06/25/2024
Many nonprofits struggle with the task of creating a budget for a grant. A program or project budget is typically half the work of a grant application but can feel twice as daunting as responding to narrative questions. Here are six helpful tips that can demystify the grant budget process, and even make it fun!
1. Numerical Narrative
Simply put, a grant budget should clearly reflect the written proposal in numbers. After you’ve submitted a grant application, members of a review panel or board who receive it could easily turn first to the budget versus the narrative, so they must match. Do you mention in your application that you will use this funding to provide more scholarships? Are scholarships listed in the budget? Is there any random line item noted in the narrative that is not in the budget? Make sure to add that missing piece so there are no questions when reviewing either. Clarity and transparency are key when marrying grant narratives and budgets to create a winning proposal.
2. Add Detail
The budget is an ideal place to add detail that breaks down a calculation. Detail demonstrates you’ve given the budget some thought and understand what it costs to deliver your program or complete a project. Is there a line item for a staff member? Make sure to include an estimated number of hours they will dedicate to this program or project with their hourly rate, ideally also including fringe expenses (i.e. insurance, other benefits) to give an accurate account of the cost of that employee to the organization.
While it’s commonly understood that operating expenses are less frequently funded by grants – UNLESS a grantor explicitly asks not to – always show staff and volunteer expenses/in-kind contributions (see tip #6) in your program or project budget for a realistic picture of what it actually costs to deliver that program or service. This can be empowering, especially for nonprofits operating on a shoe-string budget with limited revenue and resources.
3. Future Facing
Most grant cycles are 12-18 months, therefore the timeline between applying for a grant and receiving those funds can take more than a year. Projecting a program’s budget into the next year can be challenging. The best method is to make a copy of the existing budget (or create one from past expenses/contributions), then make changes based on projections. Did personnel increase or will it need to for scaling a program? Is inflation factored? Capture as many details as possible in your forecast and update and adjust to reflect new changes. Ensure the budget aligns seamlessly with your organization’s goals, both to sustain and scale existing efforts to deliver your unique impact. For nonprofit staff, volunteers, and leadership, this practice can create better cohesion and a deepened commitment to achieving a collective mission.
4. Addressing Financial Questions
Grantors may ask a series of questions about your organization’s financial standing and request a summary of its fiscal history and/or explanation of any deficits or surpluses. You may be asked to supplement the budget with a separate narrative, organizational balance sheet, and/or profit and loss (P&L) reflecting the most recent or possibly last one to two years. If you are seeking grants without a strategic plan in place, think of these questions as an opportunity for a bird’s eye view of your organization’s fiscal journey. Once collected, make sure to add these items to your Grants Readiness storage system.
The more you track these responses, the bigger your pool of financial data and language to draw from for future requests – to individual donors, for fundraising events, and grants alike. This significantly reduces time and stress scrambling to find financial data. Having it all in one place paints a clear picture of where your organization has been, is, and is headed financially. For more on getting organized, learn about our Grants Readiness service and how it can set you up for success in grant seeking and many other areas of nonprofit management.
5. Use the Funder’s Form
Oftentimes a funder will require applicants to use their budget form or template. While it can take extra time to copy over information from an existing document, doing this demonstrates compliance with the funder’s requirements. From the grant reviewing perspective, consistent formatting enables a smoother, more efficient, and more equitable reviewing process. The fun in this one can be learning more about how different budgets are structured while translating your data to the funder’s form!
6. The Value of Volunteers
Many nonprofits rely on volunteers to help run the show; some are managed by an all-volunteer staff. The hours volunteers contribute have significant value. This value can be reflected as revenue! Encourage all volunteers to track the hours they contribute to the nonprofit, broken down according to activity or purpose. Calculate the in-kind hourly rate for volunteer staff and board members based on their professional or other expertise and multiply it by the number of hours contributed. For program or project budgets, make sure the number of hours are relevant to that initiative or activity. Total hours contributed can be included in the nonprofit’s organizational budget (which, ideally, will break down from “parent” categories – e.g. programs or projects – into line items reflecting respective details). Including in-kind contributions has several benefits.
It gives a realistic look into a nonprofit’s “skin in the game” by demonstrating buy-in from volunteers, board members, and other leadership. It can reflect the strength of partnerships with local or other community organizations, a topic also commonly asked about in grant applications. In-kind calculations also give nonprofits important data that can inform where and how to request operational support. This can be especially important for small nonprofits who need to show their capacity-building efforts in order to be considered for operational support. And, it validates the efforts and valuable time volunteers contribute to the organization’s success.
Creating a grant budget can feel overwhelming or even frustrating, especially for those who find numerical tasks a bit unnerving. Remember that the budget plays a crucial role telling your nonprofit’s story in numbers. This includes a clear message of your need for funding, specifically, where it is needed, why, and how you are going about filling that gap. Invite funders into your story of impact as a financially sound nonprofit by exhibiting that you know your numbers and where your gaps are, how to manage your money, and the investments you need to continue increasing your positive impact well into the future for those who need it most.
At PSI, that’s where WE have fun! Connect with us to learn how our services can significantly increase your nonprofit’s success.