Budgets

Photos: Valentina Conde and (insert) Scott graham on Unsplash

This webpage is for trust fundraisers with three or more years’ experience. Beginners should use this page instead.

‘Grantmakers reported that they have particular trouble interpreting the budgets that they receive from nonprofits and often create strict budget formats and templates to get comparable and interpretable financial information. As one survey respondent commented, “We used to allow agencies to submit the budget in their own format, but it has been so challenging to figure out how some things were calculated, and [we spent so much time] reconfiguring the budget for presentation to our board, that we now require agencies to use our format.”’ Drowning in Paperwork, American report, 2008

There’s a separate page about constructing a budget. This section is about how to present a budget to the funder.

If the funder will part fund the work, understand what stage the funder comes into the project

Some funders are happy to come in early, some towards the end. That’s a question for your phone research, normally. It affects what you’re applying for. For example, a funder that wants to come in at the start could be presented with a new Information Officer that you’ve just started fundraising for. However, a funder coming in only when ¾ of the money is in would never fund that post standing on its own, but they might contribute to the full Information Team of four, including one new one. 

Checking the budget actually adds up

Ha ha ha – okay, basic point, which isn’t the aim of this site. However, there are slightly less basic consequences:

• You need to know where all the figures are in the budget spreadsheet, because if there’s a last minute change then you need to be able to change everything – on the spreadsheet, on the forms, on the attached proposal – so there’s consistency
• If the funder has their own form to break down the figures, I try to copy and paste it into the same Excel workbook as the budget and have the figures on the form calculated automatically. This has the added bonus of increasing the clarity as to what you actually did in going from the budget to the form. See the example budget download in the Budgeting spreadsheet in the Project Development sub-menu
• Don’t just assumes that the figures on your Excel spreadsheet are adding up accurately! We all love Excel, but like many good friends it’s not always 110% reliable. If the figures on your budget don’t add up, then the assessor (a) may notice and then (b) they may not know what you actually want! A couple of remedies:
  • You can build checks into your budgets – alternative ways of doing the arithmetic on the spreadsheet. I like to build those checks into the budget, in small grey figures. It’s a very good way of catching where you’ve forgotten to include certain cells in your formulae.
  • It’s useful to be able to check the figures on the forms, to make sure they add up. The presentation below gives some techniques to help with this…

Keep good notes

The number of times I’ve taken over someone else’s budget and been unable to update it at Stage 2 of the application, or report against the costs. You know how to communicate clearly to others. It’s perhaps your single most basic skill. Good notes might also help with internal approvals.

It’s doubly important that you do this for a new project that you helped write. The Services team will be using the budget for expenditure purposes and if they don’t understand bits of it, they’ll be at sea about what the assumptions about expenditure were – even if you talked it through with them back when the budget was written.

Handling costs that are harder to estimate

There are two sides to this:

• Risk management in your costs. You might look at a best case, worst case and an average cost estimate. If it’s a lot of money, someone ought to speak to other services to get their take on what really happens and why. (Local services in other areas, that aren’t in competition with you, are normally both happy to talk and sympathetic!) Again if it’s a lot of money, it helps to have done other market research – e.g., if the question is whether service users need travel expenses, how many and how much, you could ask them.
• Selling it to the under. There are two sides to this: 
  1. Funders are generally risk averse, so will your presentation look risk averse to them? 
  2. How do you know what a realistic figure might be? If you’ve got space, saying that you’ve spoken to others, referencing your charity’s own experience and saying you’ve spoken to some end users shows off your credentials and quality of development.

Calculating Full Cost Recovery

A couple of points people ask about:

• What’s an appropriate means of calculating FCR?

There is no one “right way” to do this with funders. As long as what you’ve done looks like common sense to a funder, you should be fine. If in doubt, you can ask the funder. (Just be prepared for sometimes slightly waffly answers.) 

• What’s an appropriate level of FCR?

I work at a charity with slightly higher overheads (including support/central admin staff and apportionment of office costs, they’re equivalent to 34% of the Services team salaries in a budget). My colleagues/predecessors have just put these in the budgets in full. I’m not aware of us ever being turned down on this ground. (Which isn’t the same as saying we haven’t, of course…) You could ask your funder – but if you really want to know a level, “What level so overheads have applicants typically come with that you’ve funded?” might give you a figure, whereas “What would you fund?” is more likely to give you some general principles.

What’s the right size for a project?

As a grants assessor, after a while you have a vague idea how much things might cost. For example: I once got turned down for a mentoring project because “it was expensive for a volunteer-led project and a mentoring project”. (You could argue that’s a reason to sometimes have a lower level of organisational cost recovery?) On the other hand, there are plenty of examples of trusts saying they don’t want to fund things to fail because the budget was too low.

How to address the issue of what’s “just the right size of budget”?

• What’s your organisation’s experience / other fundraisers’ experience of costs for a particular kind of project? You might be able to find example budgets on line or within your charity.
• Are there costs that are obviously missing, or that look high and you won’t be able strongly to explain why?
• How much benefit per head do you look like you’re delivering? One point on this is: if the costs are more than £1-2k per head, I’d possibly be worried. (On the flip side: if the costs are in the low £100s per head, a funder that wants to make a significant difference in the lives of people with greater needs is likely to be skeptical – though sometimes you could address this positively in the writing.)
• Are there reasons why the costs might be higher that you think could appeal to the funder? (For example: I once got the Lottery to fund a project that was about £2,800 a head by talking about addressing multiple needs, which I knew they’d pay more for.)

Write the budget in simple language that matches the rest of the form

Occasionally, budgets use language that only appears once or twice in the application. Given that the assessor won’t be remembering all the fine detail of what you said, this makes it confusing.

As an assessor, when I don’t understand a proposal, I’ve usually gone straight to the budget – because then I can see what the actual elements of the work are. Also, budgets are more likely to get queried in the grants meeting (when, most likely, no one can remember the detail of the project). For both reasons, I’d recommend you especially write the budget in a clear way, that’s easy to follow without appreciating the intricacies of the project.

Links

“It’s not all about the writing: budgeting”

Amada Day and Kimberly Hays De Muga do Fundraising Hayday podcasts for an American audience that are funny and sometimes have a bit of more advanced material. Four of the headings in this web page were prompted by the above podcast. They also do good coverage of the basics. Be aware: this is an American podcast and some of the rules and practices with big funders are different from the UK.