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How to Prepare Project Budget

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.



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;

Activity1: Workshop  


1.1  Trainer Per day 2 $200 $400
1.2 Venue Per day 2 $400 $800
1.3  Participant Transportation Per Person 40 $20 $800
1.4 Refreshment Per Person 40 $20 $800
1.5 Materials & Handouts Per person 40 $15 $600
Total of Activity 1


Activity 2: Training of Volunteers
2.1 Trainer Per day 1 $200 $200
2.2 Venue Per day 1 $400 $400
2.3 Refreshment Per person 20 $20 $400
2.4 Materials & Handout Per person 20 $15 $300
Total Activity 2 $1,300


                 Total Expenses




  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:




1.      Trainers /Facilitators Per day 4 $200 $800
     Subtotal $800




2.0 Trainee Transportation Per Person 50 $15 $750
2.1   Refreshment Per Person 50 $20 $1,000
Subtotal $1,750




3.0 Materials and Handouts Per person 50 $15 $750
3.1 Venues Per day 4 $20 $80
Subtotal $830


Total Expenses  






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

The different costs to include are;


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

Personnel  Services




No. Weeks Quantity Amount
1.1 Project Director, 100% full time at $40,000/year 52 1 $40,000
1.2 Assistant Project Director, 50% of full time at $30,000/year 40 1 $15,000
1.3 Outreach Coordinator, 50% of full time at  $30,000 40 1 $15,000
1.4 Training Coordinator, 10% of full time at $30,000 25 1 $3,000



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.

Personnel  Services




No. Weeks Quantity Amount
1.1 Project Director, 100% full time at $40,000/year 52 1 $40,000
1.2 Assistant Project Director, 50% of full time at $30,000/year 40 1 $15,000
1.3 Outreach Coordinator, 50% of full time at  $30,000 40 1 $15,000
1.4 Training Coordinator, 10% of full time at $30,000 25 1 $3,000
Subtotal Personnel     $73,000


Fringe Benefits


Fringe at 20% (Full Time staff) 1 $8,000
Fringe at 10% (Part-Time Staff) 3 $3,300
Subtotal Fringe benefits     $11,300




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

Equipment Quantity Amount


Desktop Computers 2 $10,000
Database and Communication Software 1 $1,500
Multiline Telephone System 1 $10,000
Subtotal Equipment   $21,500





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


Contractual Services Amount ($)


Consultants for educational outreach training $5,000
Evaluation team $10,000
Telephone and Internal Subscription $5,000
Subtotal contractual services $20,000




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

Construction Unit Unit Cost Total Cost
Renovation of Kids club centers 5 centers $10,000 $50,000
 subtotal Construction Costs     $50,000




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


Capital Costs Amount


Building of the ABC Kids Center $550,000



Subtotal of Capital costs $550,000





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.


Materials Costs Unit Unit Cost Total


Workbook  with Manuals 30 persons $45





Subtotal of material costs





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.

Supplies Unit Unit Cost Amount


Copy Paper 12 reams $40 $480


Subtotal of Supplies $480



                TYPES OF BUDGET COSTS


We have 2 types of budget cost and they are

  1. Direct Costs
  2. Indirect 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

Direct Costs                                    Project  Budget Summary


Requested Amount



Support from Other Sources


1.      Salaries / Personnel $20,000 $12,000 $32,000
2.      Employee Benefits $5,000 $3,000 $8,000
3.      Employee Travel $2,000 $0.00 $2,000
4.      Purchase of Equipment $20,000 $15,000 $35,000
5.      Materials and Supplies $0.00 $2,000 $2,000
6.      Consultants and Contracts $6,000 $0.00 $6,000
7.      Printing $1,000 $0.00 $1,000
Total Direct Costs


$54,000 $32,000 $86,000



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.

Indirect Costs                                    Project  Budget Summary


Requested Amount



Support from Other Sources






1.      Salaries / Personnel $20,000 $12,000 $22,000
2.      Employee Benefits $5,000 $3,000 $8,000
3.      Employee Travel $2,000 $0.00 $2,000
4.      Purchase of Equipment $20,000 $15,000 $35,000
5.      Materials and Supplies $0.00 $2,000 $2,000
6.      Consultants and Contracts $6,000 $0.00 $6,000
7.      Printing $1,000 $0.00 $1,000
Total Direct Costs


$54,000 $32,000 $76,000
Indirect Costs (10%) $5,400 $3,200


Total Costs $59,400


$35,200 $83,600
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