NOT-OD-09-069: Salary Limitation on Grants, Cooperative Agreements, and Contracts

Salary Limitation on Grants, Cooperative Agreements, and Contracts

Notice Number: NOT-OD-09-069

Update: The following update relating to this announcement has been issued:

March 19, 2009 - See Notice NOT-OD-09-070. The intent of this Notice is to provide information on the following statutory provisions that limit the use of funds on National Institutes of Health (NIH) grant, cooperative agreement, and contract awards for FY2009.

Key Dates
Release Date: March 19, 2009

Update of Notice NOT-OD-09-037

Issued by
National Institutes of Health (NIH), (http://www.nih.gov)

This notice provides updated information regarding the salary limitation for NIH grant and cooperative agreement awards and extramural research and development contract awards (referred to here as grants). On January 15, 2008, NIH published Fiscal Year (FY) 2008 information on the salary limitation in the NIH Guide for Grants and Contracts (NOT-OD-08-035).

Every year since 1990 Congress has legislatively mandated a provision limiting the direct salary that an individual may receive under an NIH grant. For FY 2009, Public Law 111-8: Omnibus Appropriations Act, 2009 restricts the amount of direct salary to Executive Level I of the Federal Executive Pay scale. The Executive Level I annual salary rate was $191,300 for the period January 1 through December 31, 2008. Effective January 1, 2009, the Executive Level I salary level increased to $196,700. Guidance on other legislative mandates contained in the Omnibus appropriation are referenced above.

For the purposes of the salary limitation, the terms "direct salary," "salary," and "institutional base salary" have the same meaning and are exclusive of fringe benefits and facilities and administrative (F&A) expenses, also referred to as indirect costs. An individual's institutional base salary is the annual compensation that the applicant organization pays for an individual's appointment, whether that individual's time is spent on research, teaching, patient care, or other activities. Base salary excludes any income that an individual may be permitted to earn outside of the duties to the applicant organization.

NIH grant/contract awards for applications/proposals that request direct salaries of individuals in excess of the applicable RATE per year will be adjusted in accordance with the legislative salary limitation and will include a notification such as the following: None of the funds in this award shall be used to pay the salary of an individual at a rate in excess of the current salary cap.

This is the ninth year that the limitation has been linked to Executive Level I of the Federal Pay Scale. Please see the salary cap summary and the time frames associated with salary caps at http://grants.nih.gov/grants/policy/salcap_summary.htm.

Implementation of new salary limitation:

No adjustments will be made to modular grant applications/awards or to previously established commitment levels for non-competing grant awards issued with FY 2009 funds.
NIH competing grant awards with categorical budgets reflecting salary levels at or above the new cap(s) issued in FY 2009 will reflect adjustments to the current and all future years so that no funds are awarded or committed for salaries over the limitation.
For awards issued in those years restricted to Executive Level I (see Salary Cap Summary, FY 1990 – FY 2009), if adequate funds are available in active awards, and if the salary cap increase is consistent with the institutional base salary, grantees may rebudget to accommodate the current Executive Level I salary level and contractors may charge at the higher level. However, no additional funds will be provided to the prior year grant awards and the total estimated cost of the contract will not be modified.
An individual's base salary, per se, is NOT constrained by the legislative provision for a limitation of salary. The rate limitation simply limits the amount that may be awarded and charged to NIH grants and contracts. An institution may pay an individual's salary amount in excess of the salary cap with non-federal funds.
The salary limitation does NOT apply to payments made to consultants under an NIH grant or contract although, as with all costs, those payments must meet the test of reasonableness and be consistent with institutional policy.
The salary limitation provision DOES apply to subawards/subcontracts for substantive work under an NIH grant or contract.

COMPETING grant applications and contract proposals that include a categorical breakdown in the budget figures/business proposal should continue to reflect the actual institutional base salary of all individuals for whom reimbursement is requested. In lieu of actual base salary, however, applicants/offerors may elect to provide an explanation indicating that actual institutional base salary exceeds the current salary limitation. When this information is provided, NIH staff will make necessary adjustments to requested salaries prior to award.

Questions & Answers

1. If a grant award (competing or non-competing) has already been issued in FY 2009, will an adjustment be made? No adjustments will be made. However, rebudgeting is allowable.

2. Can I rebudget grant funds or charge contracts issued in those years restricted to Executive Level l (see Salary Cap Summary (FY 1990 – FY 2009) funds to allow for the 2009 salary cap increase? Yes, provided funds are available and the increase is warranted. Prorated figures should be used for the applicable months, i.e., the $196,700 level is effective beginning January 1, 2009.

3. If an application/proposal fails to provide needed salary information, will an adjustment be made based on the new rates? No adjustment will be made if an application fails to provide adequate information regarding the individual's actual salary level.

4. Does the NIH appropriation language link the salary cap to a Federal Executive Level or to a dollar level? The link is to the Federal Executive Level pay scale (i.e., Executive Level III for FY 1999, Executive Level II for FY 2000, and Executive Level I for FYs 2001-2009).

5. As the cap is linked to Federal Executive Levels, can grantees/contractors with ongoing awards rebudget/charge up to the various salary caps, based on the fiscal year of the award and the time the salary expense is incurred? Yes, salary may be charged in accordance with the FY cap(s), as long as the levels are consistent with the individual's institutional base pay. Please refer to the salary cap summary with times frames for existing salary caps, at http://grants.nih.gov/grants/policy/salcap_summary.htm.

6. Will grantees be permitted to submit revised categorical budgets reflecting higher base salaries? Not as a general rule. NIH policy for categorical budgets states that grantees should always reflect actual base salaries in the requested budgets or provide an explanation indicating that actual institutional base salary exceeds the current salary limitation. As a general rule, NIH will use the information available in the existing application and make adjustments for the salary cap based on information available at the time of award.

The following are examples of the adjustments that NIH will make when salaries exceed the current salary limitation:

Example 1. Individual with Full-Time Appointment (based on grant award/contract issued after January 1, 2009 with salary limitation of $196,700)

Individual's institutional base salary for a FULL-TIME calendar year appointment	$ 200,000

Research effort requested in application/proposal - 6 months (50%)

Direct Salary requested	$ 100,000
Fringe benefits requested (25% of salary)	$ 25,000
Subtotal	$ 125,000

Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal	$ 56,250

Amount requested - salary plus fringe benefits plus associated F&A (indirect) costs	$ 181,250

If a grant/contract is to be funded, the amount included for the above individual will be calculated as follows:

Direct salary - restricted to a RATE of	$ 196,700
Divided by 12 months multiplied by 6 months (50%)	$ 98,350
Fringe benefits (25% of allowable salary)	$ 24,588
Subtotal	$ 122,938

Associated F&A (indirect) costs at 45% of subtotal	$ 55,322

Total amount to be awarded due to salary limitation	$ 178,260

Amount of reduction due to salary limitation
($181,250 requested minus $178,260 awarded)	$ 2,990

Example 2. Individual with Half-Time Appointment (based on a grant award/contract issued after January 1, 2009 with salary limitation of $196,700)

Individual's institutional base salary for a HALF-TIME calendar year appointment	$ 100,000

Research effort requested in application/proposal - 1.8 months (30% of 6 months)

Direct Salary requested	$ 30,000
Fringe benefits requested (25% of salary)	$ 7,500
Subtotal	$ 37,500

Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal	$ 16,875

Amount requested - salary plus fringe benefits
plus associated F&A (indirect) costs	$ 54,375

If a grant/contract is to be funded, the amount included in the award for the above individual will be calculated as follows:

Direct salary - restricted to a RATE of	$ 98,350
Divided by 6 months multiplied by 1.8 months (30%)	$ 29,505
Fringe benefits (25% of allowable salary)	$ 7,376
Subtotal	$ 36,881

Associated F&A (indirect) cost at 45% of subtotal	$ 16,596

Total amount to be awarded due to salary limitation	$ 53,477

Amount of reduction due to salary limitation
($54,375 requested minus $53,477 awarded)	$ 898

Example 3. Individual with a Nine-Month Appointment (based on a grant award/contract issued after January 1, 2009 with salary limitation of $196,700)

Individual's institutional base salary for a nine-month calendar year appointment	$ 150,000

Research effort requested in application/proposal - 2.7 months (30% of 9 months)

Direct Salary requested	$ 45,000
Fringe benefits requested (25% of salary)	$ 11,250
Subtotal	$ 56,250

Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal	$ 25,313

Amount requested - salary plus fringe benefits
plus associated F&A (indirect) costs	$ 81,563

If a grant/contract is to be funded, the amount included in the award for the above individual will be calculated as follows:

Direct salary - restricted to a RATE of	$ 147,525
Divided by 9 months multiplied by 2.7months (30%)	$ 44,258
Fringe benefits (25% of allowable salary)	$ 11,064
Subtotal	$ 55,322

Associated F&A (indirect) cost at 45% of subtotal	$ 24,895

Total amount to be awarded due to salary limitation	$ 80,217

Amount of reduction due to salary limitation
($81,563 requested minus $80,217 awarded)	$ 1,346

Inquiries

Questions concerning this notice or other policies relating to grants or contracts should be directed to the grants management or contracts management office in the appropriate NIH Institute or Center.

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