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Cost estimate and funding plan
Budgeting refers to both the cost estimate and the funding plan. Cost estimate is an estimate of all the costs incurred in the project. Direct costs include salaries with side costs, equipment and material, and travel costs. When the project is carried out in the employment of an organization (for example the University), also indirect costs, or overhead, need to be calculated. The funding organization usually has guidelines on how much indirect costs are reimbursed.
The funding organization often requires a funding plan which describes how the whole project is funded. Funding can be applied from one or more organizations.
The funding organization usually lists the costs that can be incurred in a project. These are called eligible costs.
Costs that have not been included in the cost estimate or the funding plan cannot be invoiced from the funding organization.
There are a number of funding organizations which each have their own guidelines:
- Tekes (The Finnish Funding Agency of Tehchnology and Innovation)
- European Union Framework Programme
- The Academy of Finland
Many funding organizations, for example foundations, also fund researchers as private persons, but some only fund organizations. In this case, funding proposals are made in the name of the employer (e.g. the University).
Funding is often paid in arrears in return for financial and possible progress reports. In such cases the funding organizations have guidelines on how the funding will be paid.
Cost estimate in projects in which the University is the applicant organization
Research project total costs are made up of direct and indirect costs. Direct costs include salaries with side costs, equipment and material, and travel costs. Indirect costs refer to costs of the use of university office and laboratory space, library, computers and administration. Depending on the guidelines of the funding organization, indirect costs are a certain percentage of salaries or of all direct costs. The common way for universities is to calculate indirect costs from the sum of salaries and side costs. Pricing instructions for research can be found at finance services' webpage.
(the page can only be opened from university computers).
Important to remember:
- Units have to include a rough estimate of future external funding in their financial estimate.
- Many funding organisations do not fund the whole project, but require a self-financing share. This can usually be covered with the salaries of permanent staff. NOTE! It is important to make sure that the work time of staff members has not been sold too many times!