Once you've got the money you need to make the most of it. If your grant budget was designed carefully and realistically, you should be able to spend exactly what you've received and accomplish exactly what you set out to accomplish.

In order to do this, and stay within the law, you should have some understanding of basic terms and procedures in spending grant or contract money.

ALLOWABLE COSTS

Every funding agency has categories of items which you may spend its money on, and categories which you may not. For grants funded by the Department of Health and Human Services, look up allowable and unallowable costs in the PHS Grants Policy Statement: Costs Under PHS Grant-Supported Projects. Most investigators understand that you can't use grant money to make your boat payment, but some restrictions are less obvious. For federal grants, for instance, you may not use the funds for "entertainment". A number of investigators have been surprised to learn that the refreshments they served at a project-related meeting may be classed as entertainment, and therefore may not be allowable.

For other funding agencies, the award notice or the grant application materials will often list allowable and unallowable costs. If you're not sure about something, ask the program officer for your grant.

What happens if you spend grant funds on an unallowable item? You will have to give the money back. This is usually done by cutting some other expense in your grant budget.

COST REIMBURSABLE AWARDS

Most federal awards received by the Bureau and by Hektoen are made on a "cost reimbursable" basis. That means we have to spend the money first, and then be reimbursed. In order to be reimbursed, there must be documentation that the funds were spent on an allowable expense. If there is no documentation, the money cannot be recovered. Likewise, if the expense was not allowable, the money cannot be recovered.

Since account balances for cost reimbursable awards always run a deficit, you'll have to do more than just check your account balance to make sure your spending is consistent with your budget. You should also be aware that there is no such thing as "leftover" money from a cost reimbursable award. If you can't document that you spent the whole award, then at the end of the grant period the unexpended funds go back to the funding agency.

UNIT-BASED AWARDS

Contracts with pharmaceutical or device companies to carry out clinical trials have some similarity to cost reimbursable awards, since funds are often spent before they are reimbursed. In this case, however, reimbursement is tied to documentation that the work has been completed. Most contracts of this type will commit the company to paying a certain amount up front for your start-up expenses, and then use a schedule of payments linked to completion of portions of the protocol, often according to the numbers of patients screened, enrolled and completing phases of the trial. Unlike with cost reimbursable awards, it is possible to have "leftover" money at the end of the trial. If the payments exceeded the expenses, the money does not have to be returned.

OTHER PAYMENT STRUCTURES

Some funding agencies will pay lump sum installments every quarter, or may even award the entire amount up front. With installment plans, release of the funds for the next quarter is often contingent on your submitting a report of activities completed for the quarter just ending. This payment method is often used for state-administered grants. With this kind of award, extra money at the end of the grant period usually must be returned to the funder.

DOCUMENTING EXPENDITURES

As emphasized above, for some types of grants, undocumented expenditures are as good as no expenditures. There must be a way to show that this amount of money was spent on this item, or the funds cannot be recovered. Most people are familiar with the normal ways this is done: with invoices, receipts, payroll records, etc. If you bought something for your project out of your own pocket, but lost the receipt, you cannot be reimbursed.

DOCUMENTING TIME AND EFFORT

The biggest single budget category for most grants is personnel. The funding agency is essentially buying the time of the persons named in your grant budget to carry out the project. For this reason, it is as important to document that the time was spent as agreed as it is to document that the money was spent appropriately.

RECOVERING PORTIONS OF SALARY

When a person named on a grant budget is already employed by the County, the funding for that person's work is recouped for the institution that pays that person's salary.

Please note that these funds are never paid directly to the person named to supplement their income. That person is doing grant-funded work on normal paid time, with the employer's permission, and the employer is reimbursed. There is no change in the paycheck or benefits paid to the person named in the grant budget.

At Cook County Hospital, Department Chairs may reallocate a portion of recovered salary funds to ease the burden that the project may place on the Department. This might mean using recovered money for additional clerical or clinical support, to buy some necessary equipment, or for other purposes that advance the mission of the Bureau.

THE COUNTY VERSION OF YOUR GRANT BUDGET

For those who rely on the County to administer their grants, there is an additional step required before you can expend the money. At the time of obtaining County Board approval to accept the grant, you will be asked to prepare a budget in the County's format, which may differ from the one you used when applying for the grant. This means that you will have to translate budget categories from the funder's to the County's format, and reallocate your award among them. This is usually fairly straightforward, but if you need help, go to the Finance Office at your Bureau affiliate. One tip: If you think that you might want to move fiends around among budget lines (say from equipment to supplies), be sure you have all those lines open at the time you set up the account. You will not be allowed to open a new budget line later on.

TRACKING EXPENDITURES

The agency which handles your grant -- whether it's Cook County, Hektoen, Rush or some other affiliate -- will provide you with statements showing expenditures to date in your grant account. Different formats for these statements are used by different agencies: some statements will show budgeted funds compared to what has been expended to date; some show projections of spending up to the end of the funding period.

Whatever the format, the wise investigator does not depend solely on these statements to track expenditures. Statements can be a month or more behind; they occasionally contain mistakes. If you're seriously overspending or underspending your funds, you may not know until it's too late. You should keep track of your expenditures independently, using a spreadsheet to show what's been budgeted, what's been spent, and what's projected to remain (or not) by the end of the year. Since most of your costs are in the personnel line, it's not hard to do this sort of projection early in the year, and then enter the other expenses as they occur.

COST OVERRUNS

If you have been tracking your expenditures independently with your spreadsheet, you won't have any significant cost overruns. Minor cost overruns can usually be dealt with by judicious rebudgeting. If you find you have seriously overspent your award, you will have to work with the agency handling the grant to see if there is a way to complete your project and/or move funds from another source. Serious cost overruns can endanger both the current project and, if they result in your not meeting your project goals, your relationship with the funding agency.

REBUDGETING

Funded projects almost never go as planned, and the budget estimates you made when applying for your grant may be thrown out of whack by unexpected contingencies. Funding agencies know this, and are usually willing to let you redo your budget as long as the promised work remains the same. For PHS grants, you may rebudget up to 10% of the total award (with some exceptions, see NIH Grants Policy: Definition of Significant Rebudgeting) without first getting permission from the funding agency. For other funding agencies, you should consult with the program officer before doing any major rebudgeting.

ROLLOVER OF UNEXPENDED FUNDS/ NO COST EXTENSIONS

Occasionally there will be money left over at the end of an award year. Sometimes things just didn't cost as much as you thought they would; sometimes you didn't get the project off the ground as quickly as you'd hoped. If you have been tracking your expenses, and you have a good project-related use for the extra funds, you can simply rebudget them. Be careful, however, not to rebudget in a way that looks like you're just trying to spend the extra funds before time runs out. Buying a computer in the last month of your project is usually hard to justify.

If you will need to have those funds available in the next year of your project, however, you must request permission from the funding agency to roll them over into the next award year. You must ask for this -- it will not be done automatically -- and you must ask as soon as you know you will have to. Funding agencies are not sympathetic about rolling over extra funds that you just discovered in the last two weeks of the year. Some have time limits after which you can't ask. Once again, good expense tracking will save you from having to send back money that you really need for your project.

If you're nearing the end of your whole grant period, and you have extra funds, and you need more time to finish the project, you can ask for a no-cost extension. This basically extends the end date of your award, allowing you to continue to spend what funds are left, and wrap up the project. As with rolling over funds, you must get permission, and the earlier you ask the better.

CLOSING OUT

Depending on the funding source, a final report of expenditures may be required at the end of your grant period. The agency which administers the grant will prepare and submit this report. Because these reports are required, you will be asked to finalize all expenditures and close out the account within a certain time of the end of the grant period. Most funded projects do not allow you to keep any residual funds (the major exception being funds from clinical trials contracts from private companies). Therefore, when the time is up, you have to spend it or give it back.

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See Also:
NIH-OER Grants: Grants Policy and Guidance
NIH Information For New Grantees
Terms and Conditions of NIH Grant Awards
Hektoen Institute