • Current or former University employees may not be paid as consultants. Payments to current or former University employees must be paid through the University payroll system. (see OBFS Policies and Procedures Manual, Section 17).

Other Direct Costs:

  • Other Direct Costs should be itemized and described in the Narrative.
  • Telephone service, including monthly service charges, ISDN, calling cards and cellular phone charges typically should not be included as these are classified as indirect costs. Memberships, postage, and food are typically deemed to be unallowable.
  • Further guidance regarding allowability of costs may be found in the OBFS Policies and Procedures Manual, Section 16.
  • Tuition remission
    • Tuition remission is assessed on graduate assistant stipends when allowed by a sponsor that pays full, negotiated F&A rates. View up-to-date rates.
    • When a sponsor provides reduced or no F&A, the sponsor’s policy or the Request for Proposal should be reviewed to determine if tuition remission is allowable. If allowable, tuition remission may be included at the discretion of the department.
    • The campus has elected not to charge tuition remission on State of Illinois projects with reduced F&A rates. By Federal statute, US Department of Agriculture National Institute of Food and Agriculture (NIFA) grants and certain Agricultural Research Service grants prohibits tuition remission. However, certain USDA Agriculture and Food Research Initiative (AFRI) programs will allow for tuition remission and may allow full recovery of facilities and administrative costs. Guidelines should be consulted.

    Facilities and Administrative and Fringe Benefits Rates (Urbana Campus)

    Facilities and Administrative rates, also known as Indirect Costs must be included in all budgets unless the sponsor has written policy in the guidelines or their website, that states Indirect Costs are not allowable. The most current University rates may be found at the Office of Government Costing.

Cost Sharing

Cost sharing may include only expenses that are allowable on and allocable to the project and incurred during the project period. It is the department’s responsibility to provide documentation which supports cost sharing commitments. See “Policies and Procedures Applicable to the Conduct of Sponsored Projects - Cost Sharing Documentation Requirements.” Documentation and support of cost sharing commitments must accompany the proposal documents submitted to OSP for review.