How One Nonprofit Justified Its Project Budget to a Grant Maker

Most grant makers require nonprofits to supplement a project budget in a grant proposal with an explanation of how the applicants arrived at the total cost. Such “budget narratives” may take any of several formats, so nonprofits should make sure to follow the grant maker’s guidelines. But across the board, “a good budget narrative should explain how you arrived at all of your numbers,” says Cheryl Kester, a consultant with the Kester Group.

The explanation also should address anything that may raise questions from a proposal reviewer, such as dollar amounts that, at a glance, seem quite high, or unusual line items that require additional context. A lot of reviewers read the budget narrative first, Ms. Kester says. When they get to the budget itself, there shouldn’t be any surprises.

Ms. Kester worked with the Stapleton Foundation for Sustainable Urban Communities on a 2009 proposal to the Aetna Foundation for a project that included a website redesign. When the proposal was submitted, the website redesign was the biggest line item in the organization’s budget that year, aside from staff salaries and events. Because of the expense, the narrative takes some extra space to detail the work required to build the new website.

“We wanted to make the case that the end product was going to be robust enough to meet the project objectives,” Ms. Kester says.

Nonprofits must do the necessary research and legwork to get real prices, in order to show the reviewer where the numbers came from, she says. With some budget items that may change, like consultant hours and fees, it’s OK to round some things off or call something an estimate.

See the sample budget and accompanying narrative below: