#3: Grant Budgets Cannot be Allocated For Pre-Award Costs (such as commissions)
This point is similar to #2, but discusses this in a different way. In point #2, we examined mainly why you cannot pay grant writers on commission according to accounting and cost principles.
Point #3 examines this from a logistical side of how grant budgets are designed. When creating a budget for a grant program, you design a budget for costs to (generally) create, operate, or expand a nonprofit’s program. These budgets are generally for future projects (or expansion of programs).
Once the grant is submitted, it goes through a review process. If your grant makes it to the top for approval, you then enter into a grant agreement (contract) with the funding source. They are approving your budget from time of signature forward.
Well, writing the grant happened in the past. The grant writing is also not a future part of the program and each category in the budget is allocated for something specific.
For example, you write a budget for an animal shelter that amounts to $500,000. If you were to pay a grant writer 5% of the grant that got awarded, you would pay them $25,000. Which means you would have to take $25,000 out of the budget that has no line item to pay a grant writer (because it’s unallowable – refer to point #2).