Happy New Year!

 Spring grant season is descending upon us, so I thought I would post about the budget, which can be the most critical and sometimes time-consuming part of your grant application.

There are many things to remember or consider when putting your budget together. If you don’t think it through, you will not be able to do everything that you want/need to in your project. Start Early!!!!

Okay, so first and foremost, you should have already had conversations about the following things:

• Conversations about the project (in full) and the type and amount of funding you need. If the organization you are working with has not established its annual budget, that really needs to happen before you submit your grant. Most grants, especially foundation grants, will want to see how financially solvent the organization is moving into the next year. Why? If they give money for a project, but the organization goes under, what is the point? So be ready to submit a copy of the organizations budget with your grant application just in case it’s requested.

• Do the grant award dates align with when you will start and end your project? If you get an award in June and can’t start the job until October, can you finish the entire project within the grant timeframe? If not, you will need to talk about getting that extension from the grant administrator/foundation staff. Getting to the end of the funding period and only halfway through the job is a huge red flag.

• You know who is doing what, and if they are offering match or in-kind funding to support the grant, you have established those terms. These items will need to be determined so they can be included in your budget.

• The elements of the project or program will be covered in this grant and you have read the announcement and know the guidelines.

• If you received quotes for phases of your projects, are they still current? If there have been or will be big changes in materials, labor costs, etc., you want to get the vendor to update the quote and include the updated costs.  (Once you have an approved award, it may not be possible to get an amendment, and if you do, it will only be to move money around in the budget, not to get more to cover those additional costs.) 

Now that you have accomplished all those things, it’s time to start building your budget.

If you know me, you know that the first thing that I am going to say is, “Did you read everything?”.  So you know that your project is within the financial limits and guidelines of the grant. 

• Equipment Purchases (Strict procurement guidelines and you will need written quotes)
• Renovations (You will also need cost and labor quotes in writing)
• Indirect costs and or administrative overhead costs

These are likely the top three things that a grant will have very strict guidelines for. Most often, equipment purchases cannot exceed 50% of the total award amount, and indirect costs and or additional administrative overhead costs can only be 10-15% in many cases. 

Step 1: Read everything.

Step 2: Write down what everything is going to cost. Everything! This is going to help you put together your line-item budget. This means all your costs, partner costs, other sub-award costs, etc.  The grant might have its budget broken down into broad categories; however, you need a much more detailed budget to set internal purchasing guidelines. I try to think of breaking that line-item amount into quarterly amounts. It helps ration out the funds so you don’t run out before the project or program ends. It can also help you realize that you haven’t included enough for certain things and too much for others. Also, remember your in-kind contributions that may support some elements of your project, allowing you to trim or reallocate certain costs. It’s also possible that you will see the need to seek another partner who could help support the cost in a certain area and you gain a new partner.  Budget revisions can be very challenging mid-grant, and sometimes funders don’t allow for revisions. So best to save the headache and get it right the first time.

Pro Tip: Think about what phase of your grant you will be in compared to what is going on during parts of the year. Some parts of the year are more active and will allow for more traveling, more outreach events, etc, so lay your budget out with those things in mind. In fact, it may be that if you are doing something with a construction project, you apply and start your grant timeline later due to the temperature and time of year. Construction beginning in November will quickly be delayed if you live in many areas of the United States. So, make sure that if that needs to be delayed, you can still complete the project within the grant’s time guidelines. Otherwise, you may need to talk to the grantor about those specifics and get an allowance or extension of the timeline.

In my experience, things like office supplies are often overestimated, especially now that everything is automated. Additionally, we underestimate the costs of purchasing computers, cell phones, and those types of items.  You don’t need to go crazy and get top of the line because federal grant folks will probably question that, but you need to have good working equipment that will last for the duration of the program. Projects are a little different and often don’t require much in those line items because they don’t typically carry over from one budget year to another. Still, regardless, you need to accommodate those things accordingly. 

Pro Tip- I would NOT have individuals working on their personal computers or cell phones. You are asking for trouble. If those items will be required to carry out their job duties, you should purchase them in the grant. I’m just leaving that there.

Step 3: You established your line-item budget in step 2. You know what everything is going to cost. Now, you need to develop a narrative explanation of how you arrived at those numbers. Did you get quotes? How did you calculate the staff’s time, wages, and fringes?  (Ex: 20 hrs X $25.00 p/hr X 20 weeks) 

All of the sections of your budget need to have a written explanation in the budget narrative. Some foundation grants do not ask for a narrative. Love those! However, most larger grants will ask you to explain what you include and why. You should reference quotes, and if the amount in the line item is different than the quotes, you should explain why. If you have allowed for “wiggle room” for some element, this is the place to explain why. Grants where you are doing renovations sometimes include this because it is impossible to know 100% what those final costs might be.

You should also provide some perspective about how things in the budget will work together to meet the outcomes of the project or program. For example, if you are allotting funding for a mental health assessment or counseling services for individuals in a recovery-to-work program. Your reasoning might be that workplace absence and attrition can be decreased if individuals get proper mental health care, especially if they are in recovery from substance misuse. Suppose you don’t say that in your budget narrative; someone funding a workforce program might not understand the purpose and question the budget.

Step 4: Safety Net.  Does your organization have money that you can use to float your program until the award funds hit your account? Many grants are strictly reimbursement; do you have money to pay upfront for services and wait for the reimbursement? Non-profits struggle with reimbursement grants because if you had the money to operate the grant, you might not need the grant. However, reimbursements are made on time most of the time, and it’s not a huge deal. However, if you have approximately 1 month of funding, you can tap into to cover costs until the first reimbursement or when there might be holidays and reimbursement is delayed. Some of that can be handled programmatically by pausing things or slowing down enrollments, etc, during times when you might have funding delays.

Pro Tip: Don’t start operating your grant when notified of being awarded. If you are awarded a grant and it begins on October 1, you can legally start spending effective that date. Your outcomes and metrics begin on that day. However, you might need to negotiate with vendors about when you will pay them. You will need some float money if they want to be paid upfront or have a 30-day payment policy.  Even the best reimbursement grants have at least a 30-60-day reimbursement period, which generally doesn’t start until your funding reports are received.

Step 5: Review. Once you have, it all worked out. All the boxes add up, and you think you have it all. You need to have your group review again. Have you budgeted for all the elements, staff, benefits, pay increases, benefit/insurance increases, material increases, etc.? I know that you don’t have a crystal ball and can’t anticipate everything, but there are some areas where you can build a little “fluff” to cover some expected increases. Wage increases and insurance premium increases are most often going to happen yearly; budget accordingly if your project is rolling over more than one fiscal year. You also need to ensure your partners can cover what they promised. Budget cuts happen and sometimes without a lot of notice, so if you are working with partners, you need to ensure that your project was considered when they developed their annual budget before you hit send. That is why I would like to sew all that up with memorandums of agreement for any partnership or in-kind contributions.

One additional thing to consider is match funding, which is confusing. It seems that if you are required to have a match, then it would be money that takes away from the amount of the grant that you need to ask for, but it’s tacked on to the total cost for the project. There are a couple of ways that Match can be calculated: Total Project Cost match and Grant Amount;

This is the formula for calculating Total Project Cost match funding and how it works.

Total Required= Amount Needed/1-Match Percentage

 If your project costs $1.5 million and you are required to provide a 20% match, you will have a Total Required cost of $1,875,000. 1, 500,000 / 0.80 = $1,875,000 Total Required Funding. That means your budget form and budget narrative will need to show $375,000 in match funding and where you are getting that from. If you can’t spend that much, you may need to reduce the grant request amount to make the Total Required cost what you can spend.  This is a common method for State and Federal grants.

Grant Amount Formula

Match Funding – $1,500,000 x 0.20= $300,000

This is the most straightforward method and is how most folks will think of calculating the match, but you have to be careful. It will be tough to scramble to find that $75,000 in match at the end of your grant if you are mistaken in how it is calculated. With my first grant, the group I worked with made this grave mistake, and it was such a mess. Luckily, we could calculate more in-kind match than initially considered, but trust me, it was panic-inducing. Failure to come up with the additional match funds could require you to pay back all of the grant funds for being in violation, not to mention you will have some severe legal headaches to be concerned about.  Make sure you do your homework going into the grant and know how the funder calculates required match costs.

Okay, so I feel like this was a LOT, so I will end here for today. I hope that you found something about this post helpful. Preparing budgets will get easier the more often you do it. My biggest suggestion is to think big picture and plan for challenges.

Again, you can email me at tbishop80@outlook.com if you have questions or want to discuss working together.

~ Tiffanie