Budget for Success - How to Build a Successful Grant Budget

CHRISTIAN FJELGRAVE: Welcome, and thanks for listening to Cherry Bekaert's Government and Public Sector Podcast Series. In each episode, we hear from the best in the business on the latest challenges, trends, and opportunities affecting the government and public sector. I'm Christian Fjelgrave, leader of Cherry Bekaert's Government and Public Sector Industry Team. I hope you enjoy, and thank you for joining us.


KIMBERLY KONCZACK: Hello, and welcome to Cherry Bekaert's Government and Public Sector Podcast Series. As the first in our mini-series about grants management, this episode will be about how to build a successful grant budget.

KIMBERLY KONCZACK: I'm Kimberly Konczack, and I work with the grants management and indirect cost team here at Cherry Bekaert. I've been working in local government for the last 13 years and have a great passion for serving the public sector.

KIMBERLY KONCZACK: I've been working in the grant space focusing on indirect costs for the last four years and have now broadened to general grants management, including grants management software. I am an official grants enthusiast now. I have the Grants Management Body of Knowledge training guide within arm's reach and can't tell you how many times I have to pick it up and reference it.

KIMBERLY KONCZACK: I could probably take the training course another dozen times and still not know everything there is about it, which is why I'm so excited to be working with two individuals that I'm about to introduce to you. They share the same service mentality and passion for making a difference as I do.

KIMBERLY KONCZACK: With that, Shuo Zhang and Kat Kizior, I will turn it over to you.


SHUO ZHANG: I am the grants management service line leader here at Cherry Bekaert. I am very happy to be here and share our knowledge.


KAT KIZIOR: My name is Kat Kizior, and I am also under the grants management umbrella with Shuo. I am a senior advisory associate here.


KIMBERLY KONCZACK: Great. I know both of you have worked for nonprofit and local and state government in the past. Why Cherry Bekaert versus your past experience?


SHUO ZHANG: I enjoy working with Cherry Bekaert because I am able to work with so many professionals. Not only are they rounded in grants management, they also have their own special expertise.

SHUO ZHANG: I've worked with indirect cost experts, auditors, and system engineers. This is the first time I have had the chance to have deep relationships with people with such broad expertise.


KIMBERLY KONCZACK: That's awesome. What about you, Kat?


KAT KIZIOR: I have 20-plus years in accounting and grants management experience from working with state and local government and nonprofit healthcare organizations.

KAT KIZIOR: I have always enjoyed working with those organizations, but recently I decided I wanted to help others. I felt like I had a really deep knowledge base and would answer a lot of questions, but I couldn't do that for everyone in the grants field who could learn from what I know.

KAT KIZIOR: I got the opportunity to work with Cherry Bekaert on a consulting and advisory basis. It has really become a passion to get out there and speak with grants management and accounting communities and give them the information and knowledge they need about grants.


KIMBERLY KONCZACK: Like I mentioned earlier, I am still learning. There is so much to learn, so I'm really excited to be doing this podcast with the two of you.

KIMBERLY KONCZACK: With that, let's get to the subject at hand. What is a grant budget, and why do grant budgets even matter? Kat?


KAT KIZIOR: To answer the question, what is a grant budget? It is a financial plan, and it outlines the estimated income and expenses.

KAT KIZIOR: Keep in mind, especially for the accounting people out there, it's not like an organizational operations budget where you're encompassing all the revenues and expenses for your organization or entity. A grant budget focuses on costs that are specific to the program or project for which you are seeking funding.

KAT KIZIOR: Basically, you're going to include income. You're going to include personnel costs, depending on the grant, such as direct or indirect salaries and fringe benefits.

KAT KIZIOR: In your budget, you're also going to include non-personnel costs associated with that grant funding or program. That could include overhead, equipment, supplies, and anything else directly or indirectly associated with the grant funding.


KIMBERLY KONCZACK: As I was doing research and some content development for our podcast, I came across a statistic that over 90% of grant applications require a budget. That made me pause for a minute and think about the overall importance of a grant budget when 90% of them have to be included in an application.

KIMBERLY KONCZACK: Shuo, what do you think about that?


SHUO ZHANG: I definitely agree with you. I'm not surprised by 90%. It is very important to have the right budget because the budget is your roadmap for managing that entire grant.

SHUO ZHANG: You will follow your roadmap, and your donor will use that roadmap to evaluate how well you're doing during the grant period.

SHUO ZHANG: We often see challenges people face while managing grants, and many are caused by not having a well-thought-out budget. Some lines were over-budgeted. Some lines were under-budgeted. There may be missing items that are important for running the grant, but they were not included. Therefore, you couldn't charge them, even though you're still incurring them, and that creates a loss for your organization.

SHUO ZHANG: The budget is also how you present yourself to the donor during the grant application. If you present a logical and well-written grant budget, it shows that your organization has strong financial management and a commitment to using funds efficiently.

SHUO ZHANG: A lot of times, the funding we receive is essentially taxpayer dollars, and donors want that commitment. If you have a well-rounded budget during the application process, you are more likely to receive the award.


KIMBERLY KONCZACK: Clearly, really important. How do you even begin?


SHUO ZHANG: If you are not very experienced with budget building, you may start by asking the donor what the upper limit of the budget is and then work off that total number.

SHUO ZHANG: However, we recommend starting by asking the donor if they have a preferred template. These days, most donors have their own way of managing and evaluating your application. Asking for that template upfront will save time because you won't need to rework your template into the donor's structure later.

SHUO ZHANG: You also want to ask the donor how they will evaluate your application. For example, will they view subrecipient funding as a positive because it passes dollars down to the local community? Will they require co-funding or match? Will they evaluate whether your organization can sustain the program after the grant ends?

SHUO ZHANG: You want to understand those factors before you build the budget so the budget supports both your program and the donor's priorities.


KAT KIZIOR: You also have to ensure there is a system of grants management internal controls in place for your grant funding.

KAT KIZIOR: If this is your first grant funding, it's very possible that you do not have grants management internal controls. You need to set up those controls and make sure your organization can stay compliant with the grant.

KAT KIZIOR: Even if you already have grant controls in place, this particular funding may not follow the same specifications as other grants. It may be a little different. You may need to revise internal controls or add new controls if necessary.

KAT KIZIOR: For example, some grants may involve cybersecurity. If you don't already have internal controls over cybersecurity, you may need to add them.

KAT KIZIOR: You want to demonstrate that you are going to use these funds sensibly and prudently. Those are big words you'll see in 2 CFR 200, the Code of Federal Regulations. You want to make sure funds are used carefully and that you're avoiding risks. Your internal control procedures help show that you took reasonable steps to follow the grant requirements.


KAT KIZIOR: Number two: be a know-it-all. Understand the grantor's requirements thoroughly.

KAT KIZIOR: You need to understand Uniform Guidance, 2 CFR 200, your federal requirements, and any state grant requirements. You can also use Uniform Guidance with specific agency guidance.

KAT KIZIOR: You need to really know your grant terms and conditions. This is important for building your budget. You do not want unallowable costs in your budget. You need to know what you can and cannot include.

KAT KIZIOR: You also need to know your state statutes and what you can and cannot do within your state and your entity. Your grantor can also be a good resource. Give them a call. Their websites often have training programs and documentation that provide guidance.

KAT KIZIOR: Uniform Guidance ties everything together. It tells you how to use the requirements as you go through your grant and build your budget. It also tells you the cost principles you need to follow.

KAT KIZIOR: You want to know specifically what's allowable and unallowable. Don't include unallowable costs in your budget, because if you do, it shows you did not take reasonable care when creating the budget and did not follow guidance.


KAT KIZIOR: Number three: embrace the team.

KAT KIZIOR: You have to estimate costs when building a grant budget. These are future costs, so you want to make sure they are as realistic as possible. There are direct costs, indirect costs, and hidden costs in your budget.

KAT KIZIOR: Who can you go to in order to find out exactly what those costs will be? It may be something you personally would not think belongs in that grant budget.

KAT KIZIOR: For example, let's say you're applying for a three-year concurrent grant. Did you consider salary increases over those three years? How do you know what those salary increases will be or whether they will occur? You need to talk to your finance department.

KAT KIZIOR: If you're the finance person, that's great. If you're the grant administrator, you have to communicate with finance. Find out what those costs would be. How will they affect fringe benefits? How will they affect actual costs? Make sure you appropriately put those costs into your budget for the correct amounts so you're not under-budgeting.

KAT KIZIOR: For a DOJ grant, you may need to talk to a department head. You may not work directly on DOJ grants or with a commonwealth attorney's office or sheriff's office, but you may be the administrator for that funding.

KAT KIZIOR: Go to department heads, specialty staff, and other organizations that have managed similar grants. They can tell you what kinds of costs are needed to carry out that program.

KAT KIZIOR: Make sure you have a strong team underneath you: finance, budget, department heads, project leads, and people who have worked on these types of projects before. Working as a team helps you include all costs and make your budget as realistic as possible.


KAT KIZIOR: Number four: keep it solid, solid as a rock.

KAT KIZIOR: You want to show the grantor precisely what the grant will cover. Be realistic and specific, and make your estimates as accurate as possible.

KAT KIZIOR: When you format the budget, each section should be in an outline format. List your items and costs. Use major headings and subheadings. Subtotal each component and include a grand total at the end.

KAT KIZIOR: You want to subtotal direct costs, indirect costs, equipment, and other cost categories, then show the total.


KAT KIZIOR: To go along with this, we have budget narratives.

KAT KIZIOR: Even when you are plugging numbers into the budget, you still have to write a narrative to tell your funder or grantor exactly what those costs mean and how you came up with them. You have to justify each one.

KAT KIZIOR: Here's a little trick: write your budget narrative last. It's an essential part, but after you have everything down on paper, you can look back and make sure the narrative aligns with the numbers.

KAT KIZIOR: You're also going to need that budget when making your proposal, and you want it to align with your proposal as well.


KAT KIZIOR: Play the match game.

KAT KIZIOR: Compare your budget to your grant narrative. Make sure it's clear and transparent. You want the grantor to look at it and see everything you want to tell them. Any assumptions and judgments should be clear.

KAT KIZIOR: Explain how your costs directly relate to your grant program objective. When you write your narrative after completing your budget, it's much easier to do that.


KAT KIZIOR: The last one is: don't make a rookie mistake.

KAT KIZIOR: Whether it's your first time writing a grant budget or your hundredth time, check your work. Make sure all your zeros are correct and that you don't have too many zeros in there.

KAT KIZIOR: Make sure your grant budget is complete, your calculations are complete, and your balance is what it is supposed to be.

KAT KIZIOR: Have a second set of eyes on it if you can. Someone who really understands the grant would be great. If not, at least have someone double-check for errors.

KAT KIZIOR: When your budget is complete, you want your grantor to look at it and know exactly what your plan is, how you're going to carry it out, and how much you expect it to cost.


KIMBERLY KONCZACK: Wow, Kat, that is great. I love your six-step guide. It's very comprehensive, and it makes me think about how much there is to grant readiness.

KIMBERLY KONCZACK: This is only one piece of it, talking about the budget, but the budget alone impacts other departments like finance. It is important to be generally grant ready.


KAT KIZIOR: Exactly. On top of that, if you're putting your budget together and you're having a hard time, the requirements are difficult, you don't know where to start, or you don't know where to find information, you may see your costs growing and growing.

KAT KIZIOR: You have to ask yourself: can my organization actually sustain this project? Your costs are growing, and you have to prove that you can keep this program funded and going with what you have.

KAT KIZIOR: Sometimes when you're doing your grant budget, you can look at it and say, "I don't know if this is worth it. I don't know if we can afford this. I don't know how our entity can go forward with the cost this is going to take."

KAT KIZIOR: As you go through your grant budget, analyze it yourself and think about your entire organization and sustainability.


SHUO ZHANG: Often, even though we're doing one budget, you need to look at several budgets at the same time to make sure they are consistent with your organizational goals and that you are not completely out of funding when the current grant ends. Your program needs to be sustained in some way.


KIMBERLY KONCZACK: Absolutely. In my experience in indirect costs, sustainability is such a major component. If you don't know what your indirect cost is, then you may not have a sustainable program.

KIMBERLY KONCZACK: We're definitely going to do a deeper dive into that in our next episode. We're going to talk about direct and indirect costs and how to best understand and differentiate them.

KIMBERLY KONCZACK: One last question for you both. If listeners only remember one thing from this podcast, what would that be?


KAT KIZIOR: If you're doing a budget, use your best practices and use guidance to produce the strongest budget you possibly can. Demonstrate to the grantor, funder, or donor that you really understand the funding program, the costs, and the grant compliance.


SHUO ZHANG: From my side, I would say running a grant is definitely not a one-person job. It is a collaboration. When you're building the budget, talk to all your teammates. Talk to your finance department. Talk to your purchasing department. Talk to anybody the budget might impact. That is very important to make your budget realistic.


KIMBERLY KONCZACK: Thank you so much, Kat and Shuo, for sharing your wisdom with us today.

KIMBERLY KONCZACK: To pass along email addresses, if there are any follow-up questions from listeners, I can be reached at Kimberly.Konczack@cbh.com. Shuo can be reached at Shuo.Zhang@cbh.com. Kat can be reached at Kat.Kizior@cbh.com.


CHRISTIAN FJELGRAVE: This was Christian again. I hope you enjoyed this episode and look forward to our next one. Don't forget to subscribe.


KAT KIZIOR: Thank you.


SHUO ZHANG: Thank you.