If the phrase “grant budget” was associated with a musical riff, it would certainly be from an old Lon Chaney horror movie (or for the younger crowd, any of the 999 zombie apocalypse flicks in circulation today). But it doesn’t have to be that way! Although grant budgets are serious business, hopefully this article will help you look at them as an opportunity, rather than a necessary evil.
Step 1: Become familar with the U.S. federal government’s grants management circulars from the Office of Financial Management (OMB), located @ https://www.whitehouse.gov/omb/grants_circulars. There are separate circulars for Educational Institutions; State, Local and Tribal Governments; and Nonprofit Organizations. Consider these circulars the legal “Bible” of federal grant budget guidelines, and a prudent place for you to start. Similar to reading the directions before you put your kid’s bike together on Christmas Eve. It just makes everything run a little smoother.
Step 2: Check award amounts in the RFP. Check the minimum and maximum amounts you can ask for, per year. If you’re a first time applicant and / or a small shop with little or no grant experience, consider asking for less than the full amount offered. If you do go for the full amount, be prepared to have the capacity to carry out the project (or write the capacity into the grant budget). This means staff, resources, partnerships, supplies, travel, evaluation, etc. Sometimes (but not always) it’s best to start smaller and then ask for more next time.
Step 3: Check the match requirements. Some grants require that applicants contribute a “match” to the project. This match can be in the form of cash or in-kind services. Cash is self-explanatory. In-kind means that instead of giving cash to buy needed goods and services for the project, the goods and services themselves are “donated” and a dollar amount is attached to them. For instance: A $100,000 grant request with a 25% match requirement would be $25,000 that you would have to show. This $25,000 could consist of salaries, rental space, supplies, etc. In-kind contributions can come from applicants, partners and supporters. You must also include documentation to show that these In-kind contributions are real and ready to go when the project commences – and not just good intentions.
Step 4: Read the RFP and all related documentation. Yes, they’re long, but it’s critical you read the RFP word-for-word, from beginning to end, and not just skip to the budget section. RFP’s are notorious for: a) being way too long; b) repeating information throughout; c) containing conflicting information; and d) dropping information in sections that don’t seem logical. If you don’t read the entire RFP carefully, you may miss something critical that must be in the budget that will disqualify your application.
Step 5: Create your budget at the onset and build the project around it. If it’s possible to start with your budget first, you won’t be sorry. It’s tough to spend countless hours of time developing a program, only to discover at the end that there’s no way your budget will support it. If you start with your budget, it will go through many revisions, of course, but you won’t be on a blind course at the end, frantically trying to rework your entire project before the submission deadline. With this being said, many budgets are created last, and many very successful projects have been awarded using this approach. Sometimes this is the only alternative – but starting with the budget will usually make your life easier. Many people also create their logic model at the same time they’re developing their budget. Logic model and budget = blueprint for your entire project.
Step 6: Meet with your financial person. Once you’ve done the preliminary legwork, get together with the financial person / CPA for your organization and have them help you design the draft budget. Don’t go it alone or reinvent the wheel – rely on the resources around you. This draft will likely be a loose framework at this point. Once this step is complete, you can then meet with the rest of your staff and partners to dig into the programmatic aspects of the project.
Step 7: Don’t underestimate your costs! Because if you’re awarded, you’re going to have to satisfy all the components of your program, whether they come from grant dollars or your organization’s pre-award budget. This means you could be cutting your organization short in other areas. You also don’t want to find yourself in a position of declining a grant award. Not only is this frowned upon, you just might have to kiss any future grant possibilities goodbye.
Step 8: Use the funder’s template(s) and play by the rules. Many times funders include a template in the RFP for the budget. Again, don’t reinvent the wheel and use the template. If one is not provided, follow the order of the sections in the RFP. Also don’t go with any urge you might have to do get creative with your budget, or format, in hopes of impressing the reviewers. It will just make them work harder to digest the information in your proposal and will not score you any points.
Step 9: Create your budget narrative (justification). Every line item of your budget needs to have an explanation – or justification, if you will. If you’re asking for $75,000 for the Executive Director of your program, you’ll need to justify that amount. How many hours will he/she work? Full time? Part time? What is the hourly and / or monthly breakdown? What are their responsibilities? How does their salary compare to similar positions? Does it meet the feds’ salary cap / requirement? Each line item will require this type of detail. Even though you may have given detailed descriptions in your proposal narrative, you need to do it again for your budget narrative. Why? Because many times this is the first thing a reviewer will go for. Reviewers read dozens of proposals in any given competition and they begin to run together. They may do a “Cliff’s Notes” strategy by reading the budget narrative and logic model first to get a quick and firm grasp of your project.
(a.) Common line items: It depends upon the funder and program, of course, but some of the most common grant budget line items include:
- Salaries / Wages and Fringe Benefit
- Contracted Services
- Program Evaluation Services
- Operational Expenses
- Supplies and Materials
- Professional Development
(b.) Don’t forget about your indirect cost rate! The Feds understand that it takes money to run your organization (over and above the costs of providing direct services). These admin (or “indirect”) costs keep your organization running efficiently, but are not tied to any particular program. They can include such things as staff; office space and utilities; equipment; Board expenses; financial department functions, etc. General management costs for your agency as a whole. The benefit of using an Indirect Cost Rate? Organizations have a standardized, efficient way to recover a share of their general management costs from individual programs. Federal Indirect Cost rates are negotiated with one government agency, then that rate is honored in any federal grant from any agency. Also, in an effort to relieve administrative burden, the OMB has recently specified that non-federal entities that have never received a negotiated indirect cost rate may elect to charge a de minimis rate of 10 percent of modified total direct costs, which may be used indefinitely.
Now that you’re surely an expert on federal grant budgets, you can get started on your organization’s next adventure. Still need some help? Give us a call today! We’d be happy to help you design a budget and program to help your organization succeed.