Budget development is central to effective program and project planning and development.
A compelling budget narrative clearly: explains line item purpose; defines assumptions (unit and total costs); and shows the math.
A poorly developed budget justification can contribute to the demise of a grant application. Avoid common pitfalls like failing to provide strong rationale for line-item costs and setting an unreasonable budget proposal.
One of my mom’s all-time favorite summer desserts is strawberry shortcake (I think for her it’s a close tie with banana splits). I wish I could tell you that this article contains the perfect recipe for a delicious strawberry shortcake, but instead I offer the equivalent for grant proposals—tips on how to create a compelling budget justification presentation.
Many grant professionals compare budget and budget justification development to recipes because, much like a recipe’s ingredients list, budget justifications identify essential funding needs or resources to successfully implement a proposed program or project. While budget development for some may not be as much fun as making dessert, the end result, when executed correctly, is just as fulfilling (and without the calories). Budget development is central to effective program and project planning and development. Let’s dig in . . .
Budget versus budget narrative
It’s helpful to remember the differences in budget and budget narrative purpose and how those differences drive the content and format of both. Typically, a budget is a form that contains line-item costs within major budget categories and contains no other explanatory information regarding those costs—it’s a big picture view of a project or program budget. By contrast, the budget narrative justification is a detailed description that addresses each of the major cost categories (salaries, fringe benefits, equipment, travel, supplies, other direct costs and indirect costs), and explains both the necessity and the basis for the proposed costs.
Merriam Webster’s definition of justification is, “an acceptable reason for doing something something that justifies an act or way of behaving.” you’ll remember the purpose of the budget justification is to:
- Explain the costs in a way that is acceptable and justifiable in the context of both the funder’s budget guidance regarding reasonable and acceptable uses of funding; and
- The costs are reasonable for the successful execution of your proposed project or plan
To clearly explain why line item costs are essential in relation to the aims and methodology of the project as well as meeting the goals of the project, the budget justification narrative will provide detail that justifies the purpose of the line item cost within the proposed project. For example, when justifying local travel costs, funders will typically look for an explanation of budget assumptions that describe the purpose of the trips (i.e., travel to community events for outreach and education) as well as relevant assumptions such as number of staff making the trips, number of trips and/or total mileage, and the mileage reimbursement rate. Justification for non-local travel costs for participation in mandatory and/or optional conferences or training events, however, would require more detail, such as identifying purpose of trip by conference name and location, number of staff attending, airfare costs per person, hotel accommodations cost per person, per diem for meals, and other related costs as applicable. A compelling budget narrative would clearly:
- Describe the purpose of the line item cost within the context of the program/project design, goals, and objectives
- Define assumptions used in budget development
- Show the math—include calculations
Budget justification pitfalls to avoid
Some examples of the ways a poorly developed budget justification can contribute to the demise of a grant application:
- Failure to provide strong rationale for line-item costs—For example, inclusion of personnel without clearly describing their role on the project (may be seen by reviewers as “budget padding” by inclusion of non-essential personnel)
- Failure to adhere to funder’s application requirements and/or guidance—For example, including an indirect cost rate that exceeds the published maximum rate, if applicable
- Unreasonable and/or unrealistic budget proposal—This occurs when the proposed budget seems either too small or too large for the proposed project scope and related outputs and outcomes
- Unorganized/reader-unfriendly budget presentation—This occurs for example when the budget justification is not organized in the same order and format as the sponsor’s budget categories or when the budget narrative does not match the budget (e.g., dollar amounts and language)
- Inconsistencies with application elements—This is one of the most common errors in unsuccessful grant applications. An example of this would be where the full-time equivalent (FTE) allocation of time for the project director is cited at 0.25FTE on the budget narrative, 0.33FTE on the workplan/timeline or staffing plan, and 0.25 on the proposal narrative.
To avoid making some of the common mistakes above, applicant organizations must carefully read, understand and precisely follow the detailed instructions and guidelines provided in the notice of funding opportunity and/or related technical assistance (TA) webinars or posted Frequently Asked Questions (FAQ). A compelling budget justification narrative may demonstrate to grant reviewers and/or funders the readiness of the applicant organization to implement the proposed project and effectively manage the grant funds as a successful awardee.
This project was supported, in part by grant number 90CSSG0048 and 90FPSG0051 from the U.S. Administration for Community Living, Department of Health and Human Services, Washington, D.C. 20201. Grantees undertaking projects under government sponsorship are encouraged to express freely their findings and conclusions. Points of view or opinions do not, therefore, necessarily represent official Administration for Community Living policy.