In What Foundations Want to Know, we presented the eight questions grant reviewers want answered. In Grant Writing: What Need Do You Meet? we explored how to present the needs you are meeting in your proposal. In Grant Writing: How Do You Meet the Need You Describe? we discussed present the program you want to implement that meets that need. In Grant Writing: How Do You Define Success we talked about projecting success. And in Grant Writing: How Do You Measure Success? We covered how to show actual measures of success. This week we talk about developing your grant proposal’s budget.
Crafting a budget is often the least-liked, most-feared part of writing a grant proposal. Yet, as we saw in What Foundations Want to Know, there are plenty of grant reviewers who are first and foremost concerned about your program’s budget. They would rather review a page of revenue and expense projections than read pages and pages of text. They understand that your grant proposal’s budget is a one-page, financial representation of your narrative. Through the budget, they can see what amount of funding your nonprofit is asking, how those funds will be used, whether your costs are reasonable or not, what other financial resources are needed, and how much community support there is behind the project. A well-written budget can also tell reviewers the scope of your intervention. That’s a lot of information in one page. It is important that you get the budget right.
Creating Your Grant Budget with the Input of the Program Director
The easiest way to develop your grant budget is to create it alongside your narrative. Make two columns. Label one column “Expenses” and the other “Revenues.” Then talk to your agency’s program staff, the ones who will be implementing the grant. As we discussed in Grant Writing: How Will You Meet the Need You Describe?, information about how a program works is best gathered from a program director who understands how the program works at all organizational levels.
As you are gathering information, whenever that director tells you what tasks staff do, how many staff do it at a time, how many hours it takes each staff to do, and how many weeks a year each staff will be doing it, write that information down under “Expenses.” When the program director tells you about thing provided to clients - transportation, food, rent, school supplies, sports equipment, musical instruments, to name a few – write those things down under “Expenses.” Whatever outside consultants help design, deliver, or evaluate your program, write them down under “Expenses.” Whatever outside conferences or trainings program staff will attend, write down how many will attend at what conference under “Expenses.” How staff will be getting from the office to where service delivery or training will take place, jot it down under “Expenses.” Write down everything it takes to successfully operate the program. Don’t worry about getting too detailed. You want your budget to be as detailed as your narrative. If you discover expenses that you have not included in the narrative, go back and talk about them in the narrative.
If funding other than the foundation’s will be used in implementing the program, the name of those funders goes under “Revenues.” Whatever it is that community partners contribute to program functioning, write that down. Other foundations, businesses, and government agency donors should each have line and be listed under “Revenues.” Whenever the program director talks about donations given to the program, write those down under “Revenues.” If the program is using space for free, write that down under “Revenues.” If your program charges client fees, write those down under “Revenues.” If your organization will be raising funds for the program, write those down under “Revenues.” Give each community partner their own revenue line. Make sure the community partners listed in your budget are talked about in your narrative.
Congratulations! You have just developed the majority of your budget lines. In other words, you have just created a large portion of your budget. Now the task is to develop the rest of your budget lines and put numbers to them.
Creating Your Grant Budget with Input from the Finance Officer
The best person to go to for the rest of your budget lines is your finance officer. Your finance officer will have your agency’s chart of accounts. A chart of accounts is a list of all your organization’s revenue and expense lines. Your finance officer will be able to tell you what line items you need to add to your budget in order for the program to be viable and your organization not lose money. Yes, it is possible for the grant to be funded and your nonprofit to still lose money. Your nonprofit will lose money on the funded project if the expenses exceed the revenues. The only way to make sure all the expenses are covered is to include them in the budget. And it is your finance officer who can compare your grant budget to the agency chart of accounts and add what lines are missing.
For example, your finance offer can add the fringe benefits the agency pays employees. Fringe benefits are usually expressed as a percentage of salary. Sometimes funders want the total percentage of all the fringe benefits, sometimes they want them spelled out.
Your finance officer can also add in the core organizational costs the agency must pay. Finance, technology, human resources, fundraising, executive management, board development, and marketing are necessary core organizational structures. Your finance director will be able to add those core lines items to your budget. Sometimes these expenses are listed individually, sometimes they are grouped as G&A, or general and administrative expenses. G&A is usually expressed as a percentage of total program costs.
Now give a dollar value to all the line items.
Your finance officer will have salary information. If you know how many hours a week and how many weeks a year the program staff is involved in carrying out your program, your finance officer can figure what percentage of their time can be allocated to the grant. Add in fringe benefits and you have the personal section of your budget done. Make sure your line item text has enough detail such that the calculation leading to the line item amount is obvious.
Except for G&A, the rest of your expenses are classified as non-personnel expenses. Note that consultants are included in the non-personnel expenses part of your expense budget. The agency does not provide fringe benefits to consultants therefore consultants are not included under personnel. The finance officer may provide some, but not all, of the non-personnel expenses. You may have to do some pricing research, especially if you are proposing a new program that will entail new lines in the chart of account.
If the foundation allows G&A, add up your personnel and non-personnel expenses. Take the total, multiply it with your G&A percentage, and add in your nonprofit’s G&A.
List your individual expenses, one on a line. Then take your individual expenses lines and add them all up for the amount of total expenses. You now have a complete expense budget.
Now, list your individual revenue sources, one on a line, and add them to show total revenue. The difference between how much revenue is coming in and how many expenses you will have to pay is the amount of funds you still need, either through fundraising or other revenue sources.
Revenue should always equal expenses. You want to show that the amount you are asking the foundation for is the exact amount you need.
If your revenues are greater than your expenses, then you don’t need the money. Take one of your revenue sources and use it for another agency program. If your revenues are less than your expenses, you don’t have enough to operate the program and stay solvent. You and your team have more fundraising to do.
Before submitting the budget to the foundation, check the numbers. Make sure your addition and multiplication are correct. Make sure that the numbers in your budget match the numbers in your narrative. Check and double check. Mathematical errors and financial inconsistencies are two of the most common mistakes a reviewer sees. Not only are these errors irritating, they can also be confusing. Which is correct – your narrative or budget?
Stating Your Request
You should always make a direct request for funding in your narrative. Be direct and brief. The request section of your proposal will be the shortest. Say something like, “[Name of my nonprofit] would like to partner with ABC Foundation in [program goal]. We are asking $XXX from the ABC Foundation.
If you have other sources of funding, show that too. Say something like, “The total cost of this project is $YY. DEF Foundation, GHI Foundation and JKL Corporation are contributing a total of $ZZ to this project. [Name of my nonprofit] is also contributing to this project.”
Your proposal’s budget is a financial representation of your narrative. Develop your budget with both the program director and finance officer. Once you have a complete budget, check your math. Make sure all the line items mentioned in your budget are mentioned in your narrative and that all resources needed for successful program implementation are included in your budget. Also, make sure the numbers stated in your budget are consistent with those in the narrative.
Wrapping It Up
- Your budget is a financial representation of your narrative. Make sure they are consistent with one another.
- Develop your budget with input from both program and finance staff.
- Make sure your line item text fully explains the calculation behind the line item amount.
- Check your math.
- Be brief in stating a direct request for finding.
Grant writing is just one piece of the fundraising pie. It is also important to identify your nonprofit’s fundraising strengths and gaps, explore diverse revenue streams, engange your board and excite your community.
To learn what your agency can do to move ahead, schedule a complementary 30-minute strategy session with me. During our time together, we will clarify the fundraising issues your nonprofit is facing, explore possible solutions, and develop a plan of action.
When you make your appointment, you will be asked a few brief questions about your situation so that I am best prepared to help you. I look forward to our conversation!
To discuss how this article relates to your nonprofit, I invite you to participate in a free, 30-minute discovery session with me.
During our time together, we will clarify the fundraising issues your nonprofit is facing, explore possible solutions, and develop a plan of action. When you make your appointment, you will be asked a few brief questions about your situation so that I am best prepared to help you.
I look forward to our conversation!