How to Prepare Project Budget

Don’t  know how to prepare project budget? Relax, this article provides the step by step process on developing your project budget. You will learn everything you need to know about budget, different budget costs and what costs should be included in your project budget before you submit your grant proposal.

Budget is an essential part of a proposal. Budget reveals a clear picture of all expenditures required in carrying out a project which is simply defined as a pictorial representation of a proposal using numbers.

In other words, a project budget specifies how the money will be allocated to implement the activities described in the proposal.

All funders whether federal, foundation or corporate demands while submitting your proposal to back it with your total project budget and also a breakdown of your budget.

With budget you spell out item by item of how you’re going to spend the funds once you receive the award. Mind you no funder likes to fund a total project budget without a breakdown of costs per item or activity.

A grant project budget is defined as detailed estimates of all items or activities expenditure and contributions, subtotals and totals and amount of funds required for project implementation within a specified time frame.

Budget contains the income and expenses sections.

The Income section contains all the sources of your project funds. Examples are; grants, donations, matching funds, in –kind donations, value of volunteer hours, etc.

The Expense  or Expenditure section highlights how and where the money will be spent. Expenditure may be by activity, itemized or summarized by category.

Donors check out the following in your budget;

• Transparency: how transparent you are regarding staff salaries, equipment cost, and others.
• Capacity: Donors weigh the capacity of the applicant organization in implementing the proposed project looking at their financial history.
• Impact or value for money: Donors weigh if the proposed cost will be enough for the organization to actualize the stated impact in the proposal.
• Competition: Donors review submitted budget proposal to check if it is fair and reasonable within the range to carry out the task when compared to other applications.
• RFA Guidelines: Donor double checks if you followed the budget guidelines and instructions that were specified in the RFA.

     TYPES OF PROJECT BUDGET

There are two ways to organize project budget to make it easier for donors to understand the information contained in it. The two ways are;

1. Budget by Activity or Activity Budget:

You can organize your budget based on activity and this means splitting all your proposed project activities up into smaller items and costing each of them. Each activity will now have different budgetary items assigned to it. Activity Budget refers to the costs involved in implementing your project activities.  Budget by activity has lots of advantages such as; it makes for easy comprehension and also enables you to remember the cost for each activity. In addition, organizing your budget by activity helps make your intention clear and precise.

For instance, Cherry Foundation is proposing to build the capacities of youth living with disabilities in Ohio and wants to organize the budget using activity budget method. This project will involve lots of activities like organizing workshops, renting venue, transportation, refreshment, hiring trainers and others. And all these activities involve cost. So when developing such an activity budget, you are required to break up each and every expense and list the unit costs of each expenses. Then present the total amount of the activity.

Project Budget Sample 1: Cherry Foundation organizes Capacity Building budget proposal using activity budget method;

1. Budget by Line item or Line Budget:

This method of organizing budget implies that you lump together similar kinds of costs in one budget item. For instance, Sarah Clinic Foundation proposing to implement a capacity building training for youth living with disability will have to lump all transportation cost as one budget item, training costs as another budget item and likewise others that are related. Most donors request for budget by line item and it helps them to focus on the kind of activities they would like to fund.

To be on the best position while developing your budget by line item, first do it by activity so that you don’t forget anything, also it helps to simplify your budget development process.

But in most cases, donors gives you budget template to use to compute your budget, so whatever the case, always follow donors guidelines and instructions.

Project Budget Sample 2: Sarah Clinic Foundation organizes capacity building budget proposal by line item method:

 TYPES OF COST TO BE INCLUDED IN THE BUDGET

There are costs you have to include in your budget proposal.

The different costs to include are;

• PERSONNEL COSTS

Personnel Costs is simply defined as costs of all project staff by title and the percentage of their time that they have to invest in executing the project.

It  consists  costs for salaries or stipends associated with the project implementation and  they include costs such as the salary of the Project Director, Project Coordinator, stipends to be given to the Volunteers’, honoraria for the training facilitators, and other staff  that will be involved in the project implementation.

Project Personnel salaries can be computed by using their annual salary times their percentage involvement or using their hourly rate times the number of hours dedicated to the project.

While computing the personnel cost, give details of the total amount of salaries, wages, stipends, to be paid to program personnel and the length of employment whether in months or hours to be paid.

Stallion Foundation SAMPLE BUDGET FOR GIRLS LITERACY PROGRAM Covering Personnel Costs

• FRINGE OR EMPLOYEE BENEFITS

Fringe benefits refer to costs incurred by an employee because of the person’s employment status. This is expressed as a percentage of the total cost of salaries. These benefits include FICA, health insurance, retirement contribution matches, workers compensation and other costs incurred by an employee because of a person’s employment.  Each organization has a different fringe benefits pack for their employees.

• TRAVEL COST

It covers all the transportation costs incurred in the course of implementing the project.  Travels cover airline tickets, taxi, mileage, shuttle, lease costs and others.

• EQUIPMENT COSTS

Equipment costs include costs for buying furniture, computers, Laboratory equipment, fax machines, vehicles, office building, and telephone systems.

• CONTRACTUAL / CONTRACTS COSTS

This include consulting costs, contractors cost, software licenses, training and others.

• CONSTRUCTION OR RENOVATION COSTS

Refer to costs incurred in purchasing materials for construction or renovation project.

• CAPITAL COSTS

This includes cost for land, building, fixtures and others.

• MATERIALS COSTS

These are costs relating to materials used for the project implementation such as printing of IEC materials, training manuals, reference materials, books, software and others.

• SUPPLIES

Supplies include cost in procuring office supplies such as stationeries like pen, pencil, paper, postage and others. Most times, you combine materials and supplies cost.

                TYPES OF BUDGET COSTS

We have 2 types of budget cost and they are

1. Direct Costs
2. Indirect Costs

DIRECT COSTS

Direct costs are costs that are made towards the implementation of a particular project or program. Direct costs include salaries for project staff, travel, hiring of equipment, supplies and other form of procurement directly benefiting the grant supported project or activity. These costs are essential for the success of the project.

Example1: Summary Budget for After-School Program covering direct costs

INDIRECT COSTS / OVERHEAD COSTS

Indirect costs  is also called  Overhead Costs are costs incurred by the organization such as office space rent, insurance, utilities, account and others that are not directly connected with project implementation.

Indirect cost is calculated by multiplying total direct cost by the indirect cost rate. Mind you most donors do not allow indirect costs on equipment. When the instruction says so, kindly subtract the equipment cost from the total direct cost before computing Indirect cost.

Example1: Summary Budget for After-School Program covering Direct costs and Indirect Costs. The Indirect cost is at 10 percent of the direct cost.