What Salaries to Enter During Budget Preparations!

Dhanonjoy C. Saha, PhD, Director

Anindita Mukherjee, PhD, Assistant Director

Office of Grant Support

Albert Einstein College of Medicine

New York, USA

Basics of Budget: Federal Cost Principles

ReasonabilityAllowabilityAllocabilityConsistency

NIH Grants Policy Statement: The Cost Principles

Basics of Budget: The Key Points

Read the FOABe aware of the LIMITS

NIH Link: Developing Budgets

Basics of Budget: Key Elements

Direct Cost & Indirect Cost

Institutional Base Salary

Salary, Salary Cap, and Salary Escalation

Survey for an Optimized Budget to Develop a Model System

Who Fall under Salary Cap on Federal Grants

Who Can Be a PI on a Federal Grant

Salary Escalation Policy: A SurveyWhile developing budget proposal:

Do you put the actual salary for 1st year if the salary is over the cap?

Do you use an inflationary/escalation rate of salary for the 1st

year?

Do you use an inflationary/escalation rate of salary for the subsequent years?

If so, what salary escalation rate you use for preparing the budget?

Do you have a policy to use any preset salary cap escalation rate?

What salary cap escalation rate you consider to propose?

Do you find consistency in your institutional policy regarding the use of salary and salary cap escalation rates in proposed budgets?

Salary: A Direct Cost

Broad categories commonly used:

Image Reference: Link

Fringe Benefits: The rates are based on institutional policies; NIH has no pre-set limit on fringe benefits.

Indirect Cost: “Keeping the lights on”

“Every year, the US government gives research institutions billions ofdollars towards infrastructure and administrative support.” This2014 Nature investigation revealed who is benefiting the most.

Institutional Base Salary: IBS

Direct Salary/Institutional Base Salary (IBS):“An individual's institutional base salary is the annualcompensation that the applicant organization pays for anindividual's appointment, whether that individual's time is spenton research, teaching, patient care, or other activities. Basesalary excludes any income that an individual may be permittedto earn outside of the duties to the applicant organization.”

[Refer: NIH link]

This is exclusive of other indirect payments i.e.,fringe benefits.

Salary: IBS (Contd…)

Should IBS include administrative stipend/supplement for faculty members serving as a) Dean/VCR/Provost

b) Chair/Director (department)

c) Interim Chair/Director (department)

Depends on institutional policy…

IBS: A Rational Approach… These would be included in IBS:

a) As long as these come with associated institutional fringebenefits.

b) If the supplement is for a part of the employee’s primaryappointment.

c) If the appointment is scheduled to be recurring (e.g., morethan a year, in case of interim capacity), or for indefiniteperiod.

Usually overload payments and summer salary are excludedfrom IBS.

A well-defined Federal and Institutional policy and guidelinesfor IBS are needed.

IBS: Example

Dr. Lopez is a physician scientist. Herinstitutional base salary is $150,000 peryear. She has an agreement with herinstitution to receive payments based onpatient Relative Value Units (RVUs). Sheusually receives about $200,000 additionalpayment per year. Additionally, shereceives $50,000 bonus per year for heroutstanding work. What would be her IBS?

Salary Cap It is the maximum annual rate of salary for full-

time effort that can be directly charged toagencies’ awards, contracts, grants, andcooperative agreements.

Different federal agencies have different salary caplevels.

Salary cap does not limit the actual salary paid byan organization.

An organization can pay an investigator in excess ofthe salary cap.

Who Fall Under Salary Cap Regulations on DHHS/NIH Grants?

Salary limitation applies to PDs/PIs and all other keypersonnel who directly contribute to the scientificdevelopment or execution of a project in a substantive,measurable way, and request for salaries.

Salary caps are not applicable for personnel whose effortsare not measured in calendar months or percent efforts.

Salary limitation does not apply to Consultants under NIHgrants/contracts; however, the consultant payments must bereasonable and consistent with institutional policy.

Under no circumstances may an individual be paid as aconsultant and an employee under the same NIH grant.

Salary caps apply to Sub-contracts/Sub-awards.

NIH links: NOT-OD-17-087; NOT-OD-12-035; Salaries and WagesDHHS: Salary Limitation FAQ

NIH Salary Cap: Background Congress first instituted it in 1990 through the Annual

Appropriation Bill funding NIH.

The fiscal appropriation signed by the President each yearimposes the salary cap level an agency will follow fortheir grants, cooperative agreements, and contracts.

Since 2012, the cap has been tied to the federalExecutive Level (EL)-II salaries, the cap increases whenthe EL-II salary rates go up.

Effective January 8, 2017, EL-II has been increased from$185,000 to $187,000; it changes periodically.

Ref: https://www.dfa.cornell.edu/sites/default/files/nih‐salary‐cap2015.pdfand http://www.udel.edu/research

NIH Salary Cap: Background

Ref: Dede Rutberg, Grants Administration Branch, NIDCR

NIH Salary Cap: Applicability The Salary Cap may fluctuate by the award dates

e.g., two NIH grants for the same investigator, both award starting on the same date may be subjected to two different salary caps. If one was issued before the issuance of Salary Cap for the year, and another was issued after the release of the notice.

In these situations, internal re-budgeting of the NIH grant is allowed to increase the salary up to the new salary cap level if there are sufficient funds in the budget of the project (without changing the scope of the work).Refer: Link

Salary Cap: Federal Sponsors

Agency Name Salary Cap

All agencies under DHHS(NIH, AHRQ, SAMHSA, CDC, HRSA, ACF, ACL, CMS)

$187,000 (FY17); EL-II

DoD, NASA, Coast Guard $487,999 (Effective since June 24,2014) (Bipartisan Budget Act/BBA Cap)

USDA $161,900 (FY17); EL-III

NSF N/A

DoE N/A

Office of Federal Procurement Policy Notice 03/15/2016

Salary Cap: Non-Federal Sponsors

Agency Name Salary CapAmerican Heart Association DHHS Salary Cap

Anesthesia Safety Foundation DHHS Salary Cap

Cystic Fibrosis Foundation DHHS Salary Cap

Michael J. Fox Foundation DHHS Salary Cap

Multiple Sclerosis Society $199,700

Patient Centered Outcomes Research Institute

$200,000

Susan B. Komen Foundation $250,000

Refer: https://finance.uw.edu/maa/fec/costshare/salarycap‐limitations

Salary Calculation: When IBS is over the salary cap…

“Actual salary paid to an individual is not constrained bythe salary cap. Salary above the salary cap is considered asmandatory cost sharing and must be tracked by departmentand certified on an annual basis.”

Over the cap salary: Difference between the total monthly rate and DHHS salary cap rate

NIH HHS Salary Cap Calculator

Some useful tips and guidance: NIH Salary Cap FAQ

Salary Limitation: NIH Fiscal Policy “… proposals…should reflect the actual institutional base salary of

all individuals for whom reimbursement is requested. In lieu ofactual base salary, however, applicants/offerors may elect toprovide an explanation indicating that actual institutional basesalary exceeds the current salary limitation. When this informationis provided, NIH staff will make necessary adjustments torequested salaries prior to award.” [NOT-OD-12-035]

“Applications with a detailed budget should continue to reflect theactual institutional base salary of individuals for whomreimbursement is requested. NIH will make any adjustmentnecessary using the applicable salary limit in effect at the time ofaward….an application using the modular budget format,applicants should use the current salary limit when estimating thenumber of modules requested.” [NIH Salary Cap FAQ]

What would you do when the actual base salary is wayabove the NIH salary cap?

Salary Escalation Rate: NIH Fiscal PolicyNIH Guide Notice NOT-OD-12-036 states NIH will nolonger be providing cost-of-living/inflationary increasesin awards. Can applicants still request such increases incompeting grants? [Refer: NIH FAQ]

Detailed Budget: “…Applications with a detailed budget cancontinue to request cost-of-living/inflationary increases inaccordance with institutional policy. We recognize thatinstitutions may desire to do this to document actual needsfor budgeting and accounting purposes. However, under thecurrent budget climate, it is likely that requests associatedsolely with inflationary increases will be eliminated fromthe awarded budget.”

Modular Budget: Requests for an additional module solely toaccommodate inflationary increases will not be considered.

Salary Escalation: Outlining NIH Fiscal Policy and Its Impact

NIH does not have a well-structured policy on salaryincrement rate.

NIH may align with the institutional policies.

While developing budgets, some institutions proposesalary increment following their own policies.

Some of the institutions do not have uniform policy andguidance for salary escalation rate.

The salary escalation rate can vary amongst differentdepartments within the same institute indicating a lackof consistency.

Salary Cap Escalation: Outlining NIH Fiscal Policy Problems

What if the Salary Cap increases by the timethe award starts?

Do the institutions propose increment onSalary Cap for future years while developingbudgets?

Do all NIH ICs follow uniform rules aboutsalary cap escalation?

What is the common practice and is it“optimized”?

Examples of Common Practice/Errors while Proposing Budget

Assuming the salary cap refers only to salary requested, notto IBS: In case IBS is higher than the salary cap, adjustmentshould be made.

Applying inflation to the salary cap in out years: The salarycap should remain flat across the budget years proposed andshould not be increased by an inflationary percentage.

Not adjusting the salary cap to match the appointment: Thesalary cap is for a 12-month period; the cap amount isreduced for the 9-month academic period.

Not adjusting the salary cap to match the FTE level: The capis for a 1.0 FTE; it is proportionally reduced for a 0.75 or0.50 FTE.

Refer: HHS Salary Cap LinkDHHS: Salary Rate Limitation FAQs

Salary Escalation Policy: A Preliminary Survey

OrganizationSalary Escalation Rate (%)

Salary Cap Escalation Rate (%)

Institute-1 0 (Existing salary) 0 (Always cap)

Institute-2, 3, 9, and 15 3% 0 (Always cap)

Institute-4, 5, 6, 7, and 8 3% 3%

Institute-10 2-3% 0 (Always cap)

Institute-11 3-7% 3-7%

Institute-12 4% 0 (Always cap)

Institute-13 1-3% 0 (Always cap)

Institute-14 1.03% 0 (Always cap)

Salary Escalation Policy: Preliminary Survey Results

6%

26%

33%

7%

7%

7%

7%7%

Institute (%)0 3 3 2 - 3 3 - 7 4 1 - 3 1.03

6%

26%

33%

7%

7%

7%

7%7%

Institute (%)0 0 3 0 3 - 7 0 0 0

Salary Escalation Rate (%) Salary Cap Escalation Rate (%)

What Would Be the “Optimized” Practice for Entering Salary?

Would you Include inflationary increment for salaryrate per year?

Would you consider including a slightly higher salarythan the cap in case the award starts after a new(increased) cap is in effect?

Would you enter actual salary when the PI’s salary isfar more than the DHHS/NIH salary cap?

Would you keep the salary flat and increase theOTPS?

Would you ask for additional personnel such astechnicians/post-docs?

NSF: Salary Policy & Limitation

For Senior Personnel: NSF limits the salary compensationrequested in the proposal budget for senior personnel to nomore than two months of their regular salary in any one year.This limit includes salary compensation received from all NSF-funded grants (Link to NSF Grant Proposal Guide).

For all other personnel, including postdocs, research scientists,and other personnel not budgeted as senior personnel, the 2-month salary policy does not apply.

For these other personnel, the compensation should be inproportion to the amount of effort the individual(s) in questioncontribute to the project.

At proposal time, requests for exceptions to salary limitationsshould be disclosed in the proposal budget and justified in thebudget justification.

NSF: Examples

Dr. Lopez is applying for one NSF grant with October 20, 2017deadline. The award start date is April 2018. Dr. Lopez hasapplied for a promotion for which she will most likely receivea favorable decision. The promotion will be in effect fromJanuary 2018.

What salary would you use for Dr. Lopez’s NSF proposalbudget, her current salary or the anticipated new salary?

Should a PI’s salary be budgeted by dollar amount or personmonths?

NSF policy speaks in terms of person months whenaddressing senior personnel salaries; therefore, always useperson months when budgeting a PI’s salary.

Refer: NSF Grant Proposal Guide

Department of Defense (DoD): Background of Benchmark Compensation Since enactment of the statutory formula in 1998, DoD cap

has increased more than 300%.

The Statutory Formula Cap “Benchmark compensationamount” for certain executives and contractor employeesfor FY13 and FY14 are $980,796 and $1,144,888,respectively.

The $1,144,888 “Benchmark compensation amount” isapplicable only for contracts awarded before June 24, 2014.

In December 2013, with the Administration's strong support,Congress reformed the ceiling on the reimbursement ofcontractor employee compensation to set a new cap.

Federal Register: A Notice by the Management and Budget Office on 03/15/2016

DoD, NASA, and Coast Guard: New Compensation Limit The new “Benchmark compensation cap” was set by the

Bipartisan Budget Act (BBA)

BBA significantly reduce the allowable cost limit/compensation cap for all contractor and subcontractor employees to $487,999

This may allow exception for highly skilled employees such as engineers and scientists to “ensure the agency has continued access to needed skills.”

BBA Cap is only applicable to contracts awarded and costs incurred after June 24, 2014

The BBA Cap was approved by the Senate on Dec 18

“The BBA Cap will be adjusted annually to conform to the Bureau of Labor Statistics Inflation Index”

GCA New compensation cap

Who Can Be a PI on a Federal Grant?

The applicant/participating PI/PD may not need to hold a PhD/MD/equivalent degree to be eligible to submit a federal grant.

Restrictions apply for Training Grants and Career Development Awards.

Who Can Be PIs on NIH Grants? A PhD/MD/Equivalent degree is not absolutely necessary for

most of the applications; it depends on the type of NIH grantprogram and the particular FOA.

Research Grants (R-grants) and Training Grants (T-grants):“Any individual(s) with the skills, knowledge, and resourcesnecessary to carry out the proposed research as the ProgramDirector(s)/Principal Investigator(s) (PD(s)/PI(s)) is invited towork with his/her organization to develop an application forsupport.”

Career Development (K) Awards: A research or health-professional doctoral degree or equivalent is required ingeneral.

Fellowship (F) Programs: PhD/MD/Equivalent degree onlyrequired for postdoctoral candidates.

Early Stage Investigators: NIH is committed to supporting Newand Early Stage Investigator (ESIs). A terminal research degreeor end of post-graduate clinical training is required, whicheverdate is later, within the past 10 years.

Refer: Parent Announcements: NIH Link; NIH: Who is eligible; ESI: NIH policy and compliance

Who Can Be PIs on NSF Grants?

NSF Eligibility Criteria for Senior Personnel: NSF proposals do not require senior personnel (PD/PI/Co-

PI/MPI; no distinction in scientific stature) to be PhDs.

When does NSF require a PhD or equivalent terminaldegree?

“Of all of these ways for your name to possibly appear in aproposal, only one budget-defined sub-category,“Postdoctoral (Scholar, Fellow, or Other PostdoctoralPosition)” specifically requires a PhD or equivalent. And,these Postdoctoral participants are considered “otherpersonnel,” no “senior” involved.”

Useful Links: NSF Blog Post; NSF Proposal Preparation Instruction

Who Can Be PIs for DoD/USAMRAA/CDMRP Awards?

DoD Career Development Award: PI has to be “independent, early-career researcher or physician-scientist within 10 years aftercompletion of his/her terminal degree (excluding time spent inresidency or on family medical leave).” [link]

Innovator Award: “PIs must be at or above the level of AssociateProfessor (or equivalent).” [link]

Breakthrough Award: “Investigators at all academic levels (orequivalent) are eligible to submit an application.” [link]

Distinguished Investigator Award: “PIs must be at or above thelevel of Assistant Professor (or equivalent) and be more than 6years beyond their last mentored position.” [link]

Investigator Initiated Research Award: “Investigators at or abovethe level of Assistant Professor (or equivalent) are eligible to submitapplications.” [link]

Clinical Trial Award: “PIs at or above the level of Assistant Professor(or equivalent) are eligible to submit applications.” [link]

Acknowledgement

SRAI Annual Meeting 2017 Team Research Administration Community

Albert Einstein College of Medicine, NY

THANK YOU!