What you will practice
- Identify restrictive terms on a Notice of Award that must be isolated before releasing project funds.
- Distinguish an institutional salary-cap cost-sharing obligation from sponsor-reimbursable direct salary.
- Build an award-setup handoff memo that documents budget adjustments, compliance holds, and prior-approval triggers.
A practice case for research administrators setting up a new federal research grant account from a Notice of Award (NoA). Grounded in 2 CFR 200.211, 200.302, 200.308, and NIH Grants Policy Statement Sections 4.1.15, 4.1.32, and 8.1. All people, awards, institutions, and account procedures below are fictional. Estimated time is a planning aid; this unit does not award continuing-education credit.
The Notice of Award on your desk
At fictional Meridian University, sponsored projects officer Devon receives the Year 1 Notice of Award (NoA) for Dr. Lin's NIH R01 on October 15, 2026, with a budget period start date of November 1, 2026. The competing proposal requested $250,000 in direct costs, but the NoA awards $225,000 in direct costs (a 10% administrative reduction) plus applicable indirect costs.
Dr. Lin's institutional base salary (IBS) is $240,000 for a 12-month appointment, and the Notice of Award names Dr. Lin at 3.0 calendar months (25% effort). The applicable NIH Executive Level II salary cap is $225,700. Section IV of the NoA also includes a specific restriction: no funds may be drawn down or expended for human-subjects research protocol activities until Meridian provides documentation of final IRB approval and NIH lifts the restriction in writing.
The department administrator asks Devon to open a single unrestricted grant account today so the lab can order human-subject assay kits and charge Dr. Lin's full $60,000 institutional salary share to the award starting November 1.
Before reading further, list three items in the department's request that conflict with the Notice of Award or federal cost principles.
Separate capped grant salary from institutional over-the-cap pay
Under the consolidated appropriations salary limitation (NIH GPS Section 4.1.32), none of the federal funds awarded on an NIH grant may be used to pay the direct salary of an individual at a rate in excess of Executive Level II ($225,700 in this case). At 25% effort (3.0 calendar months), Dr. Lin's proportional institutional base salary is $60,000, but the maximum direct salary chargeable to the NIH award is 25% of $225,700, which equals $56,425.
The $3,575 salary difference ($60,000 minus $56,425) plus associated fringe benefits must be paid from non-federal institutional funds and tracked in an institutional salary-cap companion code. Because salary above a statutory cap is an unallowable cost under 2 CFR 200.403, that $3,575 cannot be charged to the NIH award and cannot be counted toward any mandatory or voluntary committed cost-sharing requirement.
Isolate restricted human-subjects activities until NIH lifts the hold
When an NIH Notice of Award contains a Section IV clinical or human-subjects restriction, the recipient may not charge human-subjects research costs—including subject recruitment or human-specimen assay kits tied exclusively to the restricted protocol—until IRB certification is submitted and the NIH Grants Management Officer issues revised documentation lifting the restriction.
Under 2 CFR 200.302 and 200.303, Meridian's financial management system must maintain internal controls that prevent restricted funds from being obligated or drawn down prematurely. If non-human-subjects preparatory work is permitted under the terms of the NoA, Meridian can open the main project account for allowable non-restricted costs while holding the human-subjects budget in a restricted sub-account or spending hold until NIH's written release arrives.
Confirm whether the 10% reduction alters scope or named effort
A 10% administrative cut at award issuance requires the PI and department to align their operating budget with the $225,000 awarded direct costs. Under 2 CFR 200.308(f) and NIH GPS Section 8.1.2, Dr. Lin may rebudget among allowable direct cost categories if the adjustment does not change the approved scope of work.
However, because the Notice of Award names Dr. Lin at 3.0 calendar months, Dr. Lin cannot unilaterally reduce her committed effort by 25% or more (for example, dropping below 2.25 calendar months) to absorb the budget cut without prior written approval from the NIH Grants Management Officer.
Prepare Devon's award-setup control sheet
Complete the blank setup action column using the fictional Notice of Award facts above.
State the exact dollar figures for Dr. Lin's allowable grant salary and over-the-cap institutional share.
Specify the condition required before releasing the human-subjects funds.
| Setup item | Required setup action and dollar figure | Responsible role |
|---|---|---|
| Awarded Year 1 direct cost budget ($225,000 vs. $250,000 requested) | – | Sponsored projects officer & department administrator |
| Dr. Lin's 3.0-month (25%) salary allocation against the $225,700 cap | – | Payroll / cost-accounting coordinator |
| Section IV human-subjects restriction and assay kit request | – | Sponsored projects officer & compliance office |
| Guardrail on named PI effort during budget adjustment | – | Principal Investigator & Authorized Organizational Representative |
Compare your approach with the worked answer
Establish the Year 1 direct cost budget at the awarded $225,000 level and ask Dr. Lin and the department administrator to submit an operating allocation across allowable categories that preserves the approved specific aims.
Cap Dr. Lin's direct salary charged to the NIH grant account at $56,425 ($225,700 × 25% effort for 3.0 calendar months) and allocate the remaining $3,575 ($60,000 IBS share minus $56,425) plus associated fringe to a non-federal institutional salary-cap account.
Place a billing and expenditure hold (or restricted sub-account) on all human-subjects protocol funds and deny the request to charge human-subject assay kits until final IRB approval is submitted to NIH and the Grants Management Officer lifts the Section IV restriction in writing.
Document on the setup memo that Dr. Lin is named on the NoA at 3.0 calendar months (25% effort); any reduction of 25% or more from that approved baseline (to 2.25 calendar months or less) requires prior written GMO approval endorsed by the AOR.
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Sources and applicability
Check the terms, policy dates and agreements that apply to your award. These fictional practice cases do not authorize an institutional transaction.
- NIH Grants Policy Statement: Salary Cap / Appropriation Mandates (Executive Level II)
- NIH Grants Policy Statement Section 8.1 — Changes in Project and Budget
- 2 CFR 200.308 — Revision of budget and program plans (eCFR)