When it comes to writing grants, there are few things more important in the application than an accurate budget. But if the proposed project seems so far off, how do you develop a sound budget for your application?

In this article, you’ll find information on defining project expenses, grant budget examples, and tips on how to develop winning budgets.

At first, developing a budget might seem straightforward. We all have managed household budgets to keep the rent paid and the lights on. A budget for a grant application is very similar, though of course very specific to the project or purpose outlined in the proposal.

A grant budget is essentially a snapshot of projected expenditures and revenue for your nonprofit or its proposed project.

It is important to keep in mind that a complete grant budget is composed of both expenses AND revenue. Income going out AND income coming in.

Many grant writers and nonprofit leaders often only include an expense sheet when asked for a complete budget. (With that in mind, keep a close eye on the language used in the grant application. It might indeed ask for the cost or expense of a project only, then offer an opportunity in another section of the application to explain other sources of committed funding).

A grant budget should include the total cost of the project or program and both direct and indirect costs. In the following sections we’ll go over examples of direct and indirect costs, as well as some commonly forgotten items that are often missed when constructing a budget sheet.

Examples of Grant Budget Direct Costs

There are two types of costs associated with any project—direct and indirect. Direct costs are the main costs of running the program. The labor and material. Think of the direct costs as the more “active” or “visible” expenses that are specific to the program, rather than the whole organization.

Some direct costs to include are:

1. Staff and personnel: This includes salaries for regular staff, pay for hourly workers, and compensation for interns related to the project or program. It may also include any contract work performed unless that expense is itemized under another category (as we will discuss further down in this list).

2. Equipment: These are the items needed so personnel can carry out the initiative. Food distribution projects need shelving, refrigerators, and the food itself. Family housing initiatives need furniture, beds, blankets, and toys. Intake offices need computers, desks, chairs, tables, etc.

A proposed program might need a van or other vehicle to transport clients or goods. All these items are examples of direct costs, so long as they are essential to carrying out the program or project.

3. Rent and utilities: If your proposed project needs a space to carry out its activities, this is considered a direct cost. Same for the electricity, phone, water, or WiFi for the space. The operative distinction is that these costs are directly related to the project, and not just the organization in general.

For example, many nonprofits have several locations. While lease payment of the main office would not be a direct expense, a lease payment on a satellite building which hosts a food bank could be a direct program cost for the food bank program. (We’ll discuss more on the overlap between direct and indirect costs in the next section).

Examples of Grant Budget Indirect Costs

Indirect costs are generally unseen costs, not directly related to the specific project but that contribute essentially in some way to the nonprofit’s mission, economic vitality, or employee productivity.

Some examples of indirect costs are:

1. Administrative staff or leadership personnel: Positions that keep the nonprofit running are essential to the mission and the outcome of any program. Administrative assistants, human resources personnel, accountants, Chief Financial Officers, Chief Executive Officers, and Executive Director positions are all often indirectly related to a specific project.

These salaries are considered indirect costs. However, in a small nonprofit, an Executive Director might also run a specific program. In this case, his or her salary would be instead a direct cost of that program.

2. Overhead for the nonprofit: Rent and utilities in spaces where you are not providing direct services for your program activities are considered indirect costs. Organizational insurance, membership fees, compliance fees, and rental fees for office equipment are also all considered indirect costs.

3. Organizational equipment: Computers for administrative staff in the main office, main office desks or chairs, and company cars not used specifically for program activities are also considered indirect costs.

4. Marketing and advertising: If not specific to the project or program, marketing personnel or materials promoting the organization are considered an indirect cost. However, if the marketing is specific to the project, then it can be classified as a direct cost. Think about a general brochure listing all services for the nonprofit versus a brochure specifically about the organization’s food bank. The first would be an indirect cost, the latter, a direct cost.

With so many costs incurred throughout an organization and its programs, and considering the overlap in indirect versus direct costs, it can be a little confusing. There are also some important costs which are often missed and can get lost in the shuffle. Keep reading for some tips on making sure you have everything covered.

Commonly Forgotten Costs

Some examples of commonly forgotten costs are:

1. Percentage of other personnel time attributed to the project: Even though the Executive Director may not be running the proposed program, how much of their time is dedicated to its work each week? 10 hours? Maybe 15?

If administrative and leadership staff is contributing work to the project, then this is a direct cost. Often, grant writers will budget for a Program Coordinator but forget to factor in the wages of other staff that may be necessary for the project.

2. Outreach personnel for the project and associated costs: Is there a staff person that devotes time to recruiting volunteers, doing outreach and/ or marketing? If so, this staff time is a direct cost. Also, any materials related to volunteer or community engagement is a direct cost if it is applicable to the specific program.

3. Training and education: Does your project require that staff complete a certification course or training to be able to better deliver the mission? If so, any training or certification that is project-specific will be a direct cost.

4. Transportation costs: This is a commonly missed cost, especially for small nonprofits. When making a budget, people often forget about rental fees for the truck necessary to transport goods or the van to assist clients. If a nonprofit already has a vehicle of its own for the project, do not forget about fuel, insurance, and repairs.

A grant budget justification is used to break down and explain the itemized costs associated with the proposed project. This explanation should easily assure the reader that your figures are not arbitrary estimates but thoughtful values.

For example, consider how many hours a staff person will work and at what rate. Also take into account other benefits and clearly illustrate this in the justification. If materials are needed, write out how many and at what costs. The narrative and table should accurately reflect the estimated total project cost included on your budget sheet.

A budget justification example for direct personnel is pictured below:
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There are many resources to assist you with creating your own budget after you’ve considered the direct and indirect costs of your project.

This list contains helpful links to specific grant budget examples that you can use as a guide:

1. Grant Budget Example from SAMHSA: this budget addresses direct care services for mental health or social service. This sheet provides a great sample of staffing and personnel needs for a proposed project and walks the reader through a budget justification. It also outlines how to record matching grant funds (often a requirement for federal and other grants) in a budget justification.
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2. Grant Budget Example from the Fund for Public Education in Teton County, WY:  this easy-to-understand example outlines needs for an educational project. It includes all of the categories for materials, personnel, and travel. Plus, it makes room for extra needs not covered in other lines. Because it is in Excel, it keeps a running tab of your inputted values, ensuring they meet the projected totals.
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3. Grant Budget Example from Get Fully Funded (pictured below): this is a basic budget template, reflecting both expenses and revenue. This general example is helpful because it is comprehensive in that it covers all the necessities, but universal enough to be used as a guide for most projects. Plus, it importantly includes both expenses and income. (Remember— a complete budget example should include both).
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4. And don’t forget to check out Instrumentl’s Ultimate Guide to Grant Budget Proposal Budgets which contains many other details and insight on budget development. It covers what a grant budget should look like as well as more budget templates and examples.Indirect costs are generally unseen costs, not directly related to the specific project but that contribute essentially in some way to the nonprofit’s mission, economic vitality, or employee productivity.

Now that you know the difference between direct and indirect costs, understand a grant budget justification, and have looked at a few grant budget template examples, you can develop your own project budget.

These are the steps involved in developing an accurate budget:

1. Make a list of all the anticipated expenses. Think about personnel, materials, equipment, fees, and other direct costs.

2. Consider the indirect costs. What are the organizational expenses related to the project? What percentage of these can be factored into the grant request?

3. List your sources of actual or planned revenue. Which grants are you pursuing? How much are you requesting from each? Do you have any funding already secured? If so, how much and from whom? Besides grants, what other sources of funding will you be exploring?

4. Do the necessary research to ensure accurate line items. This may entail you looking up market figures like lease rates for square foot, salaries for your geographic area, and specific costs of equipment and other needs. Pro tip: estimate high rather than low, but not too high that it seems unreasonable.

5. Have a supervisor, Board member, or other colleague review the budget. Another set of eyes may catch something you missed.

Developing an accurate budget for your project is a key component to securing grant funds and if awarded, keeping track of your spending. Creating a budget template, discerning indirect and direct costs, and identifying potential sources of revenue gives the project direction from its onset.

In a reviewer’s eyes, budget justification demonstrates budget sheet alignment to your actual request amount. Overall, having clearly explained and sound financials will instill confidence in this alignment and in the ultimate success of your proposed project.