Budgeting, Cost Principles and Tools

Cost Principles and Guidance

Project budgets should include all costs required to accomplish the objectives in the proposal or agreement. These costs are categorized as either direct or indirect costs.

Direct Costs

All direct costs charged to sponsored projects awarded to The University of Texas must be allowable, allocable, necessary and reasonable for carrying out the objectives of the sponsored project as defined in Uniform Guidance (2 CFR 200). To be consistent in managing direct costs, the University extends these requirements to both federal and nonfederal sponsors.

For details on direct costs, see the Code of Federal Regulations (200.413), which are also detailed in the University (HOP).

All costs charged to a sponsored project must be allowable, reasonable and allocable (2 CFR 200 Subpart E—Cost Principles).

Allowable: A direct cost is allowable when it is necessary for the project and meets the criteria for reasonable and allocable costs outlined here in 200.403.

Reasonable: A direct cost is reasonable when it does not exceed that which would be incurred by a prudent person, as defined in 200.404.

Allocable: A cost is allocable to a particular award if the relative benefit of the goods or services can be assigned to that award. The cost must be incurred specifically for the award, and be charged to the award proportionally to the benefit the award received, as outlined in 200.405.

For additional details, please see Select Items of Cost Guide (PDF).

Facilities and Administrative (F&A) or Indirect Costs

Facilities and Administrative (F&A) costs are costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefited. These costs include building depreciation, equipment and capital improvement, utilities, custodial services, general administration, research administration, the libraries, accounting and purchasing. (200.414).

The University’s F&A rates are determined by an agreement with the federal government in accordance with the federal Uniform Guidance. See the current Cost Rate Agreement.

Organized Research – On-Campus
Organized Research means all research and development activities that are separately budgeted and accounted for, including sponsored and University research activities and research training activities.

58.5% (MTDC)
(14.5% ARL)

Instruction – On-Campus
Instruction means the institution’s teaching and training activities (other than research training) whether offered for credit toward a degree or certificate or on a non-credit basis, and whether offered through regular academic departments or separate divisions, such as a summer school division or an extension division.

50% (MTDC)

Other Sponsored Activities – On-Campus
Other Sponsored Activities means programs and projects financed by federal and non-federal agencies and organizations which involve the performance of work other than instruction and organized research. Examples of such programs and projects are health service projects and community service programs, as well as symposia and conferences that do not meet the definition of Instruction.

40% (MTDC)

This rate is used when the project will take place off campus for at least 90 consecutive days and one of the following criteria is met:

  • The combined proposed effort of all involved UT personnel working off-campus is greater than the combined proposed effort of all involved UT personnel working on-campus. This includes unpaid contributed effort.
  • The budget includes leasing or renting an off-site facility as a direct cost, and the personnel paid from the grant and any equipment are located at that facility.
  • The total direct costs incurred off-campus exceeds the total direct costs incurred on-campus.

You must have OSP approval prior to using the off-campus rate. Requests to use the off-campus rate are due to OSP at least seven (7) business days before the proposal deadline.

26% (MTDC)

For details and questions on the F&A Rate, including when F&A applies, how it’s negotiated, and when rates are updated, please see the Facilities and Administrative (F&A) Rate FAQ.

Exceptions Under F&A Procedures

The University of Texas at Austin will honor published (e.g. foundations or non-profits) or statutory (e.g. USDA, US Dept. of Education) limitations on recovery of indirect costs. The University also accepts the following rates from these prime sponsors without additional documentation:

  • State of Texas, City of Austin, Travis County and other state and local government agencies (excluding federal flow through) are 15% (TDC)
  • Non profit foundations and organizations without published rates are 15% (TDC)
  • Clinical Trials for Industry (excluding federal flow through) are 38% (TDC)

All other exceptions to these F&A rates require a waiver, which is approved by the Vice President for Research, Scholarship and Creative Endeavors.

F&A Waiver and Reduction Requests

Waiver and reduction requests are submitted to OVPR through the Associate Dean for Research (ADR) or equivalent in the PI’s college or unit. Requests should include:

  • OSP number
  • Detailed budget
  • Explanation for the request
  • Approval by the ADR
  • Draft commitment letter prepared for signature by OVPR if required by the sponsor

Requests for IDC adjustments must be routed by the ADR to OVPR for final review and approval at least 7 business days prior to the proposal submission deadline.

Please note:

  • OVPR does not judge the relative merit of submitted proposals; therefore, it will not waive or reduce F&A to make proposals more competitive.
  • OVPR does not grant F&A waivers or reductions for the sake of stretching a proposal’s budget; therefore, OVPR will not waive or reduce F&A to help a budget fit into an agency cost cap.

F&A Rates for Subawards

Subrecipients to The University of Texas at Austin should use the federally negotiated F&A agreements in effect at their institutions unless a published or statutory limitation from the prime sponsor applies. When no approved cost rate agreement exists and there is no sponsor-published policy, the University will accept the following F&A rates from these prime sponsors:

  • National Institutes of Health (NIH) subawards for foreign institutions of international organizations (GPS 16.6; 45 CFR 75.414(c)(1)(i)) are accepted at 8% (MTDC).
  • National Institutes of Health (NIH) subawards for for-profit entities WITHOUT an established cost rate agreement (excluding SBIR/STTR) (GPS 7.4; 45 CFR 75.414(c)(1)(ii)) are not allowed. For-profit entities WITH a negotiated rate agreement should use their negotiated rates.
  • Any federal sponsor with a subaward for a non-federal entity (never having received a negotiated indirect cost rate) (2 CFR 200.414(f)), will accept 10% (MTDC) de minimus.

Please note, the University does not negotiate indirect cost rates for subrecipients.

F&A Bases (TDC/MTDC)

Base: The F&A rate is applied to a base of direct costs in order to determine the F&A Cost. The base can be calculated in one of the following ways:

  • Total Direct Costs (TDC) = TDC means all direct costs included in the project budget. There are no exclusion or modifiers.
  • Modified Total Direct Costs (MTDC) = MTDC means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs (§200.1).

See the F&A Rate Decision Guide (PDF) for more information.

OSP Constituency List


UT’s Proposal Budget Template
Download a five-year budget template to map out proposed project costs by category.

Participant Support vs. Participant Incentive

Participant Support

Per Uniform Guidance 2 CFR 200.1, Participant Support is a direct cost for items such as stipends or subsistence allowances, travel allowances and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with conference, or training projects. Participant Support Costs are exempt from F&A when using UT’s negotiated F&A rate.

Uniform Guidance 2 CFR 200.308(c)(5) requires prior sponsor approval to transfer funds budgeted for participant support costs to other budget categories.

Participant Incentives

Participant Incentives are low value payments or items given to individuals to encourage them to participate in research. In order to be an incentive, the value of a payment or item must be minimal and should be provided to all participants in the research projects.

Paying individuals in exchange for their participation is a common and, in general, acceptable practice. Payment to individuals for their participation in studies is not considered a benefit and is not taken into account when IRB weighs the risks and benefits of the research. Payments can include compensation, gift certificates to participate in a survey, or petty cash “gifts” to encourage rural interviews.

UT Austin allows for use of Tango Card to compensate research participants. Tango Card is an online gift card service that enables researchers to allocate research compensation remotely.

Participant Incentives are part of the MTDC Base, and F&A should be calculated for funds budgeted in this expense category.

Any prior approval requirements to rebudget this expense category will be detailed in the sponsored award document.

Fringe Rates and Guidelines

The term “fringe benefits” refers to non-wage expenses paid by an employer on behalf of their employees. These expenses include insurance premium sharing, employer matching, Social Security (OASI) and Medicare, Teacher Retirement System (TRS) and Optional Retirement Program (ORP) matching, as well as assessments for Unemployment Compensation Insurance (UCI), Workers’ Compensation Insurance (WCI), vacation and sick leave.

Fringe Rates

Fringe benefits are a direct cost to a sponsored project (§200.431). They are budgeted as a percentage of the salaries and wages and shown as a separate entry in the budget. Fringe is charged on all payroll transactions processed in Workday (See a detailed list).

The University’s fringe rates are negotiated with its cognizant agency (DHHS) and are part of the University’s F&A Cost Rate Agreement.

The actual fringe benefit rate will be charged to the project when the expense is incurred, regardless of what rate is budgeted in the proposal. It may be necessary to rebudget during the project period to pay for actual fringe benefit costs.

Additional fringe benefit rate information can be found at UT Austin Payroll.


Benefits Eligibility Full-time Part-time Graduate Students Ineligible
9/1/23 – 8/31/24
26.1% 26.1% 16.4% 7.2%

Projections for Planning Purposes

Benefits Eligibility Full-time Part-time Graduate Students Ineligible
9/1/24 – 8/31/25
27.0% 27.0% 15.4% 6.4%
9/1/25 – 8/31/26
27.5% 27.5% 15.9% 6.4%
9/1/26 – 8/31/27
28.0% 28.0% 16.4% 6.4%
9/1/27 – 8/31/28
28.5% 28.5% 16.9% 6.4%

Fringe Mitigation

The transition to pooled fringe rates in FY19 may impact existing sponsored projects or previously submitted proposals. To mitigate grant/contract accounts (26- accounts) whose proposals were submitted prior to August 10, 2018 with fringe budgeted at less than the new rates, see Fringe Overdrafts Guidance.

Budget Revisions Requests

The transition to pooled fringes may impact existing awards. To that end, Post-Award will be enforcing fringe requirements on budget transfers in line with expected needs to support the new pooled fringe rates.

A budget transfer represents a deviation from the originally planned project and budget. The budget transfer may be sponsor-approved or allowed, but in either case the transfer composition of salary and fringe will need to meet the ongoing budget needs under pooled fringes.

This means, all budget transfers will need to carry a fringe-to-salary ratio of 30% (the percentage ratio may be updated annually dependent on the negotiated rate).

A budget transfer may increase or decrease only salary, only fringe or both. For questions, see Salary Cap Guidance.

To initiate a budget transfer, log into the Financial Resources Management System (FRMS) and Select the Transfers tab.


Person Months Calculator

A “person month” is the metric for expressing the effort (amount of time) personnel devote to a specific project. The effort is based on the type of appointment of the individual (Calendar, Academic or Summer).

Download UT’s Person Month Calculator Template