Many funders will request a copy of a budget or some form of financial document or statement as part of their grant-making process.
This request can either be a copy of the latest budget from a project or one that is produced for inclusion with the application when applying for funds.
This section aims to raise awareness of how important budgets are within the grant-making sector and to provide some useful tips and hints on how to create
your own successful budget for inclusion with a grant application.
No matter what size your business or setting is, budgets can play a vital role. Neglecting to budget, or ignoring the need to compose and maintain a budget
correctly, can result in the failure of a project or the business as a whole.
So what is a budget?
Budgets are financial forecasts or plans expressing the predicted income and expenditure for the year to come. Simply put, budgeting is planning ahead to
enable your setting to make informed and confident financial decisions. The advantages of preparing and composing budgets are as follows:
• To help you manage money
• To help with future planning
• To help you meet objectives
• To provide confidence in your setting
• To help identify problems before they occur
• To improve decision-making
• To increase staff motivation through targets
• To monitor performance
There are many different types of budgets and this sheet aims to help you identify which type of budget you need to use in your grant application.
Different funders will have different requirements and will need to check your budget to ensure that your proposal is viable. Some funders will require a
budget for the whole organisation, others will specifically request a budget for the particular project for which you are requesting funding.
· Line Item budgets – the most common type of budget required by funders is a line item budget, which represents expenditure in specific budget categories
such as personnel and non-personnel. The line item budget works by developing a total amount for each budget line item, and all the lines are then added
together to create a project total.
· Functional or performance budgets – contain more information than a line-item budget. It organises expenditure according to a specific programme or
project objective. Using a functional budget, you can determine the cost of performing each part of the project.
Preparing and writing a budget
This section aims to help you identify key headings to be included within your budget and how to scrutinise the figures you will use. The first step to
drawing up a budget is planning. You will need to decide what the budget will cover, what items will need to be included, and the likely categories of
expenditure and income that will be needed. The basic principle is that the budget will be split into two, expenditure and income.
Expenditure may be further divided into capital and revenue budgets, where capital refers to the costs of fixed assets (medium to long-term) and revenue
refers to daily working costs including rent and utility bills (short-term). Income can be further split into three categories of confirmed; probable; and
The second step of budget-making is preparing the figures that you will use. It is essential to be as realistic as possible at this stage. To get ideas of
figures to include in your budget expenditure section use the following guide:
• Talk to people in similar organisations, equipment suppliers, builders and contractors and request three estimates for work you know will need doing.
• Use local trade union scales to gather salary information and pay scales.
• Use catalogues or the internet to estimate the cost of office supplies and equipment like fridges, desks and stationery.
Once you have costed your expenditure, start to look at the income section of the budget and estimate the likely amounts of funding to be received from
each source. In order to aid you in future, it’s always a good idea to keep a clear note of how you arrived at each figure and of those which you are not
Once the rough figures are in your budget it would be a good idea to show others in your organisation for three reasons: (i) to make sure that you have not
omitted any details; (ii) to ask those concerned about any figures you are unsure about; (iii) to ensure the budget is viable and will not place
unsustainable financial pressure on the setting.
You now need to consider whether the income is less than expenditure and, if it is, how you are going to deal with it. There could be a fundraising
shortfall or one of your applications may fail. You need to consider the following:
• Can the project be scaled down?
• Can parts of the project be postponed or cancelled?
• Is there enough time to submit applications to other funders?
• Can the project be split into phases, with the budget referring to the first phase?
Once you are at this stage, the budget may have to be presented to the management committee for their comments, alterations and approval. This simple
checklist can be used for aiding you to prepare to write your budget:
• Work out how much will be needed under each heading
• Visit other groups similar to yours and be prepared to learn from their experiences.
• Do not guess figures if there are other groups in the same building. For example, you could ask them what their heating bills are like
• If you can’t find the correct price of something, again don’t guess; get quotes from three suppliers and use the average price of the three
• Use the relevant local authority pay scales to help you estimate staff salaries and remember to include costs of National Insurance contributions,
pension contributions, holiday entitlements and salary increments etc.
• Take into account inflation, especially if you will be budgeting into the next financial year.
An important factor to remember is to note down how you arrived at a figure for inclusion under one of the headings so that, if asked, you can explain this
at a later date.
Finally, look at the budget you have drafted, make sure it is honest and accurate; don’t under-estimate costs leading to debts which have to be met and/or
failure of the project. Don’t over-estimate costs, claiming for costs you won’t incur, as this could be seen as fraud.