Building Grant Application Budgets

Crafting a Winning Grant Application (Part 2 of 3)

Written by Sarah Smith

Happy December! It feels like the time of year when we start to say “let’s revisit this in 2024” and ignore it until after the holidays. However, the reality is that year-end reports and looming deadlines persist, especially grant deadlines. In the second part of our three-part series on grant writing, let’s delve into grant application budgets, following our initial post on grant narratives (check it out here). The upcoming third post will focus on program evaluation (but we’ll revisit that in 2024—see what I did there?).

When crafting a grant proposal, the bottom line is that you’re asking for money, and the individuals evaluating your application are deciding whether to give you money. Regardless of size, every grant application includes a budget section, which could range from one single field where you enter the amount requested to a detailed spreadsheet with justifications. Writing a compelling grant budget is a crucial yet universally unappreciated aspect of the application process.

Here is my most important note: Before you start on a grant budget you must have an annual general operating budget, broken out by program. 

If you don’t have a budget, there are lots of budget templates out there (and Partner for Better would love to help you if you need more advice!) It is nearly impossible to write a good grant without a general operating budget – so this is your reminder to make a budget for next year, if you haven’t already! 

Things to know when building grant application budgets

Program Budget versus Operating Budget

When preparing your grant proposal, you’ll need to decide whether you’re seeking funding for a particular program or for your organization’s overall operating budget. The operating budget encompasses the total expenses of your entire organization, incorporating all administrative (or overhead) costs. In contrast, program budgets focus on the costs associated with individual programs and may include a small percentage of administrative costs, where applicable. If your nonprofit exclusively runs a single program, then your operating budget and program budget are one in the same. It’s worth noting that grants that support specific programs are more common than those providing general operating funds. Therefore, understanding the specific costs associated with your programs is crucial when seeking funding. 

Actual Cost vs. Program Fees

Another crucial aspect to factor into your budget is the true cost of your program. Many organizations find that the “fee” they charge doesn’t fully cover the actual expenses of providing the program.

For instance, if I’m offering tap dancing for stray cats, I must consider all elements involved, from stage rental to the tiny tap shoes. While I might charge the cats $15 per lesson, the actual cost is considerably higher (at least $35 per cat). When constructing your program budgets, it’s imperative to evaluate and communicate the genuine cost of your programming to the funder. Additionally, take into account administrative costs, also known as overhead or indirect costs. While certain grants, like federal ones, may allocate a percentage for overhead, many grants don’t cover these overhead expenses, leaving organizations to absorb the costs. Understanding your actual costs is a critical piece of the grant budget puzzle. Whenever possible, include requests for these indirect costs in your grant proposals.

Use Real Numbers  

If you are asking for funding for a program that you already provide and you have solid financial record keeping, you should be able to articulate the actual cost of the program in your grant budget. If you are proposing a new program, make sure you have a solid idea of what it will cost to run the program. In most cases, you will need to provide a breakdown of the costs. This breakdown may include a lot of estimates, but there are many ways to gauge what the program will cost, including finding the cost of similar programs or leveraging your existing knowledge about the type of programming.  If you are writing grants for equipment or capital improvements you can include links to actual or similar products. In some cases, you may be required to include bids for services or equipment. In short, when you put it all together it shouldn’t be a rounded number – it should reflect the actual estimated cost of your program. 

Special circumstances: Capital Campaigns and Equipment

Securing funding for projects involving new construction, renovations, significant capital enhancements, or acquiring equipment such as computers and vehicles demands a distinct budgeting approach. Take a capital budget, for instance – it encompasses one-time expenses like building or land acquisition costs, permits, assessments, architectural fees, appraisals, engineer expenses, and more. It’s essential to determine which of these items necessitate estimates before diving into the process of crafting capital grant proposals. While grants for equipment are typically less complicated, having a precise understanding of the equipment cost is crucial for the budget, including any relevant installation costs. It’s important to note that not every funder supports capital campaigns or equipment acquisitions, so being well-versed in your funder’s preferences is key before delving into proposal writing.

Other Funding Sources and Matches

Grant budgets frequently request information on funding received from various sources for the project. Some organizations might hesitate to disclose the amount of funding they’ve secured, fearing that revealing too much financial support could deter grantmakers, who might assume they already have ample funding. However, the opposite holds true! Grantmakers value knowing that a program receives significant financial backing from diverse sources. Highlighting these funding sources not only validates your program but also assures grantmakers of its broad-based support from multiple sustainable streams. In certain instances, funders may require matching funds for the support they provide, and these matches can also be strategically employed to secure additional funding.

Budget Justification

Wouldn’t it be fantastic if funders automatically trusted that the amount you’re seeking is precisely what you need to carry out your impactful work? I genuinely wish that were the case, as I firmly believe that nonprofits engaged in the work are the most adept judges of their financial needs. Unfortunately, in almost all situations, you’ll find yourself needing to provide a justification for why you’re requesting a specific level of funding. This justification could take the form of a concise 250-word paragraph or an exhaustive justification spreadsheet. Regardless, solid research becomes your ally in this budget justification process.

Consider whether your program costs align with those of comparable programs. Evaluate whether the staff salary request corresponds with similar positions in your geographical area. Ask yourself if the equipment requested is truly the solution required for your situation. Examine if studies demonstrate that your intervention/services/art installation/cat dancing, or whatever you provide, aligns with the actual needs of your community. Additionally, ponder whether your program promises the kind of return on investment that the funder is seeking. Are you actively seeking in-kind donations or exploring other cost-saving measures to bolster your program? How do you stand out from similar programs in your area? 

Wrapping it all up

As the expert in your field, you possess all the answers to these questions. The key is to ensure that those individuals from whom you’re seeking funding are equally aware of these details. Effectively communicate your expertise and the rationale behind your funding requests, providing the funders with the comprehensive understanding you possess. This transparency helps build confidence in your proposal and strengthens the case for why your program deserves their support.

Stay tuned for the third part of our series on grant writing: Program evaluation. But we’ll revisit that after the holidays, which I hope ALL of you enjoy thoroughly!