3.1 Budget Basics

1. About Proposal Budgets

A budget is a key element of most proposals and serves as a blueprint for spending the project’s funds. An effective proposal budget outlines the proposed project's financial terms and helps reviewers to determine how the project will be conducted. Budget information about activities planned and personnel who will serve on the project provides reviewers with an in-depth picture of how the project will be structured and managed. Budget details usually reveal whether a proposed project has been carefully planned and may ultimately be feasible.

The proposed budget must provide an accurate assessment of all cost that are necessary to complete the projects objective.  It should be complete; that is, it should include all the costs of any personnel, supplies, and activities required by the project. For example if your work requires archeological digs in the outback of Australia, tents and sleeping bags may be required. The project needs to be feasible within the budget presented. If major cost areas are omitted or underestimated, the project, as proposed, will not be considered feasible.

Over the course of the project many different stakeholders are going to review the budget, and refer back to it. The decisions made now at the proposal stage will continue through the life of the grant, and others will make decisions based on it at future stages; therefore, it is time well spent to prepare a reasonable budget. A reasonable budget is one that is based upon actual costs when possible.

The budget will become an integral part of the obligation to the sponsor, particularly regarding effort commitments. When awarded the budget will evolve into a useful management tool.

Often required with the budget is a narrative justifying budgeted items. The budget justification will vary depending on the sponsor's budget format, including page limitations.


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2. Accounting Periods and Budgeting Salaries

To budget salary increases for faculty on the project, first determine whether their appointment type is on a fiscal year or academic year.  Most staff receive salary increases on 9/1/20xx

Stanford Accounting Periods

Appointment Type

Salary Increases on Sponsored Projects

Fiscal Year

September 1 through August 31

12 month appointment/ calendar year appointment

Salary increases for employees on a calendar year appointment (medical school faculty and all staff) must be charged to a sponsored project beginning September 1, the beginning of Stanford’s fiscal year.

Academic Year 

October 1 through June 30

9 month appointment/ academic year appointment

Salary increases for employees on an academic appointment (non-med school faculty, grad students, instructors, lecturers) must be charged to a sponsored project beginning October 1.


July 1 through September 30

summer appointment

Paid at no greater rate than the same rate as previous quarter


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3. Budget Methods

Zero Based

Gather data to estimate costs. Use current data from: People Soft, Vendor Quotes, and Travel Quotes. Break the work down to small increments so you can project costs. Apply judgment based on the facts and circumstances of this project and the PI’s portfolio. Discuss your estimates with the PI and make changes.


Assess actual costs and spending patterns from a similar project. Was that project:  within budget, on time, were performance specifications met?  Was the project free from disallowed cost at closeout? Review burn rates for non-salary expenses. Use your assessments to estimate costs for the new project.

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4. Budget Cost Categories

The costs included in a budget are typically divided into two categories.

Direct Costs 

Direct costs are those costs that can be identified specifically with a particular sponsored project, an instructional activity, or any other institutional activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. 

Examples: salaries and benefits, equipment (can be indirect too), travel, supplies and materials.

F&A (Facilities and Administrative) Costs

F&A costs are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity.

Examples: utilities, building and grounds, equipment (can be direct too), library expenses, general administration, sponsored projects administration.

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5. Consider the Costs of Out Years

You May Request an Escalation Factor

You cannot expect your budget to predict perfectly how you will spend your money five years down the road. However, you must propose a reasonable approximation of what you intend to spend. Be thorough enough to convince the reviewers that you have a good sense of the overall costs. You may request an escalation factor for recurring costs in accordance guidance received by RMG (Research Management Group) or OSR (Office of Sponsored Research).

Large Year-to-Year Variation

Any large year-to-year variation should be described in your budget justification. For example, if you have money set aside for consultants only in the final year of your budget, be sure to explain why in your justification (e.g., the consultants are intended to help you with the statistical interpretation of the data and therefore are not needed before the final year). In general, grantees are allowed a certain degree of latitude to rebudget within and between budget categories to meet unanticipated needs and to make other types of post-award changes. Some changes may require prior approval.

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