A proposal budget is a section of the proposal that represents and/or reflects the Principal Investigator's best estimate of the actual costs for conducting the scope of work. It is imperative to pay attention to any sponsor specific instructions, guidelines and/or requirements when preparing budgets. The application may also include specific budget forms that may be required for submission of the proposal.

There are two types of costs that are included in a budget: Direct Costs and Indirect Costs. When added together, the final figure is known as the Total Cost.

On this page:

Direct Costs

Direct costs are costs that can easily be identified with the project and can be directly charged to the project. Examples of direct costs include:

  • Salaries
  • Fringe Benefits
  • Tuition Remission
  • Consultants
  • Equipment
  • Supplies and Materials
  • Travel
  • Subawards

Direct costs for federal contracts and grants should be prepared in accordance with guidelines incorporated in the Code of Federal Regulations.

Indirect Costs

Indirect costs are those costs that are not specifically identifiable to any one project or program, but are considered a valid expense of conducting research. These costs are often referred to as indirect costs, or overhead. Examples of indirect costs include:

  • Building use
  • Equipment depreciation
  • Operation and maintenance of UCLA facilities
  • Student services
  • Departmental administration
  • Administrative Support Offices

For proposals to the Federal Government, UCLA has a negotiated indirect cost rate agreement with the U.S. Department of Health and Human Services (DHHS). These rates are recognized by all other federal agencies.

Which Indirect Cost Rate Should I Apply?

The indirect cost rate that is applied to the budget is often dependent on the type, or even location, of the project that is being conducted. For example, there is one rate for activities that are taking place at an on-campus location, which is campus space that is owned by UCLA, and a different rate for activities that are taking place at an off-campus location, which is campus space either leased by UCLA or not owned by UCLA.

It is important to refer to the rate agreement when developing your budget in order to apply the correct rate. For the various federally negotiated rates, please see UCLA’s most current rate agreement.

Do These Indirect Cost Rates Apply to Non-Profit Sponsors?

For nonprofit sponsors, UC policy requires that the full cost of work- both direct and indirect costs be requested. However, it is often the case that the sponsor has a written policy limiting the indirect costs. In instances where the PI requests to lower or waive the indirect cost rate or where sponsor guidelines caps their indirect cost rate at a rate lower than UCLA's federally negotiated rate, an Indirect Cost Exception request may be appropriate.

Applying the Federally Negotiated Indirect Cost Rate

The federally negotiated indirect cost rates are based on the Modified Total Direct Cost (MTDC) base. UCLA's federally negotiated indirect cost rate and the MTDC base is applied to sponsored budgets unless the sponsor has a different indirect cost policy. When a sponsor has a different indirect cost policy, an indirect cost exception may be required. When applying the MTDC base, indirect costs are not assessed on every type of direct cost contained in the proposal budget. There are specific direct costs that are excluded from the assessment of the indirect costs.

These exclusions are:

  • Patient Care Costs
  • Student fee remission 1
  • Rental Costs of off-site Facilities
  • Scholarships and Fellowships
  • The portion in excess of the first $25,000 of each subgrant and subcontract issued by UCLA to an outside entity/organization
  • The entire amount of any subgrant or subcontract to other UC campuses
  • Equipment2 and Capital Equipment

The remaining direct costs that do have indirect costs assessed are collectively known as the Modified Total Direct Costs (MTDC) base. These costs often include:

  • Salaries and Wages
  • Fringe Benefits
  • Materials and Supplies
  • Services
  • Travel
  • The first $25,000 of each subaward that is issued by UCLA to an outside entity/organization

Note: (1) Tuition and fee rates are determined and managed by the UCLA Graduate Division. (2) Equipment is defined as an individual item that costs at least $5,000 and has a life expectancy of more than one year. Items that cost less than the $5,000 threshold or that will be consumed quickly are considered as supply items. These items that cost under $5,000 will have indirect costs assessed.

Additional information needed when preparing salaries include knowing the number of months per year that the salary is being requested for and the percentage of effort that each employee will expend on the project or program. These two items, when multiplied together, are then referred to as person months. A helpful tool when developing budgets is the NIH Percent-of-Time and Effort to Months conversion chart.

Requesting an Indirect Cost Exception

Principal Investigators and administrators have a duty to ensure that sponsored projects are performed on full cost recovery basis and are obligated to seek full recovery of indirect costs from all sponsors when applying for an extramural award. Indirect cost recovery is important for long-term sustainability of UCLA's research enterprise, scholarly and creative programs and physical and administrative infrastructure.

When a sponsor or project does not budget for full indirect costs, an approved indirect cost exception is required. Only those administrators who have been delegated authority to approve an indirect cost exception may authorize less than full indirect cost recovery. Principal Investigators are not delegated this authority. Principal Investigators, with assistance from their department, prepare and submit a request to OCGA. The exception request is based on Sponsor Policy or Campus Determination, if there is no sponsor indirect cost policy.

Sponsor Policy
UCLA will reduce or waive indirect cost recovery if a non-profit sponsor (for example, non-profit foundations, charitable trusts, domestic governmental agencies, and international non-profit organizations) has a policy that limits or prohibits the recovery of indirect costs.

The sponsor’s policy must be:

  • Published and consistently applied to all grantees, or
  • Conveyed in writing (for example, letter or e-mail) by an official empowered to legally act on the sponsor’s behalf and include the official’s confirmation that the policy is not applied in an ad hoc or grant-by-grant manner.

Campus Determination
Occasionally, in the absence of sponsor policy, the VCR may determine that the development of campus research, training or public service programs or infrastructure may best be served by accepting a sponsored award at less than the indirect cost rate normally paid by the sponsor.

In such cases, it must be clearly demonstrated that campus interests are sufficiently significant and vital that performing the awarded activity at a loss is more important to UCLA’s mission than recovering the full costs of the project.

For a proposal to be submitted with a reduced indirect cost rate, a campus determination request must be submitted and approved prior to the proposal deadline.

Prepare & Submit a Campus Determination Request

  1. Addressed to the Vice Chancellor for Research and Creative Activities (VCR)
  2. Signed by the Dean (or Vice Dean for Research)
  3. Include the following information:
    1. The PI & administrating dept
    2. Sponsor (& prime sponsor if applicable)
    3. Project title
    4. Project period
    5. Total costs requested
    6. The sponsors indirect cost rate and base
    7. The requested indirect cost rate and base
    8. A short summary of the project
    9. An explanation for why UCLA is best served by accepting the award at less than the indirect cost rate normally paid by the sponsor (see the next slide for guidance)
    10. The impact to the project and UCLA if a campus determination is not granted

Potential Justifications

If the funding is Federal or State, the request will also need to be submitted (by OCGA) to UCOP for approval.

DRAFT Salary Scales

The DRAFT Salary Scales for proposal preparation is available.

Resources

Last Updated: April 15, 2026