How to Write a Successful Budget and Budget Narrative of a Grant Proposal

It’s time to talk about money.

The budget.

This is oftentimes the weakest section of grant applications perhaps because it is usually one of the last items listed in the Funding Opportunity Announcement or Request For Proposal. But this should not be the last section you write. You should write this section in alignment with the objectives and timeline.

If you have an activity in the timeline, then you should see if it should be in the budget. This way you keep the entire design extremely clear, and the project will have the needed money to implement activities.

If you design the objectives, action plan timeline, and budget properly, your project design should flow naturally and easily. Always think of project and budget as a healthy marriage.

Many grant writers will use the excuse that they are literary savvy but aren’t good with numbers, while fiscal agents will say vice versa. However, to be a good grant writer, you must be good with both words and numbers. You will have to turn the numbers into words within your budget narrative justification.

In this article and podcast, you will learn how to write a consistent budget and budget narrative in the format that grant reviewers appreciate. You will know which category to put each item of your budget and how to calculate costs. You will also get links to resources to help you put a reliable cost on each item.

The good news is you don’t have to be a CPA to write a budget.

You do, however, need to understand budgets. I know I’ve picked on small nonprofits, but now it’s time to reverse rolls as this section is where smaller nonprofits sometimes thrive.

Why? A lot of times project managers have to understand budgets because there may not be a full-time bookkeeper or finance division. Larger organizations will have an entirely separate financial division, and – while this is great (and essential) – it can also hinder the philosophy of viewing a grant in its totality.

Larger organizations will have programmatic division and finance divisions that are not always involved when it comes to the design of grants because this is assumed to be more programmatic. I urge you, no matter what the size of your organization, that both sides of the coin sit at the table during the grant design planning stage of writing up the objectives, timeline, and budget.

Don’t segregate this process! You need everyone on the same page.

The following is an outline of the main budget categories. Think of these categories as the main framework for your budget. These will be the main categories that I will use in all templates. Of course, your organization may put subcategories (the items under the main categories) under different categories, and that is perfectly fine – but this is to provide you with a general framework for your budget

Budget Categories:

• Personnel
• Fringe Benefits
• Travel
• Contracts/Consultants
• Equipment
• Supplies
• Other
• Indirect
• Program Income

Just like your objective needs to be S.M.A.R.T., so does your budget. Your budget also needs to be specific, measurable, achievable, relevant, and time-bound.

Specific: Don’t fall into a trap and use the word ‘miscellaneous’ for a budget subcategory. Be specific when listing all your subcategories. Ex. Full-Time Employee (FTE) Project Director.

Measurable: If you utilize the budget template within this book, then you will be able to adhere to measuring your budget appropriately. This is under the computation column of the budget. Ex. FTE Project Director at 2080 hours x $25 per hour = $52,000.

Achievable: To ensure that your budget items are achievable, your budget needs to make sense. Is there enough work for your project director to be hired at a full-time basis if you only offer one summer camp a year for two weeks? On the flip side, do you have ample resources included in your budget to meet the objectives? If there is required training for two staff to attend a three-day training in Washington, D.C. and your organization is based in California would you only include $100 for the training in the budget? No, you wouldn’t (or if you really could, please give me your travel agent’s name and number ASAP!)

Relevant: If you put your timeline next to your budget and are sure that each item is accounted for, then your budget should be relevant. If you listed hiring a project director in your timeline and discussed the project director’s role in your project design, then it would be relevant to include a project director in your budget. On the other hand, if you did not include the project director in your timeline or project design, then it would not be completely relevant to include in your budget.

Time-bound: Your budget is usually listed year by year or for a certain duration. Even if you are applying for a federal grant and it is a three-year grant, they are going to want to see the budget broken down year by year. If you break down your personnel computations on an annual basis but then clump all your rent or supplies into three years, it will be confusing for the reviewer. Some grant periods are less than a year and only for a specific season. Therefore, it is important to pay attention to what the duration is and when the grant will be awarded. That way you can be more specific with scheduling the grant budget so it makes sense.

Personnel

Let’s start with the personnel. Usually, you will need to contact the accounting department for this information. Take note that in the case of a multi-year grant, many organizations have automatic percentage increase each year for their employees. If not, it is still a good practice to allow for inflation and give a small percentage increase for most items each year.

What you will want to do with the personnel section is to include the staff that will be working on the grant project. This may include positions that have not been hired yet, and that is fine. Make sure you include updated resumes and job descriptions for all personnel that you will hire as employees for the grant project (Refer to the article and podcast: The Grant Writing Structure). If you will be hiring a completely new position, then make sure you include a new job description for this position.

How much should the wages be? This is a grant, so you can jack up all the salaries at any amount, right? Nope. Be careful here. The best practice is to use the department of labor’s wage and hour determination. Visit https://www.dol.gov/whd/ for more information for your specific state. All job titles will not be included in these databases, but you can use a job that has similar education or training qualifications. If you do increase an employee’s salary in a drastic way (specifically the executive director), make sure this is done by a vote from the board of directors before the wage is changed.

Personnel Budget Narrative: Example

Executive Director: Youth Soccer Rocks will allocate 30% of the executive director’s time towards this project at $35 per hour for 2080 hours, totaling $21,840. The executive director will oversee and compile reports, and supervise the project manager, coach, and bookkeeper.

Fringe Benefits

Fringe benefits vary from organization to organization, except for the Federal Insurance Contributions Act (FICA) rate, which is made up of two items: Social Security and Medicare taxes. For 2017, the Social Security tax rate is 6.2% on the first $127,200 wages paid. The Medicare tax rate is 1.45% on the first $200,000 and 2.35% above $200,000. Most of the time, the FICA rate you will use is 7.65% (although this can change, so make sure you stay up-to-date on the FICA rate). All other fringe benefits vary from state to state and from organization to organization. A cautionary note is to make sure you are following your contract and grant requirements. For instance, some state contracts may require that you include health and welfare for your employees, and they will include a specific rate. Read your contracts and make sure you incorporate all requirements.

Fringe Benefits Budget Narrative: Example

FICA: The FICA rate is at 7.65%, for $5,887.44 for grant requested salaries and $856.80 for nonfederal personnel salaries, totaling $6,744.24.

Travel

Travel will be divided into actual travel for conferences and trips and for general around-town types of travel. For example, Youth Soccer Rocks will have one grant-required training to attend in Washington D.C. which the project director and accountant will attend. They will also include gas mileage for using the minivan to transport kids to soccer games. Make sure you include any required travel in your grants. Also, if you state that your staff will attend other regional training, then include it in your budget and in your timeline.

Traveling to conferences and training needs to be specific. You will need to include the costs of lodging, flights or trains (if necessary), rental cars (if necessary), and per diem. Don’t try to pull these numbers out of the air. You can easily visit https://www.gsa.gov/portal/content/104877 to get the meals and incidental rates and lodging for virtually every city in the United States.

Note: Meals & Incidentals are at 75% of total daily costs when traveling to and from destination. For example, if you flew out from California on a Monday to Washington D.C. and the conference started on Tuesday, you would get 75% of the total meals and incidental costs for the day you were traveling.

For general driving costs, you can include the IRS standard mileage rates. This can change year to year, so make sure that you take a look at this every year to find out if the rate has changed. Just see how often gas prices fluctuate!

This rate does seem to vary year to year, and federal grants will usually only approve the maximum amount as included in this rate. The 2017 rate (at this time in April, 2017) is $0.535 per mile. Visit the IRS website for updated information: https://www.irs.gov/uac/2017-standard-mileage-rates-for-business-and-medical-and-moving-announced.

Travel Budget Narrative: Example

Required Training: Youth Soccer Rocks will have the project manager and bookkeeper attend the required conference in Washington D.C. The current airfare price from Soccer Rocks’ state to Washington D.C. is $500. Therefore, we will have two people taking round trip flights at $1,000. Lodging, based on the GSA estimates, will be $182 per night for two people, totaling $1,092. Meals and Incidentals, based on current GSA estimates, will be $69 per day for three days for two people, plus $51.75 for two days of traveling, totaling $621. All required training costs will be grant requested at $2,713.

Equipment

This category can be a little confusing as a lot of organizations want to include computers and cellphones under this category. That might work for a foundation grant, but if you are considering federal grants, then adhere to the federal requirements. According to the Federal Uniform Guidelines in the Code of Federal Regulations, equipment is defined as:

“tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-federal entity for financial statement purposes, or $5,000.” 2 CFR 200.33

What this basically means in laymen’s terms is that any item (not separate items that surpass $5,000 when combined, but a singular item) that will be $5,000 or more and has a life span of more than one year is considered equipment.  I would suggest listing at least three quotes to show that you are getting the best deal on the equipment.

Equipment Budget Narrative: Example

Minivan: Youth Soccer Rocks requests the purchase of a seven-seater minivan at $20,000. The minivan is essential for driving our youth to soccer games, practices, and related activities. See three quotes of minivans to ensure the most economical cost for the minivan, totaling $20,000.

Supplies

Supplies are where a lot of your items may be listed. This is basically what it sounds like: what supplies will your project need? This can include consumables, such as paper, printing costs, staples, and so forth. It can also include pamphlets and other types of costs.

Budget Narrative: Example

Consumables: Youth Rocking Socks requests $600 per year from the grant, and will provide a nonfederal match of $600 per year from Rocking Socks Foundation. Consumables include paper, staples, ink, cleaning supplies, and clipboards. Consumables total $1,200 per year.

Contractual/Consultant

Contractual refers to the types of services or items that different sources are performing. This, at times, can be where you may contract an accounting agency to do your bookkeeping. If you actually contract this work, you would not include the agency as an employee in the personnel category because you are not paying their fringe benefits, and they are not an employee. The example we will use is that Youth Soccer Rocks will hire a contractor to perform two months of advertising for their soccer program to recruit participants. Because Youth Soccer Rocks has a formal contract with the advertising agency, we will include this under contractual.

Contractual/Consultant Budget Narrative: Example

Advertising: Youth Soccer Rocks will hire an advertising contractor to create public awareness and advertisements on the television and radio for two months at $1,000 for each month, totaling $2,000.

Other

The other category is basically where you put any other anticipated expenses. I am including computers within this category, although those can also be included within supplies. If you can tell by now, there are certain black and white items in a budget, while others are a little grey. This is where we would identify any items that wouldn’t be classified in any other category. You will want to work with your finance division to know under what categories they allocate items. That way, it will be clear across all your grant programs.

Other Budget Narrative: Example

Computers: Youth Soccer Rocks will purchase two computers – one for the project manager and one for the bookkeeper – to complete all programmatic and financial reports. The computers will be $1,000 each, totaling $2,000.

Venue for Nutrition: Youth Rocking Socks High School will provide a space of 150 square feet valued at $100 per hour for a total of 10 hours (sessions) to discuss nutrition health. The use of this space totals $1,500.

Internet: The Internet will be required for all reports, social media posts, and administration. Internet cost is $100 per month for 12 months, totaling $1,200. We will request $600 from the grant, and $600 will be covered by a non-federal foundation grant.

Indirect Costs

If you have an indirect cost rate, then include what that is. If you do not have an indirect cost rate, I highly recommend that you include the allowed a de minimis indirect cost rate of 10%. You can go into negotiations for a higher amount of an indirect cost rate, but this is a grueling annual process. Plus, if you have a higher indirect cost rate, that means that it will take away from your project budget. The 10% is not too much to come off the top and can help provide support for other costs which may not be included in the project costs as they are indirect. These costs may include executive and administrative salaries (as mentioned in the personnel section), rent, utilities, and other costs that are more ‘overhead’ appropriate.

Indirect Budget Narrative: Example

Indirect Cost: Youth Soccer Rocks will include a de minimis 10% indirect cost rate that will cover costs of utilities, legal fees, insurance, etc.

In this article and podcast, you learned how to write a consistent budget and budget narrative in the format that grant reviewers appreciate. You now know which category to put each item of your budget and how to calculate costs. You also got links to resources to help you put a reliable cost on each item.

Wrap-up tips: If the grant is for more than one year, make sure you add in subsequent years. Also, be sure you include any non-federal matching if it is required and letters of commitment, leases, memorandums of understanding, and other required contracts to demonstrate commitment. If you are requesting an item worth more than $5,000, include at least three quotations to demonstrate the cost of the request and to show cost efficiency.

In the next and final part of this series, we will talk about Project Design.

All links:

• Visit https://www.dol.gov/whd/ for more information for your specific state’s wages.
• You can easily visit https://www.gsa.gov/portal/content/104877 to get the meals and incidental rates and lodging for virtually every city in the United States.
• Visit the IRS website for mileage rates updated information: https://www.irs.gov/uac/2017-standard-mileage-rates-for-business-and-medical-and-moving-announced. 

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