Crafting a budget is often then hardest part of grant writing. It was for me when I first started. I was a program developer, not an accountant. When accounting created the budgets, they had costs I didn’t recognize. And when I crafted them, accounting invariably added expense lines. Which either threw off my narratives because I needed to explain those costs as part of my request or jeopardized my agency not getting the funding because my budget included costs I hadn’t justified in my narrative. I wish someone had explained to me way back then what I’m about to share with you so I asked for the proper amount of money.
Determine Your Expenses First
The first step to create a grant budget is to determine your expense lines. Generally, you will have three types of costs when you do your program expense budget: personnel, non-personnel, and general and administrative.
Your personnel lines show the staff that are needed to make the program or project a success. How many staff are needed for each position are measured by full-time equivalency (FTE’s). An FTE is the percentage of hours a staff position works in a 40-hour work week. If it takes 20 hours a week to perform a needed task, that’s .5 FTE. If you need two full-time staff, that’s 2.0 FTE. These are employees, not consultants. Consultants are not considered personnel for budget purposes because you don’t pay consultants’ fringe benefits. They pay their own.
In a small agency, staff like the executive director or bookkeeper may spend a portion of their time directly administering the grant. Then they are listed in the personnel budget as a percentage FTE. In a large organization, these same staff may be included as part of general and administrative costs. Check with your auditor or financial officer to know how to correctly classify core operation staff.
Next you calculate fringe benefits. And there are always fringe benefits, even if they are only the mandatory employer taxes like social security, Medicare, unemployment insurance, and disability. Sometimes, like in federal grants, you list them all out on their own lines. More often, you calculate the overall fringe and list it as such.
Non-personnel is easier to determine than personnel. All you need is the line item with the costs next to it. Non-personnel lines include things like:
- Program supplies and materials,
- Client related costs, for example transportation, food, direct assistance,
- Program personnel related costs, for example recruitment, training, and employee travel,
- Program facility related costs, like space and utilities, and
- Operational core costs like needed technology.
General and Administrative
General and administrative expenses (G&A) are those core operating costs that are necessary for program success but whose work is not directly in the program. These costs are often referred to as indirect costs, or overhead. Your general and administrative expenses are going to include things like the costs of the executive director, senior management, human resources, legal, insurance accounting, IT, and marketing, development. G&A costs are usually expressed as a percent of combined personnel and non-personnel costs. Check with your financial officer to give you your agency’s overall G&A percentage.
Then Document Your Revenues
Sometimes all the funder asks for is an expense budget, like in government grants. Sometimes they ask for an expense budget and ask about revenues in another question. I always like to submit a revenue and expense budget, if I’m allowed. If not, then I mention revenues in other parts of my proposal. Number one, it helps me show terrific community support. Number two, it shows that the funder is not shouldering the total costs of the program. Number three, it shows that my agency is financially committed to this project too.
Even if you don’t submit it, crafting a revenue budget shows you how much you need from each funder and how much your agency needs to contribute to make the project viable. And you can use the budget for multiple funders.
Other Sources of Funding
You want to list your committed sources of funding first, including other funders, program-generated fees, In-kind donations, volunteer time, and your agency’s contribution. More about determining your agency’s contribution in a minute.
A note on in-kind donations and volunteer time: if you show them in your revenues, also show them in your expense lines. You need to offset the revenues because no actual cash will exchange hands. By including them as part of the budget, though, are demonstrating more community support than you otherwise would have.
Funding requests that have been submitted and are pending should also be included in your grant budget, including the request you are writing. Revenues should equal expenses. You want to show that you need exactly the amount you are requesting in the proposal you are writing. That way you will not be over or underfunded if the request is granted.
When you list your other funders, you show strong community support through financial commitments to your program. You are also presenting a diversified revenue base which implies sustainability because you are not dependent on one source of funding.
Your Request to Them
Before you spend time writing a proposal, make sure the funders you apply to give to organizations and programs like yours. Also be careful that your dollar request is within their range of giving. And only request an amount of funding that is not a huge stretch for your nonprofit. Remember, your narrative and attachments need to support the assertion that your agency has the organizational capacity to successfully implement and manage a large grant.
Your Agency’s Contribution
You determine your nonprofit’s contribution by subtracting your total expenses from your committed and pending revenues. If you have more revenues than expenses, then apply to some of those funders for alternate projects. If you have more expenses than revenues, you either need to find more sources of funding or have your agency contribute it. It is often common, for example, for a nonprofit to contribute the G&A expenses to the project.
Whatever amount your organization is contributing, make sure you have the resources you say you have. You do not want to end up in a situation where the grant program is costing you more to implement than the monies you received. And explain where the money is coming from: fundraising, net agency operating income, reserves, or other sources,
Proofread Your Submission Again and Again
When you finish your budget, review your narrative to make sure that all the revenues and expense lines in your budget are explained in your narrative. And be sure your numbers match. The two need to tell the same story. Double check and check again that your math is correct. Highlight your nonprofit’s excellence through your budget as well as the rest of application.
Wrapping It Up
Crafting a budget is often the most challenging part of grant writing. Whether you create the budget and have finance review it or if finance creates the budget with your input, as a grant writer it behooves you to understand the numbers. The numbers are an important part of your nonprofit’s story. Tell it well so you ensure always you ask for enough money.
Budgeting well is just one step to achieving sustainability. It is also important to identify your strengths and fundraising gaps, empower your board, and excite your community.
To learn what your nonprofit 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!