How to Develop a Grant Budget and Stay Out of Jail

All grant proposals to government agencies require a detailed budget.  As Shlomo D. Katz of the law firm of Brown Rudnick, LLP points out, you have three goals in preparing your cost/price volume:  (1) win the contract; (2) design a cost/price volume so that your company makes a profit; and (3) stay out of trouble (jail).  While his advice is directed at businesses responding to a Request for Proposals (RFPs), the same advice applies to nonprofit organizations applying for government grants.

According to Katz, you should follow four basic principles when preparing your budget.  I have modified them to apply to government grants.  They are illustrated below.

Make clear what you are promising to do and what you are not promising to do.  Once a grant is awarded, you will be held responsible for adhering to your budget.  Therefore, you should make clear what are your actions and assumptions.  For example, you could state the following:  “The following technical assistance activities are included in the price.”

Demonstrate cost/price realism by relating deliverables to your resources.  Government agencies will review your budget to determine if your cost estimates (1) are realistic for the work being performed; (2) reflect a clear understanding of the requirements; and (3) are consistent with the grant guidelines.  Therefore, you should make sure that all your budget items are directly related to the work you describe in your proposal narrative.  Your budget must tell the same story as your narrative, and it must offer costs and prices that are realistic.

Base on your cost/price data on legitimate, publicly accessible information.  FAR 3.104-3(b) states that a “person must not knowingly obtain contractor bid or proposal information or source selection information before the award of a Federal agency procurement contract to which the information relates.”  This lugubrious statement means that you must base your budget on legitimate information that is legally available to the public.

Avoid promising to deliver anything you cannot deliver.  Most government grants are firm-fixed-contracts.  In a firm-fixed-price contract, you will be reimbursed based on your budget independent of the actual costs of performing the contract.  If you promise more than you can deliver, you may wind up paying for it out of your organization’s pocket.

Your grant budget should not be an afterthought to your proposal narrative.  Make sure that the narrative and the budget tell the same story, act ethically, and use cost/price realism to help win the grant, cover all your direct and indirect project costs, and stay out of jail.



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