By Chris LaPage
March 2012
Show me the money! As far as a grant funder is considered, it is probably more appropriate to say “show me how you are going to spend the money”. For the applicant, it is the piece of the proposal that is likely to keep you up at night. After all, the reason you are seeking grant funding the first place is because you are most likely facing a funding deficit for an important project. It is only natural that you may be preoccupied with budgetary needs while you are still developing the project and the accompanying proposal narrative. Unfortunately, it is this preoccupation that ultimately leads many applicants astray with their funding proposal. This article does not suggest that there is a single magic bullet as there are many acceptable pathways to completing a budget. However, there are certain items that must be considered and addressed along the way. When you start developing the budget for your next proposal, keep the following in mind:
1. Maybe there is one wrong way to eat a Reese’sTM .
That is, if you consider your budget a delicious peanut butter cup. While there are countless valid methods to pull together a budget, there is one wrong way in the context of a grant proposal. A complete draft of the budget should be sidelined until you have tackled at least one draft of the project narrative. Funding is necessary so that you can purchases resources to complete a worthwhile project. The budget gives the grant program reviewer a picture of the funding necessary in order to acquire those resources and bring the project to fruition. Logic dictates that in order to get an accurate financial depiction of the project (budget), you must have a detailed description of the initiative itself (project narrative). While you are typically required to accompany a budget with a narrative explaining why each line item is necessary, the true justification begins with the project narrative. In many ways, the budget will naturally flow out of all the details you provide in the project narrative. Grant funders are focused on making an impact for the greater good; this usually means addressing the needs of some target population. When you attempt to develop a project narrative around your pre-developed budget, the proposal reflects that approach. In other words, you end up with a proposal that seems to focus on the financial gaps of the applicant rather than the needs of the target population.
2. Some things are in black & white.
Award Range
There is no question that many grant funders leave a lot of gray area in their proposal submission instructions. When it comes to the budget, there are certain items that leave no room for debate. You must be careful to familiarize yourself with the entire grant guidance because these “black & white” issues could be buried anywhere in the document. Begin with the “Award Information” or “Funds Availability” section and find out whether there are any award ceilings or floors. Often times, applications are dismissed without review if the budget is outside the funding range. It is not good enough to look at the budget in totality across the projected funding period as many funders limit the annual request allowed in each budget year. If the funding range appears to be open-ended or undefined, you should look into the past history of the grant program (or the funder in general) to gain some insight into what might be an acceptable request.
Cost Sharing
Another important area to consider is any requirements pertaining to a cash match or cost sharing. While this issue is usually black and white, it should be said that it is occasionally a gray area as well. This is particularly true when a program allows you to put up in-kind contributions as opposed to requiring a straightforward cash match. The primary component to make sure you get right is the amount of matching funds that are required. Most funders state this as a percentage or ratio. When the match is in the form of a ratio it is usually straightforward, such as a requirement that the applicant puts up $1 for every $10 in grant funding requested. However, you need to pay close attention when the match is presented in the form of a percentage. Some funders will state the match requirement as a percentage of requested funds while others will present it as a fraction of total project costs. Failure to notice such a distinction can completely derail your entire application. For example, if you have a $200,000 project and the grant program requires you to match 20% of the total project costs, you have to put up $40,000. However, if you are required to match 20% of the funding request for the same project, you would be required to put up $33,333 in match funding for a request of $166,667. In this scenario, misinterpreting your denominator could lead to you not offering enough match and a denied application.
If the program allows in-kind matches, make sure you are aware of what is allowable as an in-kind contribution. Usually, any in-kind contributions must be items/equipment that you would be able to purchase with the grant funds. In addition, you must ensure to consider any time period restrictions for in-kind contributions. Last but not least, some grant programs may require you calculate the percentage of use that a certain in-kind contribution will be used for the project. If you include a previously purchased computer as an in-kind contribution ($1,000) but it will only be used 50% of the time for this particular project, you may only be able to count $500 as match funding. If a funder discounts an in-kind contribution for any of these reasons, you proposal may fall short of the cost sharing requirement and be denied funding. That is why they say cash is king when it comes to matching funds. Even in the absence of a cash match requirement, for most grant programs it is essential for you to document external sources of funding for the project in a separate section of the overall budget.
Funding Restrictions
The final area to consider is allowable costs versus funding restrictions. Unfortunately, most grant programs do not put forth an exhaustive list of allowable costs as it is left to the applicant to prove why budget items are integral to the completion of the project. However, most funders generally do provide a list of restrictions. While there is usually a section dedicated to funding restrictions in the grant guidance, the truth is that they can be incorporated into various sections of the application instructions. If capital construction is explicitly listed as a funding restriction, there is no amount of justification that will encourage the funder to approve your proposal. It is always wise to double check your line item budget against the funding restrictions. Be careful, as certain restrictions may be buried in other sections of the guidance, perhaps where they address inclusion of technology or equipment. For instance, a funder may state that the budget for hardware and software cannot exceed 25% of the overall request amount. This speaks to a larger point... funders are interested in well-rounded projects (training, personnel, equipment) rather than a product and service wish list. While such restrictions are usually based on percentage of grant dollars requested, it may be stated as a fraction of total project costs as well.
3. What about the gray areas?
As previously stated, grant programs are usually full of gray areas. The misconception is that a reviewer compares budgets to examine bang for their buck. With some foundations, being frugal might be a priority. However, with the vast majority of grant programs, reviewers are charged with examining the budget to ensure that the cost structure is reasonable. The funder wants to be confident that the costs included in the budget are both necessary and reasonable to complete the project. If you are trying to low-ball pricing points in order to show the funder you are doing more with less, instead of impressing the reviewer you may in fact derail your application. Overstating costs can leave a bad taste in reviewer's mouths as well. Work with anticipated vendors to build out an accurate cost structure for the products and services you will be purchasing with the grant funding. Even if you have a single vendor in mind, it may be a good idea to get several quotes to ensure that the figures you include in the application are indeed reasonable. A cost is considered reasonable when it is consistent with the scope of work that has been articulated (project narrative). There may be some gray areas when it comes to what costs are allowable or how they should be classified. Make sure to break down the budget into the categories required by the funder for the specific program you are targeting. Typical classifications for the budget include personnel, fringe benefits, travel, equipment, supplies, contracts, and indirect costs. Most programs will also have an "other" category for miscellaneous expenses that do not fit cleanly into any other category. Remember to double-check that you are not exceeding any request limits for each of these budget classifications. For most large federal programs, equipment has a very specific definition: any item that has a unit cost more than $5,000 and a useful life greater than one year. Anything that doesn't quite fit that definition is usually classified as a supply for the project. This is an important designation especially when equipment costs are capped for a particular grant program. Items that can be reclassified as supplies do not count towards the cap. If you are unsure where a particular cost goes or it is unclear if it is allowable, you must convince the reviewer that is necessary for project completion in the justification narrative that accompanies the budget.
It is almost a guarantee that you will face some tough questions while your developing a budget for your grant proposal. Unfortunately, even if you have read every word of the application instructions, there will still be gray areas. The key to putting forth a compliant and competitive budget is to do your due diligence in making sure the financial request is consistent with the project narrative (necessary) and the structure is reasonable (budget justification). The burden of proof is on the applicant.