University of California Office of the President
Senior Vice President--Business and Finance

Research Administration Office

Memo Operating Guidance

No. 99-03

May 18, 1999

CONTRACT AND GRANT OFFICERS (CAMPUS AND LAB)*

VICE CHANCELLORS--ADMINISTRATION

Subject: NIH Modular Grant Applications and Awards

The National Institutes of Health is implementing its modular grant application process for all competing research project grants and Request For Applications (RFAs) requesting direct costs up to $250,000 in any year. Enclosed are some materials providing specific details of this new process:

1. NIH Modular Research Grants Frequently Asked Questions;
2. NIH Guide: Treatment of Administrative and Clerical Salaries under NIH Grants and Cooperative Agreements;
3. NIH Review of Modular Research Grant Applications; and
4. Overview and Summary of Changes prepared by the Research Administration Office.

The purpose of this memo is to highlight significant changes and address current issues of interest to Contract and Grant officers. Because the modular grant process represents a major change, we see this as an opportunity for implementing modifications to existing application and award administration practices. 

CAMPUS GUIDANCE 

The following recommendations are provided for your consideration in the implementation of NIH's Modular Grant Application and Award process:

• Budget for Salary Escalations Before Determining Number of Modules Required: Previously, a budget request for the first year would be developed, and then cost escalations incorporated into the successive years. Under the Modular Grant, total project costs for the entire multi-year period must be developed. The total cost, including projected escalations for the out years, is then divided by the number of years, and rounded up to the nearest $25,000 module. This is a major change. We recommend that you make sure departmental personnel understand that annual modular budgets are average budgets for the entire award period and that salary escalations result in a request for more modules than needed for costs in the beginning years to cover escalations in future years. Underbudgetting will result if the department prepares a first year budget, and then selects the number of modules required to cover the cost. Refer to Modular Research Grants Frequently Asked Questions Budgetary Issues #6 (Enclosure 1).

• Include Escalations for Consortium Participants Before Rounding to Nearest $1,000: The annual, average Consortium/Contractual cost, including the F&A cost, must be presented on the budget justification page, rounded to the nearest $1,000. As such, the consortium institution will need to prepare an estimated total award budget for the entire period, including out year escalations, and then divide by the number of years to derive the average annual cost of the consortium activity. While the consortium expense is estimated to the nearest $1,000, the cost of the consortium activity is then included in the total University direct costs to derive the number of modules required.

• Discontinue Showing Academic Year Voluntary Effort: For academic nine-month appointees, we recommend that you discontinue the practice of calculating academic year and summer month components of effort to derive the average percent effort provided in the modular budget justification. For example, if past practice on the detailed budget was to show 9 months at 10% effort with no salary requested and 3 months at 100% with 100% salary requested, the average effort devoted to the project would have been 32.5% (100% times 3 months, plus 10% times 9 months, equals 390% over twelve months). Instead, we recommend that the modular grant budget justification merely reflect the average effort to be charged to the NIH award. Using the same example, the modular grant budget justification would show 25% effort (100% times 3 months equals 300% over 12 months). The most recent NIH Q & A document suggests that academic and summer effort should be separately identified on the budget justification. We believe this is inconsistent with the notion of modular budgets and is contrary to the recent recommendation of the National Science and Technology Council Report on Reviewing the Federal Government-University Research Partnership for the 21^st Century dated April 1999. Therefore, we continue to recommend that only the average, annual budgeted effort amount be shown. However, since the justification is to be provided only for items included in the budget, another approach would be to show 100% requested reimbursement for summer effort and 0% requested budget for the academic year. Regardless of whether the average annual effort or a break-out of the summer and academic year effort is provided, it is recommended that only budgeted effort be itemized and no commitment to cost-shared effort be documented on the budget request justification. This approach will greatly reduce the University audit exposure and reduce the accounting burden for award administration.

• Use NIH Salary Cap in Preparing Both Modular Requests and Regular NIH Budgets: The NIH salary limitation continues to apply. It is recommend that you use the capped rate (currently $125,900) in preparing the modular budgets. Further, for projects exceeding $250,000 for which detailed budgets are required, it is recommended that campus departments no longer use the actual salary rate in preparing the budget, relying upon NIH to reduce the request to the allowable salary cap. Instead, all budget requests, whether modular or in detail, should be prepared using the applicable salary cap.

• Prior Approval Required for Direct Charge of Administrative and Clerical Costs: Administrative costs must be budgeted and spent in compliance with NIH Guide, Volume 23, Number 34, September 23, 1994. (See Enclosure 2) Prior approval for these costs may be secured when the nature of the work performed requires an extensive amount of administrative or clerical support significantly greater than the routine level. The basis for charging these costs has not changed. What has changed is the mechanism for agency approval of these costs. Because a detailed budget and budget justification for these costs is not submitted to NIH, when the circumstance for charging administrative costs is not covered in any of the specific examples provided by NIH in the attached notice, you will need to contact NIH for agency approval. See NIH's Frequently Asked Questions, Budgetary Issues #10 (Enclosure 1).

Please send any questions or further suggestions for improving the University’s implementation of modular grants to Meredith O’Connor. It is expected that as both the NIH and the Universities have more experience with modular grants, further refinements and improvements of the process will occur. 

Refer: Barbara Yoder
(510) 987-9848
Barbara.Yoder@ucop.edu

Meredith O'Connor
(510) 987-9847
Meredith.Oconnor@ucop.edu

Subject Index: 02, 19
Organization Index: F-405

David F. Mears
Director

Cc: Barbara Lester
Jorge Ohy
Extramural Fund Accounting Officers
 

Enclosures:

Modular Research Grants Frequently Asked Questions at http://www.nih.gov/funding/modular/modular_faq_pub.htm

Treatment of Administrative and Clerical Salaries under NIH Grants and Cooperative Agreements Awarded to Educational Institutions at http://www.nih.gov/grants/guide/1994/94.09.23/notice-treatment-of-007.html

Review of Modular Research Grant Applications at http://www.nih.gov/grants/funding/modular/modular_review.htm

NIH MODULAR GRANT OVERVIEW AND SUMMARY OF CHANGES

Prepared by the Research Administration Office, UCOP

The National Institutes of Health is implementing its modular grant application process for all competing research project grant mechanisms (RO1, RO3, R15, R21, R41 and R43) as well as for Request for Applications (RFAs) requesting direct costs up to $250,000 in any year. RFAs exceeding $250,000 per year may use the modular grant mechanism at the discretion of the program officer as published in the RFA. 

Implementation begins with the June 1, 1999 application deadline for all competing individual research project grants (RO1), small grants (RO3), and exploratory/developmental grants (R21). Implementation begins with the May 25, 1999 application deadline for Academic Research Enhancement Awards (R15). Small Business Technology Transfer grants, Phase I ((R41) and Small Business Innovation Research grants, Phase I (R43) due April 1999 were submitted under the Modular Grant Application and Award Process.

The NIH recently added a question and answer document to its modular grant website at http://www.nih.gov/grants/funding/modular/modular_faq_pub.htm (Enclosure 1).

SUMMARY OF CHANGES

• Modular features may apply to PHS 398, PHS 6426-1 and PHS 6426-3 applications. Applications that use the PHS 6426-1 and PHS 6426-3 forms will include modular grant instructions in the solicitations.
• Modular proposals will request direct costs in $25,000 modules. A typical application will request the same number of modules in each year. An atypical application contains categories of costs that affect the modified total direct cost base such as equipment and patient care costs. (Refer to the NIH Modular Grant website).
• There will be no future year budget escalations.
• Non-competing applications and awards will follow the SNAP process.
• Cost Principles and Cost Accounting Standards apply.
• The significant rebudgeting requirement is eliminated.
   

PHS 398 Application Highlights:

• The Detailed Budget for Initial Budget Period, Form 4-DD and The Budget for Entire Proposed Period of Support, Form 5-EE will not be used. All other PHS 398 Forms are submitted under the Modular Grant Application and Award Process.
• Use a new Modular Grant Budget Justification Page to submit summary total direct cost yearly budget amounts in modules of $25,000 and the budget justification. The budget justification will include information on key personnel and consortium/contractual costs when applicable. Under Personnel, provide the names, percent of effort and roles on the project. Do not provide individual salary information. (See http://www.nih.gov/grants/funding/modular/modular.htm for sample pages).
• The Biographical Sketch, Form 6-FF (Rev. 4/98) will contain a new section "Research Projects Ongoing or Completed During the Last Three Years". The page limit has been increased from 2 to 3. The information provided in the new section on "Research Projects" should include specific aims, overall goals and responsibilities for Federal and non-Federal Support.
• The Other Support page, Form 7-GG will be submitted "Just in Time" to determine overlap for likely award candidates.
• The Checklist, Form II will include the modified direct cost base, the facilities and administration rate and the total facilities and administration costs for each of the years for which funding is requested.