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[Article] Budgets from Basic to Brilliant

 

Budgets are often left for the end of the grant development process, before they are fully finalized and articulated. However, they should be at the forefront of the process, to make sure they are brilliant, instead of basic.

When developing a grant proposal application, the funder will make a vast number of requests for information regarding your organization and program. One of the most important elements within the application is the Project Budget and Budget Justification. Along with staying within the guidelines of the grant, which sometimes includes the maximum or minimum funding requests, cost per participant and maximum caps on administration costs and indirect, it is also important to build the budget so that the project can be effectively implemented upon award. An applicant should have a thorough understanding of the budget categories to be included in a budget. These categories include Personnel, Fringe, Travel, Supplies, Equipment, Contractual, Other, and Construction (although construction is not an allowable cost in most grants).

  • Personnel includes wages for the staff.
  • Fringe includes the insurance and benefits for the staff.
  • Travel includes travel to implement the project and travel to grantee meetings.
  • Supplies include necessary expendables less than $5,000 per unit needed to implement the project.
  • Equipment includes anything over $5,000 per unit needed to implement the project.
  • Contractual includes contractual agreements to outside vendors for products and services needed to implement the project.
  • Other includes any other expense that is not categorized in the previous categories.
  • Construction includes all construction costs that are needed for the project (most construction costs are not allowable expenses).

Each grant budget needs to have all expenses broken down into the smallest unit with individual line item expenses. For example: if a project requires one Project Director and two Project Coordinators, then there should be three total line items under Personnel. Each position should be broken down into the hourly wage that each individual is being compensated for.  Under the Fringe category there should be three lines – one for each staff member. For Travel it should be broken down by mileage, airfare, lodging, incidentals, etc. For Supplies it should be broken down into monthly office supplies, curriculum, books, technology, etc. For Equipment it should be broken down by unit. For Contractual it should be broken down by company and then into hours or reports within the justification. For Construction it should be broken down into labor, materials, electrical, plumbing, framing, foundation, etc.

Some grants, along with having a balanced budget, also require that the applicant match a portion of their budget. A match is when the applicant is contributing a portion of the overall expenses of the grant in the form of cash or in-kind services. Some funders require that the applicant match a percentage of the requested budget, while other funders require that the applicant match a percentage of the total budget. This is very important to understand. If the budget asks you to match the total budget and you only match the requested budget, you will be under the minimum match and your grant will likely be thrown out. For example, if a funder is asking you to match 20% of the requested budget of $100,000. Then your total budget will be $120,000 with a $20,000 match and a $100,000 request. However, if the funder asks for you to match 20% of the total budget and your pre-match amount is $100,000, then your total budget is $125,000 and your match is $25,000 because 20% of $125,000 is $25,000.

Funders are very specific in the number of budget years that they want you to include. Sometimes a project can be over a three-year period, but they only want you to submit a Year One budget. Make sure to follow the instructions closely and make sure you include what the funder is requesting. It is suggested that you include a table at the end of your budget justification showing the category totals in each year, giving the funder a cheat sheet to look at (this is assuming that the funder is requesting a multi-year breakdown).

Sometimes, along with your specific costs associated with your project, there is also an indirect negotiated cost rate that needs to be factored. An Indirect Cost Rate is the negotiated rate that you, as the applicant, has negotiated with the funder to cover. Indirect costs may be either fixed or variable. Indirect costs include administration, personnel and security costs and are usually costs that are hard to identify but necessary for the implementation of the project – costs which are not directly related to production. Some indirect costs may be overhead. If your organization has not negotiated a rate with the funder you may be allowed to use the de minimis rate of 10%. Whether you use your organization’s negotiated rate or the de minimis rate, you will need to make sure that you only apply the percentage to the “Modified Total Direct Costs.” Modified Total Direct Costs (MTDC) means all direct salaries, fringe, materials and supplies, travel, and up to the first $25,000 of each subaward. MTDC excludes equipment, rental costs, tuition remission, scholarships and fellowships, participant support costs, and any subaward portion above the $25,000 threshold. Subcontracts cannot be included in the calculation. Participant Support Costs are direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with conferences, or training projects.

Finally, remember that there is difference between a budget and a budget justification. The budget justification is the explanation of why your budget is appropriate and necessary to implement the project. It is in addition to your budget. Not only should your justification have the quantitative breakdown of all expenses, but it should also link the goals and the objectives of the project to each of the expenses.

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