The Who, What, When, Where, and How of Grant Budgets
Your budget will tell the funder instantly if you know what you're doing.
You probably remember the mnemonic in the title of this chapter from grade-school English class on how to write a news article. In teaching budget preparation, I have long stressed that a budget must be able to stand on its own and answer questions about your grant proposal (not raise questions). It occurred to me that, in this way, a grant budget is like a good news article, and by using the familiar formula the grant writer will remember to include all of the important components in the budget. These words are also a good way to group expenses and income for a clear presentation. Of course “why” is missing from the list of points to cover. I’ve not discovered how to explain that in numbers—yet.
Who will carry out your project? Staff, consultants, and volunteers all have a place in this part of your budget. In thinking about the staff, don’t forget support and supervisory staff. They may spend only a fraction of their time on a project, but some portion of their salaries usually should be included. And think about what you’d have to pay people to do the work of your volunteers. If you include volunteers in your staffing, list them on a separate line, and put a corresponding line for the same amount in the income section of the budget as “donated services.”
List all your direct expenses—supplies, postage, mailing, shipping, special-space rentals, service fees, equipment, transportation, and other direct costs.—that you must have to do the project. Don’t leave out the value of supplies you have on hand; you’ll have to replace them after the project has consumed them, so these should be counted too.
You will probably need a line for indirect expenses. These are expenses that you can’t justify as part of the project but that you must incur to operate your organization. Examples are rent, utilities, insurance, and accounting and banking fees. Of course if your budget is for your entire operations, everything is a direct expense. (I provide an in-depth explanation of indirect expenses, and how to allocate them, in my book The Wise Guide to Winning Grants. My free online Budget Builder Spreadsheet turns a complicated indirect expense calculation into a fill-in-the-blanks spreadsheet.)
When will your project take place? What period is the grant meant to cover? Sometimes those dates won’t be the same. Let the funder know when you need the money by clearly labeling the column of expenses or by including the dates in the title on the page. And if the project dates and grant dates aren’t the same, you may need to list the specific costs you want the funder to cover in a separate column. That way, they can see the total costs, as well as what part their grant will play in the overall project.
The location of the project can be expressed in several ways. If yours is an operating budget, you’ll include all your occupancy costs—such as rent and utilities—and costs of any additional spaces you’ll have to rent. Your project’s grant budget will include a percentage of your occupancy costs as indirect expenses, indicating that at least part of the program will take place in your offices. Specific rental costs will show when you are operating outside your office space. And if that extra space is donated, include a fair market value for the space in your expenses, showing a corresponding space donation line in the income section.
Your income sources statement will tell the funder just how you expect to carry out the project. Will there be service fees charged to clients? Will audiences pay admission? In addition to the funder for whom you’re preparing this budget, what other funders do you expect to support your project? Which have already made a commitment and which are pending? Will you have any in-kind income, that is, will anyone, such as your volunteers, donate goods or services to the project? List everything here. The more sources supporting your project, the better it will look to the funder.
Footnotes and Budget Narratives
Sometimes everything just can’t be clear from numbers alone, so feel free to add footnotes or to write a short narrative putting some of the important expenses into context. Your largest expenses will most often need explanation, especially if their roles in the project are not clear. For example, if you have large travel costs, and your project takes place locally, you might want to explain that the travel costs will allow you to bring in an expert from across the country to take part in the project.
Your budget will instantly tell the funder whether or not you know what you’re doing.
Here’s a sample budget created using the above guide. Take a look and see how much you can tell about the project just from the budget!
Use my Budget Builder Worksheet (download) to create your first project budget.
This article also appears in the Information Exchange of the Association of Fundraising Professionals website.
You can access a video of a budget workshop I conducted for Chamber Music America on its website.
Also check out Financial Management Resources from the Wallace Foundation.