Budget Development

Budget preparation varies greatly from project to project. All Request for Proposals (RFP) require some type of budget presentation. Budget items should match up exactly with the project activities, goals, and objectives being proposed. Eliminate budget amounts that cannot be justified by your proposed activities. Realistic figures go a long way toward convincing readers and project officers that your organization is reliable and can do the job. For example, an on-campus project that requires minimal travel should not include a $1,000 travel line item.

The following are some key components of budget preparation.

Organizational Contribution

Often called "matching funds," most funding sources require some indication that local resources will be used to support the project. Local matching funds are an indication that the project can be sustained beyond the grant funding. Local matching sources usually come in two forms:

  1. Cash contributions require the organization (or partners) to have a source of funds dedicated to the project. Matching funds are often expressed in terms of a percentage of the total project.

    Example: Your project asks for $100,000, and the funder requires a 25% cash match. You must raise $25,000 locally.

  2. In-kind contributions require the organization to show sources of local support which can include items other than cash. Many items can be used for in-kind matches but personnel costs are common and relatively easy to calculate. When determining local contribution, remember that support can be calculated from partners as well as your own organization. Use any source that provides direct service to the project but is not being supported by grant funds.

    Example: If a staff person will spend time with the project but not receive any direct funding from it, the staff salary is $60,000 per year, and 5% of the time will be spent on the project.

    Calculation: Staff salary x % (fringe benefits-42.5%) = actual annual salary with fringe benefits x 5% of time = match total ($60,000 x 42.5% = $85,500 x 5% = $4,275)

Developing the Budget

Two types of costs are common to most budgets: direct costs and indirect costs. Direct costs are items required to carry out all the activities of the project as defined by its goals and objectives. Indirect costs are overhead charges calculated as a percentage of the total cost, and help the organization cover its costs related to such items as bookkeeping, research, administration, depreciation, and general operations.

Example Calculation: Total project cost x percentage of costs that are indirect = total amount of indirect charges ($100,000 x 8% = $8,000).

Common Budget Categories


The wages and/or salaries of personnel working on the project. Remember fringe benefits. Example: Staff salary x fringe benefits percentage = total salary cost.

Contracted Services

These include services required from outside the organization. Examples: consultants, trainers, or services provided by a supporting organization.

Materials, Printing, & Postage

Most projects require daily supplies, including photocopies, printing, and general office materials.


Many grants do not allow purchases of equipment. Equipment is often based on the amount of money involved. Example: items under $500 are supplies; items over $500 are equipment. If equipment is allowed and purchased it needs to become part of an inventory system and properly identified.


Travel costs involve mileage, air fares, meals, parking, and lodging associated with a person's work-related travel for the project. Most organizations have specific guidelines for the amounts allowed.


Communication costs can include phone service, stamps, fax machines, internet access and email, and messenger services.

Separate Line Items

Budgets may require a separate line item for costs related to special items. For example, a project that has several workshops needs a category such as "workshop expenses" for materials, room rentals, and other associated costs. Unless a specific format is required, the best practice is to include cost categories that best describe how funds are being spent.

Budget Narrative

A budget narrative is not always required, but it is always a good idea. It serves to explain how costs were calculated and is a definite plus with grant readers. Formats may vary, but in a budget narrative, each item listed in the budget is described in terms of how its cost was determined.

Narrative example for a staff member salary of $30,000:

"The salary represents a full time person (1.0 FTE) who will direct the installation of computer equipment at XYZ sites."

Narrative example for a staff member salary of $1,000:

"Project travel was calculated using institutional guidelines of $ .325 per mile. It is estimated that travel will be approximately 100 miles per week for 15 weeks. The remaining costs related to this project are for one out-of-state trip to the national conference."