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Grant Readiness Worksheet Series

Worksheet No. 07

Budget
Builder

Your budget tells your project's story in numbers. Make sure the two stories match.

01Why This Matters

Reviewers read your narrative and your budget side by side. The two must align.

A reviewer will check whether the activities you describe in the narrative match the costs in the budget. Mismatches signal poor financial planning at best and inflated estimates at worst.

Federal awards are governed by 2 CFR 200, which sets hard rules on what costs are allowable, how indirect costs are calculated, and how funds may be used. Many private funders apply similar standards. Knowing the rules is part of grant readiness.

If a reviewer cannot connect your narrative to your numbers, neither piece carries weight.

Strong budgets are not just compliant. They are credible. Every line item answers what it is, how it was calculated, and why it is necessary for the project.

02The Concept in Plain Language

Direct, indirect, allowable, unallowable. The four words that govern every federal budget.

Direct costs are tied specifically to the project: personnel time on the project, materials used by the project, travel for the project. They are charged to the award.

Indirect costs support the project and the rest of your organization: facilities, executive leadership, accounting, IT. They are recovered through an indirect cost rate.

Allowable costs meet the four-part test under 2 CFR 200: necessary and reasonable, allocable to the award, consistent with organizational policies, and conforming to award terms.

Unallowable costs cannot be charged to federal awards. The common ones: alcohol, entertainment, lobbying, fundraising, bad debts, fines and penalties.

Your indirect cost rate authority matters. If you have a Negotiated Indirect Cost Rate Agreement (NICRA) with your cognizant federal agency, you use that rate. If you do not, you can elect the de minimis rate of 15 percent of MTDC (Modified Total Direct Costs). Either way, document the authority in your budget narrative.

03What Grant-Ready Looks Like

The Standard

A grant-ready organization can produce a budget that matches the funder's required format, aligns line-by-line with the project narrative, and documents the basis for every calculation.

Grant-ready also means knowing your indirect cost rate authority, segregating unallowable costs in your general ledger, and being able to explain the budget to a reviewer or auditor without scrambling.

04Your Worksheet

Draft your budget in categories. Check each line against the narrative.

Start with five core categories. Add detail as needed. Confirm every line maps to your project narrative. Your work autosaves as you go.

i.Category one: personnel. Estimated cost and narrative alignment check.

Salaries and wages of staff working on the project. Confirm titles, FTE percentages, and rates.

ii.Category two: fringe benefits. Estimated cost and methodology.

Calculated as a percent of personnel. Confirm the rate matches your organization's actual fringe rate.

iii.Category three: travel. Estimated cost and basis for calculation.

Number of trips, destinations, per diem rates. Use federal GSA rates where applicable.

iv.Category four: supplies, equipment, or contractual. Estimated cost and basis.

Note that equipment over 5,000 dollars per unit has special tracking requirements.

v.Category five: other direct costs. Estimated cost and basis.

Communications, printing, participant support, evaluation, etc.

vi.Total direct costs.

vii.Indirect cost approach: NICRA, de minimis (15 percent MTDC), or other.

If unsure of your organization's status, this is your first action item before submitting.

viii.Unallowable or questionable costs you have flagged.

List any costs you are uncertain about. Resolve before submitting.

05What This Looks Like in Practice

Notice how each budget aligns to the narrative and documents the indirect cost authority.

Nonprofit

A workforce development nonprofit's 187,500 dollar budget for a one-year Department of Labor project: Personnel 120,000 (Director 0.25 FTE, Trainer 1.0 FTE, calculated at organizational salary scales), fringe 30,000 (calculated at organization's audited 25 percent rate), travel 8,000 (four conferences at 2,000 each, per GSA rates), supplies 5,000 (training materials per cohort, calculated from prior program data), indirect 24,500 (de minimis at 15 percent of MTDC).

Every line item is referenced in the project narrative. The de minimis rate is elected because the organization has no NICRA.

"Total project budget of 187,500 dollars includes 163,000 in direct costs aligned to narrative activities and 24,500 in indirect costs calculated at the de minimis rate of 15 percent of MTDC. The organization has elected de minimis and has no NICRA. Unallowable costs have been excluded."

Local Government

A city public works department's 900,000 dollar federal infrastructure grant budget: Construction 800,000 (scoped per the engineer's estimate and project narrative), engineering and design 75,000 (calculated at 9.4 percent of construction, consistent with state procurement standards), inspection 25,000 (calculated at 3.1 percent of construction). Contingency is not included because the NOFO does not allow it. No indirect costs are charged to the award.

Every line item maps to a phase in the project narrative. The decision to not charge indirect costs is documented in the budget justification.

"Total project budget of 900,000 dollars is fully direct-cost. No indirect costs are charged per organizational policy for this award. All line items align to scoped phases described in the project narrative. Contingency is excluded per NOFO requirements."

06Red Flags

Pause and reassess if any of these are true.

Budget gaps are usually the easiest readiness gaps to close. Take the time before you submit.

Watch for these signals

You do not know whether your organization has a NICRA or uses the de minimis rate.
Your budget categories do not match the funder's required format.
You have line items in the budget that do not appear in your project narrative.
You are charging indirect costs as a flat percent without confirming your rate authority.
You cannot explain how a single line item was calculated.
You have included costs you know or suspect are unallowable under 2 CFR 200.

Your Next Step

Lock the numbers. Justify every line.

If your budget is strong: draft your budget narrative now. Every line item gets a sentence: what it is, how it was calculated, why it is necessary.

If you have gaps: resolve your indirect cost rate authority before submitting. If you have never had this conversation with your finance team, this is the moment.

Continue to Worksheet 08: Sustainability Plan to answer the question every funder asks.

For ongoing strategy, frameworks, and grant insights, explore The Grant Project Library.

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The Complete Series

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Hard work doesn't win grants. Readiness does.