A project budget that raises questions, includes mistakes, or asks for too much money — or too little — can undermine a strong grant proposal and cost your nonprofit crucial resources.
“Grant makers tend to fund organizations that they can trust,” says John Hicks, principal at DLB Hicks, a company that advises nonprofits on grant seeking. The project budget and other financial information you share in a proposal — audits, 990s, your nonprofit’s overall budget — reveal the financial health of your charity and whether its spending matches its priorities.
Your project budget should reinforce the story you’re telling in the proposal, Hicks says, and show how you are investing in the grant. For example, if your work is based on helping a population in a hands-on way, donors probably will want to see whether your spending reflects the staffing structure needed to do that effectively, including a dedicated program director.
“If you’re spending money wisely and carefully — or at least perceived to be — then that gets across to the funder that we invest our money in our mission,” Hicks says. “You can say whatever you’re going to say in the narrative, but the budget numbers are black and white.”
Here are more tips from Hicks and a variety of foundation decision-makers that will help you make sure your proposal budgets hit the mark.
Be clear and concise. Make it easy for someone who isn’t familiar with your organization to understand your proposal, including the budget, says Tamela Luce, president of the Phoenixville Community Health Foundation, in Pennsylvania. She recommends sharing the draft with someone outside your nonprofit and tweaking it based on their feedback.
Use direct language and “get to the point,” says Kristi Poling, program director at the Barra Foundation, a Philadelphia grant maker that promotes innovation. Without wasting words, she says, explain what you’re going to do and what that will take, including which expenses you need to cover and why.
Explain any issues that could raise red flags. Most grant makers understand that some situations, like the timing of a grant or an unexpected bequest, can cause a nonprofit to run a deficit or a surplus. It’s important to disclose and spell out the reasons for such irregularities, Luce says, so that the donor doesn’t have to spend time following up with questions. “Grant makers, unfortunately, are looking for ways to turn down proposals a lot, because oftentimes we get more proposals than we can fund,” she says. Don’t make it easy for the program officer to reject yours.
If your operational budget or financial audit reveals a continuing issue like debt, Hicks says, include a note that explains why — and what steps you’re taking to fill the gap.
Follow each grant maker’s instructions. More and more foundation applications have a budget template, Hicks says. “Do exactly what they’re asking you to do.” These grant makers want to see your numbers in a certain way for a reason. “They’re not doing it as an extra ‘make work’ piece for a grant seeker. It’s usually because their board members want to see an apples-to-apples comparison.”
Respond to the specific questions you are asked, Luce says, and include any requested attachments. If you don’t understand a question, she says, give the program officer a call. “A lot of funders will appreciate that and want to clarify what they are looking for.”
Minimize errors, like columns that don’t add up. “If you can put forth a proposal where you’re minimizing the chance that they’re going to have to call and ask questions, so much the better for you, and quite frankly, the funder as well,” Luce says.
That includes checking your math, Hicks says, because foundation trustees are likely to do the same. “If you make a simple mistake on the budget, that can work against you,” he says.
Ask for the right amount of money. Grant makers want to know if you are presenting a budget that will “get the job done,” Hicks says. It’s worth doing the work to figure that out, so that you don’t have to ask for more money later. Here are a few ways to do that.
- Research the “fair-market price” for your budget items, such as salaries, computers, and services. This will help you build credibility with grant makers, who probably have an idea of what similar programs cost from reading grantees’ reports, Hicks says. For instance, if you’re allocating resources for a program director, look at similar job listings on Idealist.org to determine the going rate for such a position.
- Show the full cost of your work. Some fundraisers may worry that the true cost will look too expensive, but this is a “warped, weird reality,” Poling says. “We’re never going to have a realistic idea of the cost if we don’t know what it costs.” Consider the time your employees will need to dedicate to the project, operational needs like electricity and rent, and any other expenditures that may be required to carry out the work.
Start small. Barra likes to see budgets that include more rather than fewer costs, Poling says. But it’s better to be conservative when writing a letter of inquiry. “Then, if you get invited, talk to the funder to see how you can adjust and build that out once you have a relationship.”
Be precise. If the grant has a budget limit, don’t round up your request to match it, says Alyson Ferguson, chief operating officer at the Scattergood Foundation, a behavioral-health grant maker in Philadelphia. “I appreciate the thoughtfulness when the application comes in for $4,997 or $5,003 versus the limit of $5,000,” she says. “It reflects that the organization knows their numbers and developed a budget that works for them, not the funder.”
Clearly define your programmatic and administrative costs. To Luce, a high overhead rate signals that the nonprofit may be classifying as administrative or fundraising expenses things that could qualify as program activities. “It’s rare than an organization is truly spending that much on its management and fundraising,” she says. Work with your accountants to set specific criteria for calculating those percentages.
Link your spending to your mission. Poling sometimes asks organizations to include a one-sentence note for each line item that explains how it ties into their mission, so that she can share this information with Barra’s board. This is especially important for budget items that could be confusing, she says, or that you’re having trouble getting other grant makers to support. “Even if you think I won’t fund it, explain to me why I should,” she says. “Because maybe I just don’t understand it.”
Show where other project resources come from. Ferguson likes to see a percentage breakdown of each type of source, in buckets such as contracted work, foundations, individual donors, and other services. This helps her understand who a nonprofit’s audiences are beyond the program participants, and how to help it raise more money.
Make sure fundraisers understand the numbers. If a program officer has questions about your proposal budget or other financial documents, Luce says, he or she probably will call the nonprofit’s development department rather than the accountants. “You’ll sound like the smartest person in the room if you’re able to answer those questions about the financials,” she says.
Ask the program officer for feedback. Whether or not you win the grant, Luce says, contact the foundation to learn how you can improve your next proposal. “You don’t have to agree with what the funder says. But don’t argue. Take it in.”
This conversation can help you figure out how to tweak your budget or financial narrative to addresses the grant maker’s concerns — and continue building your relationship with the program officer.
Lisa Schohl helps produce the Chronicle’s webinars and writes and edits online resources, how-to articles to help nonprofit professionals do their jobs well. Her experience includes working in communications and program management at international nonprofits, freelance reporting for publications such as the Knoxville News Sentinel, and working as a Spanish-English translator in Spain. Email Lisa or follow her on Twitter.
