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<TITLE>NOT-OD-04-025: SALARY LIMITATION ON GRANTS, COOPERATIVE AGREEMENTS, AND CONTRACTS</TITLE>
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<META NAME="description" CONTENT="NIH Funding Opportunities and Notices in the NIH Guide for Grants and Contracts: SALARY LIMITATION ON GRANTS, COOPERATIVE AGREEMENTS, AND CONTRACTS NOT-OD-04-025. NIH">
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SALARY LIMITATION ON GRANTS, COOPERATIVE AGREEMENTS, AND CONTRACTS
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RELEASE DATE: February 13, 2004
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NOTICE: NOT-OD-04-025 (see <a href="http://grants.nih.gov/grants/guide/notice-files/NOT-od-04-034.html">NOT-OD-04-034</a> for update)
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National Institutes of Health (NIH)
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This notice provides updated information regarding the salary
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limitation for NIH grant and cooperative agreement awards and
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extramural research and development contract awards. On March 18,
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2003, the Fiscal Year (FY) 2003 information on the salary limitation
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was published in the NIH Guide for Grants and Contracts.
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For fifteen consecutive years, Congress has legislatively mandated a
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provision for the limitation of salary. For FY 2004, the Consolidated
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Appropriations Act, Public Law 108-199, which includes appropriations
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for the Department of Health and Human Services, restricts the amount
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of direct salary of an individual under an NIH grant or cooperative
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agreement (referred to here as a grant) or applicable contract to
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Executive Level I of the Federal Executive Pay scale. The Executive
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Level I annual salary rate was $171,900 for the period January 1
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through December 31, 2003. Effective January 1, 2004, the Executive
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Level I salary level increased to $174,500.
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For the purposes of the salary limitation, the terms "direct salary,"
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"salary," and "institutional base salary" have the same meaning and are
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exclusive of fringe benefits and facilities and administrative (F&A)
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expenses, also referred to as indirect costs. An individual's
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institutional base salary is the annual compensation that the applicant
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organization pays for an individual's appointment, whether that
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individual's time is spent on research, teaching, patient care, or
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other activities. Base salary excludes any income that an individual
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may be permitted to earn outside of the duties to the applicant
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organization.
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NIH grant/contract awards for applications/proposals that request
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direct salaries of individuals in excess of the applicable RATE per
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year will be adjusted in accordance with the legislative salary
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limitation and will include a notification such as the following:
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According to the Consolidated Appropriations Act 2004, "None of the
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funds appropriated in this Act for the National Institutes of Health,
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the Agency for Healthcare Research and Quality, and the Substance Abuse
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and Mental Health Services Administration shall be used to pay the
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salary of an individual, through a grant or other extramural mechanism,
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at a rate in excess of Executive Level I" of the Federal Executive Pay
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Scale. This is the fourth year that the limitation has been linked to
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Executive Level I of the Federal Pay Scale.
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Please see the salary cap summary and the time frames associated with
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existing salary caps at
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<a href="http://grants.nih.gov/grants/policy/salcap_summary.htm">http://grants.nih.gov/grants/policy/salcap_summary.htm</A>
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Implementation of new salary limitation:
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o No adjustments will be made to modular grant applications/awards or
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to previously established commitment levels for non-competing grant
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wards issued with FY 2004 funds.
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o NIH competing grant awards with categorical budgets reflecting salary
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levels at or above the new cap(s)issued in FY 2004 will reflect
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adjustments to the current and all future years so that no funds are
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awarded or committed for salaries over the limitation.
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o For awards issued with FYs 2003, 2002 and 2001 funds, if adequate
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funds are available in active awards, and if the salary cap increase is
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consistent with the institutional base salary, grantees may rebudget to
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accommodate the current Executive Level I salary level and contractors
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may charge at the higher level. However, no additional funds will be
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provided to the prior year grant awards and the total estimated cost of
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the contract will not be modified.
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o An individual's base salary, per se, is NOT constrained by the
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legislative provision for a limitation of salary. The rate limitation
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simply limits the amount that may be awarded and charged to NIH grants
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and contracts. An institution may pay an individual's salary amount in
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excess of the salary cap with non-federal funds.
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o The salary limitation does NOT apply to payments made to consultants
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under an NIH grant or contract although, as with all costs, those
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payments must meet the test of reasonableness and be consistent with
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institutional policy.
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o The salary limitation provision DOES apply to subawards/subcontracts
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for substantive work under an NIH grant or contract.
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o COMPETING grant applications and contract proposals that include a
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categorical breakdown in the budget figures/business proposal should
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continue to reflect the actual institutional base salary of all
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individuals for whom reimbursement is requested. In lieu of actual
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base salary, however, applicants/offerors may elect to provide an
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explanation indicating that actual institutional base salary exceeds
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the current salary limitation. When this information is provided, NIH
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staff will make necessary adjustments to requested salaries prior to
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award.
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Questions & Answers
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1. If a grant award (competing or non-competing) has already been
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issued in FY 2004, will an adjustment be made? No adjustments will be
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made. However, rebudgeting is allowable.
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2. Can I rebudget grant funds or charge contracts issued with FY 2001,
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2002 or 2003 funds to allow for the 2004 salary cap increase? Yes,
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provided funds are available and the increase is warranted. Prorated
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figures should be used for the applicable months, i.e., the $174,500
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level is effective beginning January 1, 2004.
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3. If an application/proposal fails to provide needed salary
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information, will an adjustment be made based on the new rates? No
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adjustment will be made if an application fails to provide adequate
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information regarding the individual's actual salary level.
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4. Does the NIH appropriation language link the salary cap to a Federal
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Executive Level or to a dollar level? The link is to the Federal
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Executive Level pay scale (i.e., Executive Level III for FY 1999 and
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Executive Level II for FY 2000 and Executive Level I for FYs 2001,
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2002, 2003 and 2004). As the cap is linked to Federal Executive
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Levels, can grantees/contractors with ongoing awards rebudget/charge up
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to the various salary caps, based on the fiscal year of the award and
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the time of the salary expense is incurred? Yes, salary may be charged
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in accordance with the FY cap(s), as long as the levels are consistent
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with the individual's institutional base pay. Please refer to the
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salary cap summary with times frames for existing salary caps, at
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<a href="http://grants.nih.gov/grants/policy/salcap_summary.htm">http://grants.nih.gov/grants/policy/salcap_summary.htm</A>
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5. Will grantees be permitted to submit revised budgets reflecting
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higher base salaries? Not as a general rule. NIH policy states that
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grantees should always reflect actual base salaries in the requested
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budgets or provide an explanation indicating that actual institutional
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base salary exceeds the current salary limitation. As a general rule,
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NIH will use the information available in the existing application and
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make adjustments for the salary cap based on information available at
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the time of award.
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The following are examples of the adjustments that NIH will make when
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salaries exceed the current salary limitation:
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EXAMPLE 1. INDIVIDUAL WITH FULL-TIME APPOINTMENT (based on grant
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award/contract issued after January 1, 2004 with a $174,500 salary
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limitation)
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Individual's institutional base salary for a FULL-TIME twelve month)
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appointment $ 180,000
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Research effort requested in application/proposal - 50%
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Direct Salary requested $ 90,000
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Fringe benefits requested (25% of salary) $ 22,500
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Subtotal $ 112,500
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Applicant organization's F&A (indirect) costs at
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a rate of 45% of subtotal $ 50,625
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Amount requested - salary plus fringe benefits plus
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associated F&A (indirect) costs $ 163,125
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If a grant/contract is to be funded, the amount included for the above
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individual will be calculated as follows:
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Direct salary - restricted to a RATE of $ 174,500
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Multiplied by effort (50%) to be devoted to project $ 87,250
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Fringe benefits (25% of allowable salary) $ 21,813
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Subtotal $ 109,063
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Associated F&A (indirect) costs at 45% of subtotal $ 49,078
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Total amount to be awarded due to salary limitation $ 158,141
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Amount of reduction due to salary limitation
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($163,125 requested minus $158,141 awarded) $ 4,984
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EXAMPLE 2. INDIVIDUAL WITH HALF-TIME APPOINTMENT (based on a grant
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award/contract issued after January 1, 2004 with a $174,500 salary
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limitation)
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Individual's institutional base salary for a
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HALF-TIME appointment (50% of a full-time
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twelve month appointment) $ 90,000
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Research effort requested in application/proposal 30%
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Direct Salary requested $ 27,000
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Fringe benefits requested (25% of salary) $ 6,750
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Subtotal $ 33,750
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Applicant organization's F&A (indirect) costs at a rate
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of 45% of subtotal $ 15,188
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Amount requested - salary plus fringe benefits
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plus associated F&A (indirect) costs $ 48,938
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If a grant/contract is to be funded, the amount included in the award
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for the above individual will be calculated as follows:
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Direct salary - restricted to a RATE of $ 87,250
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for a 50% appointment multiplied by 30% effort $ 26,175
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Fringe benefits (25% of allowable salary) $ 6,544
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Subtotal $ 32,719
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Associated F&A (indirect) cost at 45% of subtotal $ 14,723
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Total amount to be awarded due to salary
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limitation $ 47,442
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Amount of reduction due to salary limitation
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($48,938 requested minus $47,442 awarded) $ 1,495
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INQUIRIES
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Questions concerning this notice or other policies relating to grants
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or contracts should be directed to the grants management or contracts
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management office in the appropriate NIH Institute or Center.
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</pre>
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<P><HR><P>
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<A HREF="/grants/guide/WeeklyIndex.cfm?WeekEnding=02-13-04">Weekly TOC for this Announcement</A><br>
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<A HREF="/grants/guide/index.html">NIH Funding Opportunities and Notices</A>
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