Nonprofits utilize grant funding as a primary revenue source. Therefore, It is with a fair amount of confidence we can report that you will need to write a grant proposal budget. Grant makers need to know what your funding request is and how you intend to utilize those funds. You may have questions about this common, yet less discussed, section of a grant proposal.
We prepared the following guide to help you write a strong grant budget.
What is a Grant Budget and Why are They Important?
Understanding a grant proposal budget requires knowing both what it is and what it is not. A grant budget is not your organization’s operating budget. A grant proposal budget is specific to your proposed project or program. This budget outlines what your intended expenditures would be if you were awarded the grant funding.
The grant budget is an important piece of your grant proposal because it shows the grant maker exactly what their funding will be used for. While making a compelling written justification for your funding request may be valuable, having a solid budget outlined will paint a clear picture of your intentions.
The grant budget will also be where you list any additional costs and funding sources that are outside of your grant proposal. This can show how you intend to fully fund your project if it extends beyond the scope of the current funding request.
A grant budget is helpful for both you and the grant maker. It will set you up to launch your project with an anchoring financial plan, making management that much easier. And, when it comes time to report out on your grant activities, you will have already established funding categories and expenses.
What is a Budget Narrative for a Grant?
A budget narrative provides space for you to explain how you arrived at your grant proposal budget and expense categories, expand on the descriptions in your budget line items, and share any additional funding sources planned for the project.
So, while the grant budget paints a funding picture in numbers, the budget narrative expands on these rows of information and gives context and meaning. The budget narrative takes each component or category of your budget and provides further explanation or justification for the expense. While your budget may list something such as “staff” or “personnel,” the budget narrative provides an opportunity to be more detailed in describing and supporting these line items.
You will also use the budget narrative to justify the costs in each budget category. So, while the numbers and short descriptions are relatively static in the budget, in the narrative you will make your case for these expenditures.
Budget narrative example
The budget narrative is used to justify or explain the rationale for each budget item. For example, if your budget listed “Travel” as one of the budgeted expenses, you might include the following narrative:
Travel expenses: $3,000
The staff is expected to travel to each project location to deploy the project widget. It is estimated that three staff will be required to travel approximately 1,800 miles over the project timeline. Travel will be reimbursed at the current IRS determined mileage rate.
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How Should You Prepare a Grant Proposal Budget: 5 Steps to Follow
Preparing a grant proposal budget will be one of the more important pieces of your grant writing process. The budget is where the true ask is formed: how much money do you need to complete the project? Given that the budget is so critical, we have compiled five steps to follow to complete this portion of your grant proposal.
1. Review grant guidelines
Before you get started writing your grant budget, make sure to read and understand the grant proposal guidelines. You should be confident that you understand the key requirements within the grant. Some things to look for as you read through the grant guidelines are:
Eligibility: funders will often list characteristics of their preferred awardee. This section will list details such as geographic location or type of organization they intend to fund. If you do not meet these eligibility requirements you are unlikely to receive funds.
Areas of funding: beyond qualifying characteristics, some grants specify what kind of projects or operational expenses the grant maker will fund. Paying close attention to this section will help you write your proposal to specifically address the intended use of grant funds.
Grant amount: when researching funding opportunities, many grant writers quickly find the listed grant amount. Be sure to consider this posted detail as a way to know if the funding amount aligns with your project needs and goals.
Limitations: many grants will also list what the grant funds cannot be used for in addition to specified allowable uses. Pay close attention to these allowable uses and limitations for the grant funds. Do not submit a grant proposal that includes any requests for funds outside of the allowable expenditures or outside the scope of the grant.
2. Identify project costs
Spend time researching exactly what your project will cost. Bring together a team that can look deeper into time and cost estimates. You want to be as exact in this process as possible as it will provide you with confidence that you can execute your project within your proposed budget. Keep in mind that if you are awarded the grant and the project expenses exceed the grant funding, those expenses will be on your organization to cover.
Do not estimate or guess at your cost figures. This is the time to be as close to reality as possible. It will be easier to justify these costs in your budget narrative, and having real numbers will set you up for success after your grant proposal is awarded funding.
3. Include projected revenue
Many foundations and grant making organizations like to see that their funds are not the exclusive source of revenue for your project or nonprofit. When drafting your budget and budget narrative, outline the revenue sources you intend to utilize to pay for your project.
If the current grant will pay for the entire project, include any adjacent projects paid through other funding sources in your budget narrative. Incorporating these details builds confidence in your sustainability and project success.
4. Align the budget and the narrative
Most grants require you to complete a budget on a spreadsheet as well as a narrative explaining that budget. Be sure these match up. At minimum, your budget categories should be reflected in both the spreadsheet and narrative. A best practice is to make sure that all budget items are described and accounted for within your narrative justification of these expenses.
A common mistake in grant writing is that these two budget components are not in sync. If you outline a budget and then describe or justify expenses that were not listed in the spreadsheet, or fail to articulate items that were, you might find that your grant proposal is not awarded.
Aligning your budget and narrative shows you have a thorough conceptual understanding of the project you are proposing. Missing the connections between these two components may lead to a lack of confidence or clarity in your plan.
5. Have someone else review your budget
Once you have dotted all of your ‘i’s’ and crossed all of your ‘t’s’ you won’t be in any position to critique your own work. Give your grant budget and narrative to someone else to review for errors or inconsistencies.
What is the Difference Between Direct Costs and Indirect Costs for Grants?
Grant budgets are typically broken into multiple cost categories. Most of these cost categories will be considered direct costs. A smaller, specific amount of your budget may include indirect costs.
So what is the difference between the two?
Direct costs are the expenses that go directly toward producing the goods or services outlined in your grant proposal. Some examples of direct costs are:
Salaries (if costs are tied to personnel directly implementing the grant activities)
Supplies directly connected to grant activities
If you are intending to pay salaries with your grant funding, you need to include the associated benefit costs on a separate line item in your detailed budget.
Indirect costs are the general business or operating costs required to maintain your organization. Grants often list the allowable indirect costs as a percentage of your total grant award. This cost is reported as a single line called “indirect costs” rather than listing out what might be covered by these funds. Some examples of indirect costs are:
Salaries (of personnel maintaining operations but not directly implementing grant activities)
Business services and administration
The Dyson Foundation outlines examples of direct and indirect costs. They also note their typical indirect allowable cost percentage at 15%. Watch for that detail in the grant proposal request information provided by the grant maker.
What is the Difference Between Modular and Detailed Budgets?
In your exploration of possible grants, you might come across something called a modular budget. Although uncommon, it is worth knowing the difference between a modular and detailed budget.
The National Institute of Health (NIH) is the only funding entity that requires the use of a modular budget. Why is it still worth mentioning, you may wonder? The NIH is the largest funder of research in the United States, awarding over 50,000 competitive grants each year.
The modular budget they request in a grant proposal is a budget that is written in modules, or increments. Instead of outlining your specific budget line items, you submit in increments of $25,000 up to $250,000 for a funding year.
If you determine that applying for a NIH grant is aligned with your nonprofit needs, you can use examples of modular budgets to better understand how to build your funding request.
Within every other grant proposal requiring a budget, you will need to complete a detailed budget.
A detailed budget is just what it sounds like, a budget that outlines the detailed costs of your project. In a detailed budget, you will list each of your expected expenditures for the entirety of your project.
What Should a Grant Budget Look Like? Grant Budget Templates and Examples
Below we provide a simple grant budget template and example in order to help you visualize what you will be developing. Before we show our example, note that many grants will provide a budget template in their documents.
If a grant maker provides a template, use their template. The grant reviewers are going to be familiar with the structure and organization of their template and be able to focus on reading and evaluating your project, not trying to orient themselves on where to find the details.
If the funder does not provide a template, consider the following as an example as you build your own budget template:
When you complete your own grant budget you may want to consider expanding on each of the activities shown in the above example. San Francisco State University also has a grant proposal budget example to see how each of these budget categories can be extended in your grant budget.
You can also find another example of a helpful grant budget template from the Southern Regional Education Board. Their template gives descriptive details of what might be included under each budget category.
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Wrapping Things Up: How to Prepare an Effective Grant Proposal Budget
In this article, we described grant proposal budgets and budget narratives, outlined steps to write your budget, and provided a template and example of a budget. Writing a grant proposal budget is where you will prove to your grant maker that you have a strong grasp of your intended use of funds. Spend some time understanding what a grant budget is and what should be included before writing your own.