Preparing Grant Budgets

Each month, Nonprofits Assistance Fund hosts the Financial Management Network.  These free, informal gatherings are opportunities for members of the nonprofit community to get together to discuss different financial topics and network with peers. Key takeaways from these discussions will be posted and form an archive to help promote healthy financial practices.

Preparing Grant Budgets (8/26/09)

The Minnesota Common Grant

MCF on the Minnesota Common Grant

  • Common Grant Components:
    • Cover Sheet
    • Proposal Narrative
    • Standard formats for organization and project budgets
  • Download the Form

Financial Information and Grants

  • Although the grant applications are primarily about the narrative, the common grant does ask for financial statements in addition to a budget.
  • Foundation staff, just like others in the nonprofit world, may need assistance in understanding your financials
    • No standards for financials - each organization uses different language
    • Make sure to explain everything in the narrative
    • Nonprofit financials include some potentially confusing things - restricted funds, designated funds, endowments

Narratives

  • If the use of funds is not obvious, be sure to make the case in a narrative
  • More information is better, you want your application to be as easy to understand and compelling as possible
    • Explain any atypical funds
    • Explain differences/changes between years if applying to a previous funder
    • Explain any significant changes.  For example, if your budget is much smaller this year due to the economy, make sure to explain the circumstances in the narrative. 
  • Make sure budget/financial narratives get into the narrative section of your proposal - cross reference them

Transforming your Actual Budget into a Grant Budget

  • Foundations often look at the budget first, to see if it makes sense.
    • Explain restricted/reserve funds
    • Show multi-year grants - help foundations see what you'll have when
  • We recommend starting from an agency-wide budget to ensure all the pieces are there.  If you customize everything you're more likely to overlook something important
    • Show how much the whole project will be and which components you are requesting from this grant
    • Show that you've thought through your costs and sources of funding
    • Lay out the other funding sources for the other program/project components - pending grants or contracts, individual donors, etc

Minnesota Common Grant

  • Submit an overall program/project budget
  • Generally do not need to specify which line items will be funded by the requested grant

Government grant

  • Requests are often more detailed
  • For government grants, make sure your line items fit their categories/use the same terminology
  • Show full costs of programs/projects, even for government grants

budget scenarios

Allocations

  • If 40% of salary is paid by a grant, 40% of benefits too
  • Minnesota Common Grant breaks out benefits, government grants may not
  • Be aware that government grants may have rules that you may never be told - remember to do your own research and ask questions
True program/project costs
  • There are two kinds of costs
    • Direct Expenses
    • Indirect Expenses - often referred to as "administrative" or "overhead"
  • Include all shared/allocated direct costs in the budget
    • Many costs considered "overhead" have a direct relationship with programs/projects and should be allocated
      • Supplies, rent, etc.
    • "True overhead" costs are board expenses, the audit or other accounting costs, etc.
    • Some funders might not want you to include some of these costs
    • We recommend being truthful - it's about fundraising appropriately and funding the true costs of your programs
  • Allocating costs takes time and lots of work, there are "no shortcuts to budgeting"
  • Different allocation methods:
    • Allocate space (rent or depreciation if you own a building)
    • Time studies (not that detailed)
    • Square footage
    • Number of people
    • Number of FTE's
    • Number of people served

Relationships

  • Build relationships with foundation people, this will help you get feedback about your proposal and numbers
  • You want to be able to ask them questions
  • Ask which financials you should send - year-end? monthly?
  • Asking multiple funders to fund one project can get tricky, show in narrative that you've thought about it
    • If overfunded, let the grantor know. They'll most likely let you keep the money for general operating, but they must release the programmatic restrictions before the funds can be used for another purpose.
    • List other funders applied to - say pending

Interested in Learning More?

View our Resource Collection or check out the Discussion Archive for notes from other Financial Management Networks.

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