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Congratulations on reaching this point. You have done well so far and I encourage you not to stop now but to keep going.

In this lesson you will learn about the budget section. This section of the proposal is both critical and required because it details how you intend to use the funds you are requesting. All amounts will be projected, not actual, and will reflect the expenses you expect to incur over the entire duration of the project (the “project period”) for which you are submitting the proposal. The precise project period that applies to a particular grant will be stated in the RFP and could be less than one year, one year, or more than one year. It is very important to determine the project period before you begin to develop your budget because that will determine the total amount of each line item. For example, if you estimate your project will need $75 per month for office supplies, that would equate to $900 over a twelve-month period. But if the project period is eighteen months, you would need to budget $1,350 ($75 x 18 months) to cover this expense over the entire project.

Do not confuse project period with “renewal option.” The latter term applies to grants for which grantees are eligible to receive funding over more than one project period. For example, a one-year project period with three, one-year renewal options means the applicant would submit one proposal that, if accepted, could provide funding for a total of four years. Each renewal option is usually contingent on the grantee’s successful project performance, as well as a periodic appropriation from the legislative body that oversees the funding that supports the grant. If no funding is appropriated in a given year, grantees can lose the grant, regardless of their performance. Further, even if money is appropriated for subsequent project periods, there is no guarantee that the grant amount will be the same; it could be more or less than requested.

The majority of non-construction-related federal government grants use line items (called “Object Class Categories”) that correspond to SF (“Standard Form”) 424A, the first page of which is depicted in the following image. As you can see in Section B, there are nine possible budget categories, ranging from line a (personnel) to line j (indirect charges).

Begin the budget development process by reviewing the proposal in its entirety to estimate the expenses that correspond to each of the budget categories that will be applicable to your project. Make sure you include all of the expenses that would be necessary to conduct all proposed activities until the very end of the project period. If you are unsure of these amounts, the person in your organization who is responsible for taking care of your books, like your accountant or bookkeeper, should have this kind of information.

As you will recall from Lesson 1 (”What Is a Government Grant and What Is Its Purpose?”), some government grants require that you provide matching funds, which depending on the particular grant can be in the form of cash, in-kind donations, or a combination of the two. While these funds the amount of the government grant, plus the match, if required collectively comprise the total project budget, they must usually be listed separately in Section B of the SF-424A. As a rule of thumb, the amount of grant funds being requested from the government is placed on the appropriate line (a through j) in column B1. Column B2 is typically used for the portion of your total budget that represents the anticipated cash match (if applicable), while column B3 is typically used for the portion of the match that you expect will be derived from in-kind donations. The fourth B column is sometimes used for additional funding sources, like “program income” (money your organization might generate by charging a fee for its activities). The RFP will provide specific instructions to help you complete Section B in accordance with the grant-making agency’s requirements, as well as discuss whether or not program or other income is an allowable source of funds under the particular grant for which you are applying.

The following image provides an example of a completed Section B in which the total project budget is $71,116 and the grant requires a 20 percent match in any combination of cash and in-kind donations.

In addition to the SF-424A, most federal agencies also will require that you submit a budget narrative providing the basis and other details for each expense line item. The following images demonstrate what a budget narrative using the example SF-424A above might look like.




Each line item in the budget narrative should correspond to the line items on the SF-424A. Additionally, the budget narrative should clearly delineate the portion of each line item that is comprised of federal cash (the grant), as well as non-federal cash and in-kind contributions (the latter two would be included if the grant requires a match).

Ideally, the budget narrative should be done in Excel or another spreadsheet application where you can program the various cells to calculate automatically, making it much easier to implement changes whenever needed. Using a spreadsheet application can also make it easier to periodically monitor and report your actual versus anticipated expenses during the project period.

When preparing a budget for a government grant, you need to keep in mind that expenses must be what are considered “reasonable and necessary.” Although this term might seem nebulous and, therefore, open to interpretation, quite the opposite is true. All federal grants must be managed in accordance with the applicable “Circulars,” which are publications issued by the U.S. Office of Management and Budget to all federal agencies that dictate how government dollars must be spent and accounted for. Most project grants will be governed by Circulars A-110 (“Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations”), A-122 (“Cost Principles for Non-Profit Organizations”) and A-133 (“Audits of States, Local Governments and Non-Profit Organizations”).

Before applying for a grant, you should thoroughly read all applicable Circulars so that you understand your financial management responsibilities and to ensure that all of your project expenses meet the definition of “reasonable and necessary.” Additionally, the Circulars are periodically updated, so you are strongly advised to consult the RFP each and every time you apply for a grant to determine which one/s will apply and whether there have been any updates. You can view the Circulars from the OMB website (www.omb.gov).

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Assignment

For this assignment you will do the following exercise:

  1. Review your proposal and complete your budget.

Test

Read over the following questions and provide the best answer possible.

  1. Most federal government agencies require a budget narrative, in addition to the SF-424A.
    1. True
    2. False
  2. All budget amounts will be projected, not actual.
    1. True
    2. False
  3. If you are unsure of the costs of the various line items, who should you contact within your organization to help you?
    1. Project manager
    2. Project director
    3. Accountant
    4. None of the above
  4. Ideally, you should do your budget in Excel (or another spreadsheet application) to help you monitor your expenses and easily make needed changes.
    1. True
    2. False

 

Lesson 7 >

Want to Go to College?
$3 Billion in Pell Grants are Unclaimed Every Year by Eligible Students

Grant Funding and Assistance
Billions of dollars are now easily available to many Americans