Grant Writing Confidential header image 2

Seliger’s Quick Guide to Developing Federal Grant Budgets

January 24th, 2011 · by Isaac Seliger · 4 Comments

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.”

Tags: Budgets · How-to