University Controller's Office
Search
go
Grants & Contracts
 

Post Award Financial Administration Policies

Salary Cap Administration

Summary

This document outlines the procedures for implementation of salary caps set by sponsoring agency regulations, i.e., a maximum reimbursement for project participants. The cap is either a rate or an amount of pay.

Policy

Virginia Commonwealth University will comply with all requirements of sponsoring agencies for awards accepted by the University. If an agency specifies a salary cap, the University will ensure that any salary above that rate or amount will not be charged to the award, but will be treated as voluntary committed cost sharing. The existence of a salary cap may influence the University’s willingness to propose, or to accept, a specific award.

Procedures

1. Definitions

A salary cap is defined as a maximum amount or rate of compensation for personal services that a sponsor will reimburse the University on a sponsored program.

The limitation may be stated in terms of an amount of pay that may be charged to an agreement, regardless of the rate of pay of the individual to whom it applies. For example, if an amount for reimbursement is capped at $100,000 for an annual budget period and Dr. Jane Doe earns $200,000 during that period, it would be allowable to charge up to 50% of her salary to the award during that period but any effort beyond that amount would have to be cost shared.

The limitation may be stated in terms of a rate of pay that may be charged to an agreement, regardless of the total amount of pay that is charged for the individual to whom it applies. For example, if a rate of pay for reimbursement is set at $100,000 annually and Dr. Doe still earns $200,000 annually, the University would have to cost share one half ($100,000/$200,000) of Dr. Doe’s salary for whatever percent effort Dr. Doe worked on the project.

As of January 8, 2017, the only agencies with established salary caps are the National Institutes of Health (NIH) and the Department of Defense (DOD). The NIH cap is currently (January 8, 2017) set at a pay rate of $187,000 per year for any individual directly charged to an NIH award. The DOD cap, "Benchmark Compensation Amount", applicable to contracts only, is currently set at a total compensation rate of $952,308 (all forms of remuneration for services, and related costs that would be considered fringe benefits) per federal fiscal year. These limits change periodically.

Institutional salary is defined as the contracted salary approved by appropriate University officials following prescribed administrative procedures.

2. Proposal Preparation

The University’s practices in submitting proposals recognize and comply with the policies, guidelines and practices of the intended sponsoring agency.

        a. Submitting Proposals to NIH
 

When submitting competing NIH proposals, the University will calculate requested salary amounts based on the full institutional salary rate of each individual proposed to work on the project. NIH has indicated that the awarded budget will reflect any applicable salary cap. For example, for Jane Doe, M.D., with an institutional salary of $185,000 and 20% annual effort, the salary budgeted on a competing proposal should be $37,000 ($185,000 x 20%).

When submitting non-competing continuation NIH proposals, if an individual’s rate of pay exceeds the established cap, the University will calculate the proposal budget based on the maximum allowed (capped) salary rate, because the reduction to the cap has already been recognized by NIH in computing the approved budget target for the continuation year. For example, for Jane Doe, M.D., with an institutional salary of $185,000 and 20% annual effort, the salary budgeted on a non-competing proposal should be $37,400 (the capped rate of $187,00 x 20%).

                            b. Submitting Contract proposals to DOD.

When submitting proposals for DOD contracts, the University shall make all reasonable efforts to avoid proposing an amount of effort for any individual which will cause the total compensation (salary and benefits) to exceed the DOD compensation cap. Computing the effect of this limitation on any specific proposal is complex, because the limitation applies according to the federal fiscal year, it changes periodically, and is set at a level that few, if any VCU proposals will be affected. If the amount of salary (annual salary X % effort) being proposed for any individual exceeds the limit per year, contact the Office of Sponsored Programs for assistance.

 

3. Project Administration

Virginia Commonwealth University’s procedures in administering awards involving a salary cap will be consistent throughout the University.

If unobligated funds are carried forward into a subsequent budget period, they are subject to any salary cap in effect within that subsequent budget period.
 
 

                            a. Rate Limited Caps

When the salary cap is in the form of a limit in the rate of pay, the maximum salary chargeable to the award in any pay period is the capped rate divided by the number of pay periods in a year. For example, Jane Doe, M.D., who has an institutional salary above a $125,000 rate cap and is paid twice monthly on a 12 month contract, cannot have salary charged to the award at a rate of more than $5,208.33 per pay period (i.e., the amount charged will be the % effort times that rate cap for a pay period).

When an individual’s salary rate exceeds the cap established by the funding agency, the difference between that individual’s salary rate and the maximum rate allowed under the cap must be charged to a cost sharing index created for this purpose. This difference must be reported as committed cost sharing on the effort certification report. In Dr. Jane Doe’s case, the $50,000 annual salary difference must be charged to a cost sharing index at a rate of $2,083.44 per pay period (i.e., the amount charged will be the % effort times that rate difference for a pay period). For example, 20% effort x $2,083.44 = $416.67 chargeable to the cost sharing index.

                        b. Amount Limited Caps

When a salary cap is in the form of a limit in the amount of pay, the maximum salary chargeable to the award in any pay period is the capped amount divided by the number of pay periods in a year. When an individual’s salary amount exceeds the cap established by the funding agency, the difference between that individual’s salary amount and the maximum amount allowed under the cap must be charged to a cost sharing index created for this purpose. This difference must be reported as cost sharing on the effort certification report.

Each situation involving an amount cap must be individually evaluated, taking into index the makeup of the capped amount (e.g., salary, salary plus benefits, etc.), the period to which the cap applies (e.g., payments within a specific federal fiscal year, payments within an award budget year, etc.) and other factors. Every reasonable effort should be made to calculate the applicable limits and cost sharing when a capped person’s pay action is initiated. However, at times it will be necessary to adjust the amounts charged to the project and cost sharing indexes after the fact.