Tag Archives: budgeting

More on developing federal grant budgets: Stay in the proposal world, not the operations world

This is an update to our popular post “Seliger’s Quick Guide to Developing Federal Grant Budgets.” While that post provides a step-by-step description of how to develop a federal grant proposal budget, it assumes that the budget preparer understands the difference between the real world and the proposal world. Experts in real-world budgets are often too sophisticated for the proposal world.

When we’re hired to complete a federal proposal, we send our client an Excel template that models the SF-424 budget form found in all grants.gov WorkSpace applications. Recently, we’ve been working for a series of large nonprofits and public agencies that have skilled Chief Financial Officers (CFOs). Most of these CFOs, however, have little or no understanding of proposal budgeting, as they’re accustomed to detailed operational budgets. Yet they’re often charged with filling out a proposal budget.

Even if we discuss the proposal world with the CFO first, the completed template we receive back is usually way too detailed, because it reflects actual program operations, not the idealized proposal world. This not only makes preparing the associated budget narrative/justification far too complex, but also means the budget presentation won’t display well when saved as the required .pdf for attachment to the kit file. The budget will also confuse proposal reviewers (which is never a good idea while being very easy to do), as most of them are not accountants, CFOs, etc.

So how do you keep your budget anchored in the proposal world?

  • Keep the number the number of line items short—around, say, 20. If you use 40 line items, the spreadsheet bloat will be very difficult to format in a way that is readable and meets RFP formatting requirements (unless you’re a wiz at Excel, which almost no one—including us and the CFOs we encounter—is).
  • Only include staff and line items that will be charged to the grant (and match, if required).
  • Personnel line items must match the staffing plan in the narrative. Resist the urge to load up the budget with small FTEs (2% to 20%) of lots of existing administrators/managers, as this will make your agency look bureaucratic (not a good idea, even if it is) and clog the budget narrative. Large numbers of small FTEs are what a federally approved Indirect Cost Rate is for. If your agency has at least one existing federal grant, get an approved Indirect Cost Rate, which is not that difficult, and many of your proposal budgeting woes will be solved.
  • Unless the RFP requires it, don’t line-item fringe benefits. These can usually be lumped together as a the percent of salaries your fringe benefit package equates to. For most nonprofits, this will be in the 18% to 30% range. Anything above 30% will probably generate unwanted attention from grant reviewers, even if that is what you pay. If the fringe benefit rate is relatively high, this should be explained in the budget narrative (e.g. lower salaries, high local costs, need to retain staff, etc.).
  • For multi-year budgets, don’t include expected yearly salary increases or annual inflators; this is too detailed and will, again, result in a very complicated budget justification. Inflation in the current environment is low. In a high-inflation environment like the ’70s, this advice would be different.
  • Regarding the “Other” Object Cost Category on the SF-424A, it’s unnecessary to break down line items too far. For example, lump together facility costs (e.g., rent, utilities, security, janitorial, maintenance, etc.), or communications (e.g., landline and cell phones, mailings, etc.) into single line items. Try to consolidate.
  • If feasible, try to make the total annual budget level for each project year. This can be a bit challenging, if, for example, the project involves start-up costs (e.g., buying staff furniture, hiring a web designer/social media consultant, etc.) in year one. The way to do this is to increase some other line item(s) in the out years to keep the budget level. Level annual budgets will make the budget easier to write and understand.
  • Make one line item your plug number to enable reconciliation to the maximum allowed grant and/or level annual amounts in multi-year grants. The plug number should be in the Other Object Cost Category and could be advertising, communications, or similar line items that look OK with an odd number in different years. Reviewers are aware of plug numbers and won’t hold reasonable plug numbers against you.

The proposal budget is just a financial plan that supports the proposed project activities, not a detailed expression of an operational situation. Following the notice of grant award, your agency will have to negotiate the actual budget in the contract anyway.

In most cases, the grantee can move 10% of the total grant among line items by notifying the federal program officer or requesting larger budget changes to reflect operations in the real world as the project is implemented. Unless you ask to swap an Outreach Worker for a lease on a Tesla for the Executive Director, the program officer will likely go along with your plan, as most simply don’t care what you do so long as the grant doesn’t end up in BuzzFeed, Politico, or the New York Times. Program officers want to make sure you are reasonable implementing a proposed project, but they don’t care about relatively small changes in operations-level detail. Fighting over small details in a proposal budget is a foolish thing to do, as is including small line items. Get the big picture right and the details will shake out during implementation.

More on Federally Approved Indirect Cost Rates in Developing Federal Grant Proposal Budgets: De Minimus has Arrived

We’ve written about federally approved indirect cost rates before in developing federal grant proposal budgets; I thought there was nothing more to say of this bit of grant writing arcana, but I was wrong.

In general, indirect costs are an agglomeration of “keeping the lights on” costs that are lumped together is a single line item, below the total direct costs in a Federal SF-424A budget form. Since I began writing proposals during Nixon administration,* it was generally necessary for the nonprofit or public agency applicant’s CFO to prepare a “cost allocation plan,” separating the organization’s operating budget into direct costs (e.g., program service staff, client/participant services costs, etc.) and indirect costs (e.g., administrative staff, facility maintenance, etc.).

To claim an indirect cost rate in a federal grant budget, this cost allocation plan must be submitted to the cognizant federal agency, which is the federal department/agency that provides the greatest amount of grant funding to the organization. For example, the cognizant agency for a job training provider would likely be the Department of Labor (DOL), while for an FQHC it would be HRSA.

There’s a Catch-22, however: the organization had to have a federal grant to have a cognizant federal agency to apply to for approval of a cost allocation plan. Thus, non-federal grantees, or ones who never bothered to get an approved cost allocation plan, were basically out of luck regarding indirect costs. There was a workaround: additional line items for administrative costs could broken out. Still, it’s easier to blob a single, indirect-cost line item than it is to include numerous administrative costs, which complicate the budget and narrative while raising uncomfortable questions.

It seems that, while I wasn’t looking, the Feds, and in particular the DOL, has introduced the concept of de minimus into indirect costs. “De minimus” is a Latin expression often used in legal matters to denote something that is too trivial to consider.

We recently completed a DOL proposal for a large nonprofit in a big midwestern city. The client, who we’ve worked for for years, has had lots of federal grants but never applied for an approved indirect cost rate. Since I knew this, I left out indirect costs in the draft budget, putting in a slew of direct cost line items instead. A closer reading of the RFP, however, revealed this nugget:

If you meet the requirements to use the 10 percent de minimis rate as described in 2 CFR 200.414(f), then include a description of the modified total direct costs base.

Apparently the CFR (Code of Federal Regulations) was changed in 2014, allowing a 10% de minimus indirect rate in lieu of an approved rate. Amazing! This old dog has learned a new trick.

Federally approved indirect costs rates can vary from 15% for a small human services nonprofit up to 80% for a university or hospital (think of all the building upkeep, squadrons of deans and hospital administrators, free lunches, etc.). In my experience, however, most Federal agencies will not approve an indirect cost line item more than about 15% for most human services programs, no matter the approved rate. We’ve worked for a large East Cost substance abuse treatment provider that has a Federally approved indirect of 42%, but they never got more than 15% on their federal grants. So the 10% de minimus rate mirrors reality, which is always a surprise in matters relating to the Feds.


* Yes, I’m a geezer.

Seliger’s Quick Guide to Developing Grant Proposal Staffing Plans

The staffing plan is usually one of the easier and shorter parts of the grant proposals. That’s because the project description will usually imply the staffing plan. For example, a project that conducts “outreach” or health navigation is going to consist of a director or supervisor or some sort, possibly an marketing specialist to create and execute ads, and some number of navigators or outreach specialists.* There may also be an administrative assistant or data clerk.

For healthcare projects run by a Federally Qualified Health Center (FQHC), though, a staffing plan might consist primarily of healthcare providers: two doctors, three physicians assistants, two nurses, a patient care assistant (PCA), a case manager, and front office staff.

It’s a almost always a good idea to propose a full-time Project Manager or Project Coordinator or Program Director or some similar position, unless the budget is too small. Many federal RFPs require a full-time manager or an explanation of why this is not considered necessary.

Most staffing plans follow a generic bulleted format in which a position is listed (like a Program Director), a percentage of time devoted to the project is listed (like 100%), a description is offered (like “Will oversee day-to-day activities”) and minimum qualifications established (like “must have at least three years of relevant management experience, along with at least a B.A. (M.A. preferred) in an appropriate field”). In many staffing plans for new programs, most staff members will be unknown, with the possible exception of the Program Manager. Consequently, you should put in a line that says something like, “Staff members will be hired following an open and fair recruitment process, in keeping with the organization’s Personnel Policy.”

That may not strictly be true—we’re well aware that many organizations have candidates in mind for particular positions—but it should be part of the proposal anyway. If it sounds like you’ve already hired and are already paying your potential staff members, you raise the dreaded specter of supplantation.

Most staff positions in most proposals should have three to four short sentences about what the staff person will do. In many cases, the explanation will be obvious even by the standards of doltish federal grant reviewers. For example, if you’re running an after school education program, you might have a listing like “Teachers (300%): At least three full-time, state-certified teachers will be hired to provide educational enhancement to at-risk youth. Teachers will cover reading, math, cuneiform, Python, and art, as noted in the project description. Teachers will have at least one year of relevant experience, as well as a bachelor’s degree in an appropriate field.” You can also say that all staff will have at least 20 hours of pre-service training, and in that training they will learn effective teaching techniques, why they should not sext with students, and how to handle disciplinary issues.

As noted above, shorter is generally better. Also, the staffing level should be large enough to cover the plausible range of activities but small enough to not go over the budget. For particularly small programs, like those with less than $100,000 per year, 1.5 or 2 Full-Time Equivalent (FTE) staff might be appropriate. In most social and human service programs, personnel costs will be largest cost category, since each warm body is going to cost a minimum of $30,000 per year, plus benefits, which can exceed 30% for some nonprofits and most public agencies. Each body adds up to lots of costs fast. A good rule of thumb is to assume about 80% of the budget for salaries and benefits, with 20% for everything else. There are exceptions—many job training proposals like YouthBuild include participant stipends, which can easily consume 25% of the budget—but relatively few proposed projects have this kind of large, non-personnel budget cost.

It’s also a good idea to have avoid oddball percentages in your staffing plan. Don’t say someone is going to have 17% or 4% of their time devoted to the project. Most positions are full-time (100%), half-time (50%), or, in rare cases, quarter-time (25%). If you have to calculate positions on an hourly basis, keep in mind that the federal standard is 2,080 person hours in a person year. Thus, a .5 FTE = 1,040 hours.

Evaluators and other consultants (e.g. social media consultants, curriculum consultants, etc.) can be listed in the staffing plan in the proposal narrative but generally are not included in the Personnel Object Cost Category in the budget, as they will usually be hired on an hourly basis or via a subcontract. In federal budgets, these are included in the Contractual or Other Object Cost Categories.

Finally, remember that in federal budgeting, the most important part of proposal staffing plans/budgets is that the proposed services discussed in the project description be plausible. Staffing plans and budgets don’t have to be exactly match reality and will likely change, as the grantee will have to negotiate a detailed budget after the notice grant award is received. Still, they have to meet the plausibility test that reviews will apply.


* Always check the acronyms for proposed positions. For example, it would not be a good idea to list Community Outreach Workers for a women’s health outreach project, as you would be proposing hiring COWs. Another unintentionally funny position name we see fairly often is Peer Outreach Workers (POWs).

More on Developing Federal Grant Budgets: Stay in the Proposal World, Not the Operations World

This is an update to our popular post “Seliger’s Quick Guide to Developing Federal Grant Budgets.” While that post provides a step-by-step description of how to develop a federal grant proposal budget, it assumes that the budget preparer understands the difference between the real world and the proposal world. In preparing proposal budgets, experts in real-world budgets are often too sophisticated for the proposal world.

When Seliger + Associates is hired to write a federal proposal, we send our client an Excel template that models the SF-424 budget form found in all grants.gov application kit files. Recently, we’ve been working for a series of large nonprofits and public agencies that have skilled Chief Financial Officers (CFOs). The challenge, however, is that most of these CFOs have little or no understanding of proposal budgeting, as they’re accustomed to detailed operational budgets.

Even if we discuss the proposal world with the CFO first, the completed template we receive back is usually way too detailed, because it reflects actual program operations, not the idealized proposal world. This not only makes it unnecessarily difficult to prepare the associated budget narrative/justification, but also makes it hard to get the budget presentation to display well when saved at the required .pdf for attachment to the kit file. It will confuse proposal reviewers (which is never a good idea while being very easy to do).

Here are some additional tips to keep your federal budget anchored in the proposal world, where it belongs:

  • Minimize the number the number of line items—around, say, 20. If you use 40 line items, the spreadsheet bloat will be very difficult to format in a way that is readable and meets RFP formatting requirements (unless you’re a wiz at Excel, which almost no one, including us and the CFOs we encounter, is).
  • Only include staff and line items that will be charged to the grant (or match, if required).
  • Personnel line items must match the staffing plan in the narrative. Resist the urge to load up the budget with small FTEs (2% to 5%) of lots of existing administrators/managers. This will make your agency look bureaucratic (not a good idea, even if it is) and clog the budget narrative. Large numbers of small FTEs are what a federally approved Indirect Cost Rate is for. If your agency has at least one existing federal grant, get an approved Indirect Cost Rate, which is not that difficult, and many of your proposal budgeting woes will be solved.
  • Unless the RFP requires it, don’t line-item fringe benefits. These can usually be lumped together as the percent of salaries your fringe benefit package equates to. For most nonprofits, this will be in the 18% to 30% range. Anything above 30% will probably generate unwanted attention from grant reviewers, even if that is what you pay. If the fringe benefit rate is relatively high, this should be explained in the budget narrative (e.g. lower salaries, high local costs, need to retain staff, etc.).
  • For multi-year budgets, don’t include expected yearly salary increases or annual inflators; this is too detailed and will again result in a very complicated budget justification. Inflation in the current environment is low. In a high-inflation environment like the ’70s, this advice would be different.
  • Regarding the “Other” Object Cost Category on the SF-424A, it’s unnecessary to break down line items too far. For example, lump together facility costs (e.g., rent, utilities, security, janitorial, maintenance, etc.), or communications (e.g., landline and cell phones, mailings, etc.) in single line items.
  • If feasible, try to make the total annual budget level for each project year. This can be a bit challenging, if, for example, the project involves start-up costs (e.g., buying staff furniture, hiring a web designer/social media consultant, etc.) in year one. The way to do this is to increase some other line item(s) in the out years to keep the budget level. Level annual budgets will make the budget narrative easier to write and understand.
  • Make one line item your plug number to enable reconciliation to the maximum allowed grant and/or level annual amounts in multi-year grants. The plug number should be in the Other Object Cost Category and could be advertising, communications, or similar line items that look OK with an odd number in different years. Reviewers are aware of plug numbers and won’t hold reasonable plug numbers against you.

Always remember that the proposal budget is just a financial plan that supports the proposed project activities, not a detailed expression of an operational situation. Following notice of grant award, your agency will have to negotiate the actual budget in the contract anyway.

Also, in most cases, the grantee can move 10% of the total grant among line items by notifying the federal program officer or requesting larger budget changes to reflect operations in the real world as the project is implemented. Unless you ask to swap an Outreach Worker for a lease on a Tesla for the Executive Director, the program officer will likely go along with your plan, as most simply don’t care what you do so long as the grant doesn’t end up in BuzzFeed, Politico, or the New York Times.

Seliger’s Quick Guide to the Concept of “Program Income” in Developing Federal Grant Budgets

Almost all federal budgets require applicants to complete the ever-popular SF-424, which has been the cover page for federal grant applications since the Carter administration. The “SF” stands for “Standard Form,” but at the link you’ll find many variants of this “standard” form (don’t ask why). Regardless of the version, the SF-424 includes sub-forms, including the SF-424A, which is a summary of federal “Object Cost Categories.” The “Program Income” Object Cost Category is found near the bottom of every SF-424A.

The Program Income Object Cost Category represents revenue generated by grant implementation, but in most cases it’s a bad idea to declare any Program Income on the SF-424A. Even if Program Income exists, you shouldn’t list it because Program Income is in effect a deduction from the grant request. Let’s say that the Boys and Girls Club of Milaca, Minnesota* is seeking a grant to provide mentoring services for at-risk kids. All Boys and Girls Clubs charge nominal membership dues and/or user fees, although the dues/fees are often waived for various reasons. Still, Clubs charge dues/user fees to support operations and to make parents/caregivers** feel they’re paying for something. People value something they pay for, even when they pay very little, much more than something they don’t. Our applicant Boys and Girls Club would probably want to try to get the parents/caregivers of mentees (yes—this is right word) to pay dues, but this should never be shown on a SF-424A.

We’ll explain why by using a thought experiment.

Assume the mentor program grant request is $200,000. If $5,000 is shown as Program Income from dues, what is the size of the grant needed to implement the project? The answer is of course $195,000.

Almost all grant budgets are based on a “but for” or “gap” analysis—in other words, but for the grant, the project cannot be implemented or the grant represents the missing funding gap (see also our post on the dreaded supplantation concept). For most human services proposals, the grant always equals the size of the “but for” or “gap.” In addition to helping build the need argument, most federal agencies don’t want program income to be included in the proposal budget, as such income would also need to be tracked during project implementation. This would complicate reporting. The legal fiction is that there is no Program Income; both applicants and federal funding agencies usually agree to look the other way.

As in most grant writing generalities, there are exceptions to the No Program Income rule I’ve just illustrated. A good example is a HRSA Section 330 proposal budget for primary health care, which must show income for third-party payers like Medicaid and private insurance. Another example is the HUD Section 202 affordable housing development program. In Section 202 budgets, Section 8 rental income must be shown to demonstrate project feasibility. Affordable housing grants use the “but for” and/or gap analysis in supporting cash flow statements. Unlike privately funded market rate housing cash flow statements, however, which show an excess of income over expenses to prove feasibility, publicly funded affordable housing cash flow statements always show infeasibility. The infeasibility must be solved, or the gap closed, by the grant request.

Our advice to clients regarding Program Income is always, “when in doubt, leave it out,” but we’re just lowly grant writing consultants and our clients are free to ignore our advice, which they often do.

For example, last year we wrote a Family & Youth Services Bureau (FYSB) Transitional Living Program (TLP) for Homeless & Runaway Youth proposal for a very large homeless youth services provider in a big midwest city. Our client, like most similar faith-based homeless services providers, charges nominal rent to homeless youth living in their transitional housing facility and also requires that the residents work part time.

While this may be a good policy to encourage self-reliance among homeless youth, it’s a very bad idea to include this Program Income in the TLP SF-424A. TLP grants are supposed to help youth with no resources whatsoever and to house the most needy—not the ones who can work part-time or somehow have money for rent.

It was very difficult getting our client to understand this conundrum until we pointed out that they were inadvertently proving they didn’t need the grant amount requested, while opening themselves up to being seen as “cherry picking” the best homeless youth clients. I’ll leave the perils of implied cherry-picking in grant writing to another post, but cherry-picking is also usually a fast way to the exit in grant seeking.

If you want to include program income anyway, you should at least increase the total program budget so that the grant amount requested remains at the maximum allowable amount.


* When I was a kid growing up in Minneapolis in the late 50s, my dad was a big wrestling fan and I often accompanied him to watch wresting matches live at the very dingy Minneapolis Auditorium. One of my favorite wrestlers was Tiny Mills, “King of the Lumberjacks.” Tiny was kind of a good bad guy and was always introduced as being “formerly from Alberta, Canada, but now hailing from Milaca, Minnesota.” For some reason I found this endlessly amusing, only learning later as a teen going on road trips that Milaca is actually a charming town in North Central Minnesota on the way to the beautiful Lake Mille Lacs.

** In writing proposals about at-risk children and youth, always refer to them as having “parents/caregivers,” not just “parents,” to account for those living with grandparents or in foster care.

Seliger’s Quick Guide to Developing Foundation Grant Budgets

Faithful readers will remember our post “Seliger’s Quick Guide to Developing Federal Grant Budgets.” This is a companion post for developing foundation budgets.

Unlike federal budgets, foundations rarely provide budget forms, or, if they do, the form is usually fairly simple and most grant writers, even novices, should be able to figure out how to complete it. The challenge is deciding what to present to the foundation and what format to use when a budget form is not provided. We opt for a simple Excel spreadsheet. If the concept of using Excel makes you break into a cold sweat, stop reading and learn how to use Excel immediately. I could place an illustration of a typical foundation proposal spreadsheet here, but we never post sample work products. For our reasoning, see “If You Want Free Samples, Go To Costco; If You Actually Want Proposal Writing, Go To A Grant Writer.” You’ll have to use your imagination to visualize what the spreadsheet should look like, but you’re grant writers and should have at least a soupçon of imagination.

Most of the foundation proposals we write are for project concepts involving operating support, a human services delivery project, start-up costs for a new nonprofit, or a capital campaign. The following applies to the first three (I’ll write a future post discussing capital campaign foundation budgets, which are structured differently):

  • Place a descriptive title at the top of the spreadsheet, such as “Project NUTRIA Three-Year Line Budget Spreadsheet and Justification.” Don’t forget to add your agency name above the title.* I like the look of the Center Across Selection tool in Excel, but choose your own actual formatting.
  • We use two broad line item categories: “Personnel” and “Other” in column A, which is usually titled “Line Items” or similar.
  • Starting with a “Personnel” header, list each administrative or project position as a line item row in descending order from the Executive Director down. Provide a subtotal row, then a row for fringe benefits. It is not necessary to itemize fringe benefits. Instead, express them as a percentage of the personnel subtotal in the first calculation column. Finally, provide a Personnel Total row.
  • Everything else goes into “Other” header. Provide enough line items to cover the activities noted in the proposal, but not so many as to make the spreadsheet print on two pages or be otherwise difficult to read. Typical “Other” line items include local travel, professional development, equipment, printing, communications, insurance, hourly staff (e.g., tutors for an after school program) expressed as hours (there are 2,080 hours in a person year, so two FTE tutors = 4,160 hours) in the first calculation column times an hourly rate in the second calculation column, and so on. Provide an Other Total row.
  • Provide a Total Cost row, which is the sum of the Personnel and Other Totals. If your agency uses an indirect rate, the Total row will be called Total Direct Costs, followed by an Indirect Costs row (expressed as a percentage of Total Direct Costs in the first calculation column) and a Total Project Costs row.
  • Moving across the spreadsheet from column A (line item names), the next two or three columns should be for calculations (e.g., numbers, months, percentages, etc., so the readers can figure out how your formulas are derived). The next three columns will be Year One, Year Two and Year Three yearly totals. The formulas in these cells will be multiplications of the calculation cells for each line. The next column will be the project period total for each line.
  • The last column should be larger and be titled, “Narrative Explanation” or similar. Place a brief description of the line item (“10 iPhones @ $200 ea. to enable Outreach Workers to connect with participating at-risk youth through social media, as detailed in the attached project narrative”). As I discussed in my post on federal budgeting, I see no reason to have long-winded budget narratives that regurgitate the proposal like Jon Voight by the eponymous snake in Anaconda.
  • Provide a bottom sum row for each project year and the project budget year total, perhaps with a cost/participant total, and you’re done.
  • Actually, you’re not quite done, as you will have to struggle with font sizes, row heights and such to get Excel to print the spreadsheet on a single, readable page. But grant writers love struggle, so this should be the fun part of the exercise.

It is OK to estimate most line items. As with all budgets, however, the most important aspect is to make sure that the budget is consistent with the narrative. For example, if the narrative discusses having Outreach Workers using social media to engage at-risk youth, there should be a line item in the budget for the cost of buying the phones and/or computers, as well as a separate line item for phone service charges. Also, I like round number budgets—say $250,000/year for a $750,000 project total. The round number can be easily achieved by making one row (e.g. participant incentives or advertising) a “plug number” (guessed flat per year number for a particular line item), rather than a calculated total. Keep adjusting the plug number in each year until you achieve the round number.

Although this kind of spreadsheet may seem too simple, it will provide enough detail for the foundation to understand your budget request. If the foundation gets interested in funding the project, you’ll know because, in most cases, the foundation will request additional budget details.


* “The Name Above the Title” is the title of a 1991 CD by the somewhat forgotten folk-rocker John Wesley Harding. I’ve been asked many times about the music I listen to while writing proposals. One of these days, I compile a playlist or two and post them. J.W. Harding might be on one of them.

Seliger’s Quick Guide to Developing Federal Grant Budgets

Many novice grant writers, and more than a few old hands, are terrified of federal grant budgets. Oddly, I find budget development one of the easiest aspects of grant writing, so I thought I would provide Seliger’s Quick Guide to Developing Federal Grant Budgets:

* When you first read the RFP, ignore the budget instructions, except for the following: what is the maximum grant allowed, is the maximum grant for an annual budget or project period, is there a minimum, and what are the eligible and ineligible cost items? These answers are all you’ll need to develop the project concept and write the first two drafts of the narrative. When the second draft of the narrative is finished and incorporates changes to the first draft from all interested readers, you’ll have a more or less complete narrative description of the project concept, including a staffing plan. Budget development time will arrive.

* Learn to love the SF 424A, which is, as it sounds, the federal Standard Form (“SF”) for budgeting. The SF 424A is part of the SF 424, which is the basic “Application for Federal Assistance” or cover sheet used for most federal grant applications. This being the federal government, there are of course many different versions of the not-quite-Standard Form SF 424 and 424A, including alternate versions used by the Department of Education, HUD, DHHS, etc., as well as hard copy and Grants.gov versions.

But all SF 424A variants share common “Object Cost Categories”, which are found on Section B of the form. Object Cost Categories are the categories into which you have to allocate all budget line items. You’ll notice that the SF 424A Section B includes Object Cost Categories summary input boxes for grant costs only, which means you’ll have to create a line item budget using Excel or a similar program to calculate the Object Cost Category subtotals—unless you love using a pencil, legal pad and calculator and want to return to the Disco Era.

Once you have a line item spreadsheet created using the Object Cost Categories in column one, add as many columns as you need for the number of years. Keep in mind that you will usually need three columns for each budget year (“Federal,” “Non-Federal” and “total”), as well as three columns for the multi-year total, unless it is a one-year grant. Even though the SF 424A Section B only requests information for use of grant funds, you’ll need the non-federal amount to fill in the SF 424 and Section A of the SF 424A (I know there’a a lot of “A’s” and “B’s”” in all of this, but welcome to federal grant writing), as well as for the budget narrative (see below).

It’s always handy to have two or three calculation columns as well, which enable readers to easily see how you developed each line item (e.g., 12 mo. x $4,000 = $48,000 for the salary of the Project Director). Having been in business for 18 years, we have lots of SF 424A templates to use as a starting point, but I’ve never seen the feds bother to make one available. As far as I can tell, no one has told federal grant making agencies that Excel exists and it is still 1977 at the Department of Education.

* Now that you have a spreadsheet, it’t time to dream up the costs. That’s right, I said “dream up.” This is because federal budgets are rarely scored and all you really have to accomplish is stay within any maximum/minimum amounts and eligible/illegible item instructions in the RFP (see step one above) and make sure the budget is consistent with the narrative (this is why it is a waste of time to work on the budget until the narrative is gelled). “Consistency” means, for example, that if the narrative lists two Outreach Workers and a van for them to cruise around in, the budget needs to have these two positions listed under the Personnel Object Cost Category and a van lease under the Contractual Object Cost Categories. Most human services program budgets are composed of about 75% personal/fringe benefit costs and 25% everything else.

Thus, start with personnel and estimate salary costs, based on your agency’s current salary structure, calls to other agencies or the ever popular WAG method. Keep in mind that a person year is 2,080 hours, meaning that 1.5 FTE Outreach Workers can be calculated as 3,120 hours x $15/hour. Fringe benefits are expressed as a percent of salaries. Depending on the agency, fringes usually range from 15% to 30%. Part-time employees, interns and the like who do not receive full benefits are best listed in the Other Category, using an hourly rate jacked up by a dollar or two per hour to account for their reduced benefits.

* Once the Personnel and Fringe Benefits Categories are complete, it’s time for the rest. We rarely have more than about 15 line items beyond Personnel and Fringe in our budgets because it is a waste of time to have 100 line items. Remember, the budget is usually not scored, you’ll have to create a Budget Narrative (see below), and the more line items you have, the more complex the Budget Narrative becomes. Also, after you receive a Notice of Grant Award, you’ll have to negotiate a real budget with a federal Budget Officer anyway.

* The Travel Category usually includes milage reimbursement (always a popular line item with staff) and travel for conferences (an even more popular line item with staff). Your agency probably has a reimbursement rate of around .50/mile and, depending where you are in the country, $1,500 – $3,000 / person trip is about right for conference travel and per diem.

* We rarely use the Equipment Category in federal grants and you should avoid it as well. This is because the feds consider anything with a unit cost of less than $5,000 to be a “supply” and you can buy $4,999 copiers the same way you buy paper clips. As soon as the unit cost goes over $5,000, you enter the realm of federal purchasing rules, which is not a place you want to be. This is one reason vehicles and other big ticket items are better proposed as leases, even though it may make little economic sense. Remember, you are in the Proposal World, not the Real World.

* The Supplies Category is used for consumables and things most normal people would think of as equipment,but cost less than $5,000 each. Consultants, partner subcontracts, leases and similar items go into the Contractual Category. Construction is another Category we rarely use. Most federal grant programs specifically preclude the use of grant funds for construction and, guess what, there is yet another budget form, the SF 424C, for construction programs, which I will ignore in this post. Any quasi-construction “paint-up/fix-up costs,” modular buildings, etc., that you think you can squeeze by your Budget Officer should be put in the Other Category. The Other Category is loaded up with anything that doesn’t fit in the other Categories, including matching funds from your agency and partners, if applicable. This leaves the Indirect Charges Category.

Unless your agency has a federally approved indirect cost rate, based on an approved cost allocation plan, $0 is the correct entry for this Category. If you have an approved rate, it will be expressed as a percent of salary costs, total direct costs or whatever your rate approval letter states in the Indirect Charges Category. If you don’t have an approved rate and want to claim administrative costs, they would be placed as individual line items in the Other Category, assuming the RFP states that administrative costs are allowable. Typical administrative line items would be accounting, payroll, janitorial, purchasing, personnel administration, etc.

* It’s time for the fun-filled budget narrative. Typically, the feds do not provide a format for the budget narrative, instead going on for pages about what the narrative is supposed to include. If you want to return to the Disco Era I mentioned above, you could respond with something like the following for every line line item, ending up with a 25 page budget narrative:

Two Outreach Workers are needed to reach out to the target population because the target population is difficult to reach, doesn’t trust the government and is too busy doing other things to readily accept wraparound supportive services without being dragged to the intake center. The Outreach Workers will conduct outreach, using the Project NUTRIA van (see the Van Lease line item below in the Contractual Category for more detail), since the project area is pretty big and outreach will be conducted mostly at night, when it is also pretty scary. By having two Outreach Workers, outreach will be able to be conducted seven days per week for at least ten hours per day . . . and so on. Cost calculated as follows: 2 Outreach Workers x $2,500/mo. each x 12 months = $60,000. This salary is reasonable, based on salaries paid to Outreach Workers by the applicant and other agencies in Owatonna.

It’s easy to see how the above can get pretty tedious to write and even more tedious to read, particularly since the explanation for why Outreach Workers are needed should already be in the narrative. Instead of all this regurgitated drivel, we usually present our budget narrative in one of two ways: a “Narrative Justification” column in the Excel spreadsheet or a Word table that models the spreadsheet.

For the above example, the narrative justification would read something like this: “Two Outreach Workers to conduct outreach and intake, as detailed in the attached Project Narrative, 2 @ $30,000/yr.” That’s it. In 18 years of presenting simple and easy-to-understand budget narratives, I’ve yet to see any review comments that said the proposal would have been funded if only it had included an incomprehensible 25 page single spaced budget narrative instead of a one page Excel spreadsheet or two page Word table.

Now that you know how to tackle the federal budgeting challenge, go forth and budget.

EDIT: If you’re into budgets—and really, who isn’t?—you should also check out our “Quick Guide to Developing Foundation Grant Budgets.”