Grant Budget Narrative and Justification

Find the budget instructions before you write anything: the notice of funding opportunity for a government grant, or the application guidelines for a foundation. They set the categories and their order, the page limit, the costs you can't charge and how to handle overhead. Four common formats show how much they vary.

• Federal program grants: a line-by-line justification in the categories of the budget form, with every calculation shown.
• NIH modular budgets: requests of up to $250,000 a year in direct costs, in $25,000 modules¹, with a personnel justification giving roles and person-months but no salaries.
• NSF: a budget justification of no more than five pages per proposal², plus a separate one for each subaward.
• Foundations: their own form, sometimes with a cap on overhead. The Archstone Foundation, for one, allows up to 10% for indirect costs³.

Every figure needs a source you could hand an auditor. The Uniform Guidance, which governs federal awards, requires each cost to be necessary, reasonable and allocable to the project, and adequately documented⁴. NIH adds a blunt warning for applicants: "Significant over- or under-estimating suggests you may not understand the scope of the work."¹

1. 1

   Salaries and time

   Take salaries from payroll or offer letters, then set each person's share of time on this project.

2. 2

   Fringe rate

   Ask finance for your benefits rate and what it covers, such as payroll taxes, health insurance and retirement.

3. 3

   Purchases

   Get a quote, catalog price or recent invoice for each item, and save it.

4. 4

   Travel

   Count trips, travelers, nights and miles, then apply the rates in your travel policy.

5. 5

   Indirect rate

   Find your negotiated rate agreement, or decide whether to use the de minimis rate.

Reviewers expect to see the arithmetic. The Justice Department's Office of Justice Programs gives the budget its own numeric score in technical review. It asks for a detailed computation for each budget line item, listing the total cost and how it was calculated⁵. For staff, that means the salary rate and the time each person spends on the project.

Then add a sentence on what the cost pays for, using the same names for roles and activities as your project narrative.

Indirect costs cover shared expenses such as accounting, administration and facilities. If you have a negotiated rate agreement, name it and apply the rate to the base it specifies. If you don't, most federal awards let you charge a de minimis rate of up to 15% of modified total direct costs⁷, with no documentation needed to justify it.

That base is usually smaller than your total direct costs. Modified total direct costs leave out equipment, rent, participant support costs, tuition remission, scholarships and the part of each subaward above $50,000⁶, among other items. Say your direct costs are $116,280, including $9,000 of bus passes for students, which count as participant support. The base is $107,280, and 15% of it is $16,092.

Apply 15% to the full $116,280 instead and you would claim $17,442, which is $1,350 more than the rule allows. Don't count a cost twice, either. Federal rules require consistent treatment⁴, so a bookkeeper paid through your indirect rate can't also appear as a direct line.

Foundations write their own rules. Use their percentage, check which costs they apply it to, and show the arithmetic either way.

Lay the budget, the justification and the project narrative side by side before you submit. Every total in the justification should equal the budget form, year by year. Every person and activity in the proposal should have a cost, and every cost should point back to an activity.

If the project narrative is still changing, settle it first. The foundation grant proposal writer drafts one from a funder's own guidelines.

Prefer to start from a document? The grant budget template includes a worked budget narrative to adapt, an indirect cost explanation and a budget sheet in the funder's categories.