Federal Grant Budget Justification: What Reviewers Look For

1. Personnel Costs: The Largest Scrutinized Line

Personnel typically represent 60–80% of a federal grant budget. Each person listed must have a clearly justified role, an effort level (expressed as percentage of their appointment), and a salary that matches institutional records. Common errors include:

• Effort inflation — Listing a PI at 50% effort when their role description reflects 10–15% of work. Reviewers notice disconnects between narrative and budget.
• NIH salary cap — For NIH awards, no individual's salary charged to the grant may exceed the Executive Level II cap ($221,900 in FY2026). Calculate correctly or the application will be flagged.
• Missing fringe benefits — Fringe benefit rates must be applied to all personnel salaries using your institution's negotiated rates. Using a flat percentage without justification triggers scrutiny.

2. Indirect Costs (F&A Rates)

Facilities and Administrative (F&A) costs — commonly called overhead or indirect costs — are calculated as a percentage of the Modified Total Direct Costs (MTDC). Your institution's F&A rate must be negotiated with a federal cognizant agency (typically DHHS or ONR for research universities). Key rules:

• MTDC excludes equipment (items over $5,000), capital expenditures, patient care costs, tuition, and subaward costs beyond the first $25,000 per subaward.
• Some programs cap F&A rates — NSF limits F&A on some training grants; USDA and DOE have program-specific limits. Always check the solicitation.
• If your institution does not have a negotiated rate, use 26% de minimis rate (as permitted under 2 CFR 200).

3. Equipment, Supplies, and Travel

• Equipment — Items with a unit cost over $5,000 and a useful life over one year. Must be specifically justified as essential to the project. F&A is not applied to equipment costs.
• Supplies — Consumables under $5,000. Broad categories (e.g., "laboratory supplies: $12,000") are acceptable if connected to specific aims.
• Travel — Must show destination, purpose, and connection to project goals. Include conference attendance only if justified by dissemination plans. GSA per diem rates apply to domestic travel.

4. Subawards and Consultant Costs

If your project involves collaborators at other institutions, you will include either a subaward (when the collaborator has substantial programmatic responsibility) or a consultant agreement (for specific, limited services). Subawards require a full budget from the subawardee institution, their negotiated F&A rate, and a statement of work. Reviewers flag subawards that lack clear justification or that appear to transfer core work away from the primary applicant.

5. Cost Sharing — Proceed with Caution

Voluntary committed cost sharing (contributing institutional resources beyond what the grant requires) is strongly discouraged by most agencies, including NIH and NSF. Once committed in your application, it becomes a binding requirement. Only include cost sharing when the solicitation mandates it. Mandatory cost sharing must be documented with the source of matching funds before submission.