84. Personnel Costs
By the end you'll be able to
- Distinguish institutional base salary from charged salary.
- Convert level of effort into a defensible salary calculation.
- Apply the correct treatment of academic-year versus summer salary.
- Document the basis for every personnel line.
Personnel is typically 60 to 80 percent of a program budget, which means it is also the line most often miscalculated. You will learn to build personnel from three inputs: the annual institutional base salary, the level of effort committed to the project, and the period of performance the effort covers. The output is a defensible direct labor figure, not a guess.
You will internalize the distinction between effort and salary that auditors care about most. A 100 percent effort commitment means 100 percent of the person's professional working time is devoted to the project. It does not mean the project pays 100 percent of the salary, because the institutional base may already include components federal funds cannot reimburse (extra compensation, administrative supplements, summer salary on academic appointments). Calendar months, academic months, and summer months each have distinct rules. A nine-month faculty appointment generates summer salary only on top of the academic base, not as a substitute for it. Misstating the base or the effort produces overcharges that propagate through fringe and indirect recovery and become serial findings on a single audit.
By the end you should be able to take a staffing plan, convert each role to FTE or person-months, compute the salary charge for the budget period, and document the basis (institutional base salary letter, board-approved salary scale, prior award rate). Personnel done correctly anchors the rest of the budget. Personnel done sloppily contaminates every other line.
Common mistakes
These are the traps learners hit most often on this topic. Knowing them in advance is half the fix.
Charging 100 percent of salary on a 100 percent effort commitment when the base includes non-allowable components.
Effort and salary are not the same thing. Extra compensation, administrative supplements, and certain academic-year arrangements are not federally reimbursable even at 100 percent effort.
Treating summer salary as a replacement for the academic base.
For nine-month appointments, summer salary is additional, not substitute. Substituting the rates underbudgets the line and creates a shortfall mid-project.
Practice problems
Try each on paper first. Click Show solution only after you've made a real attempt.
- Problem 1A nine-month faculty member with an academic base of $90,000 is requested at 1.0 academic month of effort and 1.0 summer month of effort. Calculate the salary charge.
Show solution
Academic monthly rate = 10,000 per academic month. 1.0 academic month of effort = 10,000) because summer salary is charged at the academic-month rate on top of the academic base. 1.0 summer month = 20,000 (plus applicable fringe at the faculty rate). The summer charge is in addition to the nine-month base, not a substitute.
Practice quiz
- Question 1A staff member's institutional base salary is $80,000 and the project commands 25 percent of her effort for 12 months. What is the salary charge to the project (excluding fringe)?
- Question 2A 100 percent effort commitment means:
- Reflection 3In one or two sentences, explain why mis-stating the institutional base salary contaminates the rest of the budget.
Lesson 84 recap
Personnel cost equals institutional base salary times committed effort times the period of performance, with academic and summer months treated under their distinct rules. Document the base for every line.
Coming next: Lesson 85 — Fringe Benefits
Personnel is only complete once fringe is layered on top. Next we build the fringe calculation using the correct rate and components.
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