The first time you fill out a federal budget, the form looks easy. A few rows of numbers, a total at the bottom. Then the notice asks for a budget justification, and you find the form doesn't say what any of those numbers mean or where they came from.
This article walks through the standard categories, how to write each line so a reviewer can follow the math, and where the line between a contractor and a subaward changes your budget. By the end you'll be able to turn a column of figures into a set of short arguments.
Start with the form's categories
Federal applications commonly use the SF-424A, Budget Information for Non-Construction Programs. Section B breaks costs into object class categories:
- Personnel
- Fringe benefits
- Travel
- Equipment
- Supplies
- Contractual
- Construction
- Other
The form then adds a total for direct charges, a line for indirect charges, and a grand total. In the Grants.gov version, the individual category lines are optional and you leave blank any that don't apply.
Not every funder uses this form, and some notices set their own categories or templates. Use the funder's categories and order, even if your accounting system groups costs differently. A reviewer comparing five budgets against one scoring sheet should not have to translate yours.
Write each line as a small argument
A line that says "Personnel: $72,000" tells the reviewer nothing. A good justification line gives four things: what the cost is, how you calculated it, why the project needs it and, where relevant, how it ties to an activity in the narrative.
Show the arithmetic every time. Your reviewer should be able to rebuild each figure on a calculator.
Personnel and fringe benefits
For each position, give the name or role, the annual salary, the percentage of time on this project and the resulting amount. Fringe benefits follow as a rate applied to those salaries.
Here's a hypothetical example. Say a small youth literacy nonprofit is requesting funds for a tutoring program:
| Role | Annual salary | Time on project | Cost |
|---|---|---|---|
| Executive director | $80,000 | 10% | $8,000 |
| Program coordinator | $52,000 | 100% | $52,000 |
| Salaries total | $60,000 | ||
| Fringe benefits at 24% of salaries | $14,400 |
The justification text then reads: "The program coordinator manages tutor recruitment, scheduling and family outreach full time. The executive director provides oversight at 10 percent of her time. Fringe benefits are calculated at the organization's actual rate of 24 percent of salaries."
If you charge salaries to a federal award, remember that 2 CFR 200.430(g) requires the charges to be based on records that accurately reflect the work performed. The percentage in your budget is an estimate, so make sure your timekeeping can support it later.
Travel
Say who is traveling, where, why and how you priced it. For local travel, show the miles and the rate. In the same example, "40 home and school visits × 50 miles round trip × $0.70 per mile = $1,400" is a complete line. For trips away from home, break out airfare, lodging, meals and ground transport with the number of travelers and nights.
(The mileage rate here is an assumption for the example. Use your organization's documented policy, and check the notice for any travel limits.)
Equipment versus supplies
Under 2 CFR 200.1, equipment is tangible personal property with a useful life of more than one year and a per-unit cost at or above the lesser of your organization's capitalization level or $10,000. Everything else tangible is a supply. A computing device below that threshold counts as a supply, regardless of how long it lasts.
So a $1,400 laptop for the coordinator belongs under Supplies, not Equipment. Many organizations set a lower capitalization level than $10,000, in which case their own level governs. Ask finance what yours is before you assign the line.
Contractual, other and indirect
List each contract with the vendor or type of service, the scope, the basis for the cost (hourly rate and hours, or a fixed fee) and, if required, how you'll select the vendor. "Other" holds what doesn't fit elsewhere, such as printing, phone service or participant stipends. Check whether the notice wants participant support costs shown separately.
For indirect charges, state the rate, where it comes from and the base it applies to. The indirect costs article covers negotiated rates and the de minimis rate.
Contractor or subrecipient: why the label matters
The Contractual line is where budgets most often go wrong. A partner who delivers part of your program may be a subrecipient, not a contractor, and the two are treated differently.
2 CFR 200.331 sets out the characteristics. A subaward carries out a portion of the federal award, and the subrecipient typically makes programmatic decisions and is responsible for following the award's requirements. A contractor provides goods or services within its normal business operations, to many purchasers, and isn't subject to the program's compliance requirements. The rule says the substance of the relationship matters more than the form of the agreement, so calling it a "contract" doesn't make it one.
The classification affects your budget directly. Under the definition of modified total direct cost (MTDC) in 2 CFR 200.1, only the first $50,000 of each subaward is in the base for indirect costs. Contractor payments for services are not subject to that cap.
Using a hypothetical $80,000 payment to a partner at the 15 percent de minimis rate:
- Treated as a subaward: $50,000 enters the base, so indirect costs on it are $7,500.
- Treated as a contract: $80,000 enters the base, so indirect costs on it are $12,000.
The $4,500 difference is why you can't pick the label that produces the larger number. If the partner shapes the program and carries compliance duties, it's a subaward, and you should budget it that way. Confirm any close call with your grants officer.
Check the whole budget before you submit
Before the justification goes out, read it once from the reviewer's side:
- Does every figure on the form match a figure in the justification?
- Does every line show its calculation?
- Does each cost connect to an activity, as in a budget that tells a story?
- Do the categories match the funder's template, and the total match the award ceiling in the notice?
If you're new to federal awards, the whole grant lifecycle shows where the budget you submit becomes the budget you report against.
Your next step
Pick one budget category from a past proposal, such as personnel or travel, and rewrite it so every number shows its calculation. Include the role or purpose, the quantity, the rate and the result. Then ask a colleague to rebuild the total from your text alone. If they can't, the justification isn't done.
SoliContraX can draft a budget narrative in the funder's categories when a notice calls for one, working from the figures and organizational materials you supply. You check the math and finish it. See how to get started.