THE PURPOSE & IMPORTANCE OF A BUDGET
A budget is a key element of most grant proposals and serves as a blueprint for spending the project’s funds. The budget should be derived from the objectives, tasks, and activities expressed in your proposal/program.
An effective proposal budget outlines the proposed project in fiscal terms and helps reviewers to determine how the project will be conducted. Budget information about activities planned and personnel who will serve on the project provides reviewers with an in-depth picture of how the project will be structured and managed. Budget details usually reveal whether a proposed project has been carefully planned and may ultimately be feasible.
The proposed budget must give an accurate assessment of all cost items and cost amounts that are deemed necessary and reasonable. It should be complete; that is, it should include all the costs of any personnel, supplies, and activities required by the project. The project needs to be feasible within the budget presented. If major cost areas are omitted or underestimated, the project, as proposed, will probably not be considered feasible.
Over the course of the project, many different stakeholders are going to review the budget and refer back to it. The decisions made now at the proposal stage will continue through the life of the grant, and others will make decisions based on it at future stages; therefore, it is time well spent to prepare a reasonable budget. A reasonable budget is one that is based upon actual costs when possible.
The budget will become an integral part of the obligation to the sponsor, particularly regarding time/effort commitments. It will evolve into a useful management tool during negotiations, and, if the project is funded, the budget will become the financial plan used by the funding agency to provide support. When variances between the budget and actual expenses are indicative of a change in scope, this may require sponsor approval.
Often required with the budget is a narrative justifying budgeted items. This budget justification will vary depending on the sponsor's budget format.
There are different budget types and the opportunity solicitation should be reviewed carefully to determine which format is required for a particular funding opportunity. Even within a particular agency, there may be different types of budgets depending on the type or level of funding. Even if you have been funded by an agency in the past, their budget requirements may have changed. If you are working on a proposal to a U.S. government agency, assume there have been changes since the last time you applied.
Cost Groups
Most budgets are composed of two kinds of costs: direct costs and indirect costs.
Direct costs are costs that can be identified specifically with a particular sponsored project, an instructional or institutional activity, or one that can be directly assigned to such activities relatively easily with a high degree of accuracy. These costs include expenditures for project personnel salaries and employee benefits, supplies, travel, equipment, telephones, and postage. All direct cost items must be included in the budget.
It is important to ensure that all costs meet the criteria, of allowable, allocable, and reasonable as defined by the Federal Cost Principles (OMB Circular A-21). The Assistant Controller can help you understand these definitions.
Indirect costs are incurred by a grantee that cannot be identified specifically with a particular project or program. They include the costs of many services the college provides (procurement, administrative, library/technology, SRO, custodial, accounting/finance, and security) as well as building maintenance and depreciation, and utilities. These costs are often referred to as the “cost of doing business”, business overhead, or Facilities and Administrative Costs (F&A). In accordance with Kenyon’s negotiated agreement with the Department of Health and Human Services, the following predetermined F&A rates should be used:
Kenyon College Indirect Cost Rates:
On Campus 51.50%
Off Campus 16.30%
Base- Direct salary and wages including vacation, holiday, sick pay and other paid absences but excluding all other fringe benefits.
Private Funding vs. Government Funding
There can be great variety in how private funding agencies handle indirect costs. There is no single accepted standard percentage. Many foundations have unwritten policies not to fund overhead at all.
Considerations for writing the budget narrative or budget justification:
The budget narrative should:
*All proposals for outside funding must be certified by the Assistant Controller