What should a budget proposal include?

A budget proposal is a detailed financial plan that outlines how grant funds will be used to achieve your program’s objectives. It serves as both a planning tool for your organization and a transparency document for funders, demonstrating fiscal responsibility and realistic resource allocation. Here’s a comprehensive guide to creating an effective budget proposal.

Core Components of a Budget Proposal

1. Budget Format and Structure

Most funders prefer a line-item budget format that categorizes expenses into standard categories. Your budget should include both the numerical breakdown and a detailed budget narrative that explains and justifies each expense.

Standard Budget Categories:

• Personnel (salaries and benefits)
• Fringe benefits
• Travel
• Equipment
• Supplies
• Contractual/Consultant fees
• Other direct costs
• Indirect costs (administrative overhead)

2. Personnel Costs

Personnel typically represents the largest portion of nonprofit budgets, often 60-80% of total project costs.

Include:

• Salary calculations showing annual salary × percentage of time devoted to project
• Benefits calculation (typically 25-35% of salary for health insurance, retirement, payroll taxes, workers’ compensation)
• Clear job descriptions and time allocation for each position

Example:

• Program Director: $65,000 annual salary × 0.75 FTE = $48,750
• Program Coordinator: $45,000 annual salary × 1.0 FTE = $45,000
• Administrative Assistant: $35,000 annual salary × 0.25 FTE = $8,750
• Total Salaries: $102,500
• Benefits (30% of salaries): $30,750
• Total Personnel: $133,250

3. Detailed Budget Example

Program: “After-School STEM Education Program”

Grant Period: 12 months

Total Project Cost: $175,000

Personnel (76% of budget – $133,250)

Program Director (0.75 FTE)

• Annual Salary: $65,000
• Project Allocation: $48,750
• Responsibilities: Program oversight, curriculum development, partner relations

STEM Instructors (2.0 FTE total)

• Annual Salary per position: $40,000
• Project Allocation: $80,000
• Responsibilities: Direct instruction, lesson planning, student assessment

Administrative Support (0.25 FTE)

• Annual Salary: $35,000
• Project Allocation: $8,750
• Responsibilities: Registration, data entry, parent communication

Fringe Benefits: $41,250 (30% of salaries)

• Health insurance, retirement contributions, payroll taxes, workers’ compensation

Equipment (6% of budget – $10,500)

STEM Learning Kits: $6,000

• 30 robotics kits at $200 each for hands-on learning activities

Technology: $3,500

• 10 tablets at $300 each for digital learning components
• Software licenses for coding programs: $500

Safety Equipment: $1,000

• Safety goggles, lab coats, first aid supplies

Supplies (5% of budget – $8,750)

Educational Materials: $4,000

• Workbooks, art supplies, basic laboratory materials, printing costs

Office Supplies: $1,500

• Paper, folders, pens, organizational materials

Snacks and Refreshments: $3,250

• Healthy snacks for 50 students × 180 program days × $0.36 per student per day

Travel (2% of budget – $3,500)

Staff Professional Development: $2,500

• Conference registration and travel for 2 staff to attend National STEM Education Conference

Program Field Trips: $1,000

• Transportation costs for 3 educational field trips to science museums and tech companies

Contractual Services (8% of budget – $14,000)

External Evaluation: $12,000

• Independent evaluator to conduct program assessment and prepare evaluation report

Curriculum Consultant: $2,000

• Expert review and enhancement of STEM curriculum materials

Other Direct Costs (1% of budget – $1,750)

Communications: $750

• Phone, internet, postage for program operations

Program Insurance: $500

• Additional liability coverage for field trips and hands-on activities

Background Checks: $500

• Required screening for all staff working with minors

Indirect Costs (2% of budget – $3,500)

Administrative Overhead: $3,500 (2% of total direct costs)

• Portion of rent, utilities, accounting, general administrative support
• Note: Rate negotiated with funder; standard rate is 10% but funder caps at 2%

4. Budget Narrative

Each budget category should include a detailed narrative explaining:

Justification: Why each expense is necessary for program success.

Calculation Method: How amounts were determined.

Cost-Effectiveness: Why this represents good value.

Relationship to Objectives: How expenses directly support program goals.

Sample Budget Narrative – Personnel Section:

“Personnel costs represent 76% of the total budget, reflecting the intensive, relationship-based nature of quality after-school programming. The Program Director (0.75 FTE) will oversee all program operations, develop curriculum, and maintain relationships with school partners. This position requires an experienced educator with program management skills, justifying the $65,000 annual salary level, which is competitive with similar positions in our region.

Two full-time STEM Instructors are essential to maintain our target student-to-instructor ratio of 12:1, ensuring individualized attention and safety during hands-on activities. The $40,000 salary reflects the specialized skills required for effective STEM instruction with middle school students.

Administrative support (0.25 FTE) will handle registration, data collection, and family communication, allowing instructional staff to focus on program delivery. Fringe benefits are calculated at 30% of salaries, reflecting actual costs of health insurance ($8,000 per FTE), retirement contributions (6% of salary), and payroll taxes.”

5. Budget Best Practices

Cost-Share and Matching Funds

Many funders require cost-sharing, where your organization contributes resources beyond the grant amount. This demonstrates organizational commitment and leverages funder investment.

Types of Match:

• Cash Match: Direct financial contribution from your organization
• In-Kind Match: Value of donated goods, services, volunteer time, or facility use
• Hard Match: Required contribution that must be documented
• Soft Match: Encouraged but not required contribution

Example Cost-Share Calculation:

• Grant Request: $150,000
• Required 25% Match: $37,500
• Cash Match: $15,000 (existing staff time allocated to project)
• In-Kind Match: $22,500 (facility rental value, volunteer time at $25/hour)

Multi-Year Budget Considerations

For multi-year grants, show annual budget breakdowns and account for:

• Inflation Adjustments: Typically 3-5% annual increases for salaries and costs
• Scaling Activities: How program size changes over time
• Sustainability Transition: Decreasing grant dependence in later years

Year 1: $175,000 (full startup and implementation)

Year 2: $165,000 (reduced equipment costs, 3% salary increases)

Year 3: $155,000 (organization cost-share increases, sustainability activities begin)

Common Budget Mistakes to Avoid

Unrealistic Salary Levels: Research comparable positions in your region and sector

Missing Budget Categories: Include all necessary expenses, even small items

Incorrect Calculations: Double-check all math and percentage calculations

Inadequate Budget Narrative: Provide sufficient detail to justify each expense

Ignoring Funder Guidelines: Follow specific formatting and category requirements

Unrealistic Indirect Rates: Use your organization’s negotiated rate or funder’s maximum

6. Budget Monitoring and Reporting

Include plans for budget oversight and reporting:

Internal Controls: Describe financial management systems and approval processes

Regular Monitoring: Monthly budget reviews comparing actual vs. projected expenses

Variance Reporting: Process for addressing significant budget deviations

Documentation: Record-keeping requirements for receipts and expenditure tracking

Audit Readiness: Maintaining documentation to support all expenses if audited

7. Budget Flexibility and Modifications

Address how budget changes will be managed:

Pre-Approved Flexibility: Many funders allow 10% reallocation between categories without approval

Modification Requests: Process for requesting significant budget changes

Emergency Procedures: How unexpected costs or funding shortfalls will be handled

A well-prepared budget proposal demonstrates financial competence, realistic planning, and clear understanding of program requirements. It should tell the story of your program through numbers, showing funders exactly how their investment will create meaningful impact while ensuring responsible stewardship of their resources.