By Meg Davis

There’s no getting around it – for most of us, creating a budget is a joyless task. But while it requires dusting off math skills some of us hoped we’d left behind in school, budgeting can also help you to develop useful and practical plans. This week’s blog post describes how to create a very basic program budget.

We recommend creating a budget that is relatively detailed from the beginning. You may or may not decide to send this detailed budget to donors when you apply for grants (more on this at the end), but you should still create one for internal use in your organization.

SETTING UP THE SPREADSHEET

If you don’t use a spreadsheet already we recommend that you start to do your budgeting on a spreadsheet and not in a word-processing document (for a free version of the Excel spreadsheet software, go to www.openoffice.org). With a spreadsheet, you can keep things more organized, have the spreadsheet do the math (so there are fewer errors), and print budgets that look professional.

We recommend you include the following columns when you set up your budget:

·         Expenditures (listing each specific expense on a separate line)

·         Calculation (explaining how you came up with each cost – more on this in a moment)

·         Need (the total amount you need)

You may also want to include a separate column for each source of income that is confirmed, and one at the end showing the total balance that you still need to raise.

About the calculation column: this is a column that lists exactly how you came up with each cost. For instance, if the total amount we’re budgeting for rent is $6000, the “calculations” column says “12 months x $500/mo.” If we’re budgeting $720 for office supplies for one year, the “calculations” column says “$60/month x 12 months”. This makes it easier to remember and update the number later if we find out our calculations were not correct.

The reason to spend the time going into such detail in the beginning is that later on, your estimates of what things cost may change. You want to make it as easy as possible to go back and remember how you came up with each number without having to recalculate it again each time you look at the budget – or worse, to constantly bug your colleagues with questions like, “what on earth were we thinking when we allocated only $1000 for hotel rooms?” If your budget is detailed enough in the beginning, you can easily see what you were thinking.

For each expenditure, you should take the time when you draft your budget to research what the likely cost will be. This may involve calling some companies and doing some research online.

This is how it looks:

Expenditure	Calculation	Need
Rent	12 months x $500/mo.	$6000
Office supplies	$60/month x 12 mos.	$720

Another way to do this is to break the calculation into two columns, so that you have only one set of numbers in each column. In this approach, instead of a “Calculation” column, you would have a “Units” column and a “Cost Per Unit” column. Here’s an example:

Expenditure	Units	Cost per Unit	Need
Rent	12 months	$500	$6000
Office supplies	12 months	$60	$720

Some of us prefer the first version and some prefer the second one. Use whichever one works best for you.

EXPENDITURES

The two major categories in your expenditures column are administrative expenses and program expenses. What’s the difference?

Administrative expenses include expenses that are shared across all of your programs. This includes the rent for your office, office utilities, salary for the bookkeeper or administrative assistants, and so on. Most donors prefer to see administrative costs that are less than 20% — ideally 15% or so – of your total project budget. In the real world, few of us are able to meet this arbitrary percentage – so when you actually apply for funds, you may need to leave a few admin expenses off your proposal in order to keep this category low.

Program expenses are any funds that you only spend on this project. That includes program staff such as a person you hire just to help with this program, things you buy for the project (such as a computer or supplies), travel for this program, and space you rent just for the program. In the ideal world in which donors live, program expenses are money you would not spend if you were not doing the program. (In the real world, life is rarely that simple, but it does help you to think along these lines in order to plan your budget.

Program expenses are always a bit more straightforward than the admin expenses, so let’s do that part first.

PROGRAM EXPENSES

The largest expenditure in your program expenses may be program staff. Let’s say you’re going to hire a program officer to work on the project. Her salary, health insurance, and any other benefits should all go in the program section of your budget.

If her supervisor is a program director who has to supervise other projects as well, then you should estimate the average number hours a week the program director will spend supervising this program officer. Perhaps it’s going to mostly be about one day a week, except when there’s a big meeting or workshop, when it will be forty hours. You can estimate about ten hours a week as an average. In that case, the program director is spending 25% of her time supervising this project, and 25% of her salary, health insurance, and social security should go into the program section of your budget.

If you are planning a conference or workshop, here are some costs you’ll need to include. Remember to include budget amounts for staff in each of these categories as well.

·         Travel for participants. Estimate the airfare. In the calculation column, put the estimated airfare x the number of participants.

·         Ground transportation. Each participant may need to take a taxi to get to and from the airport – especially if the airport is in another town. In the calculation column, put the allowance per person x number of participants. You may want to reimburse people based on how much they actually spend, but you can also just tell each participant what their ground transportation allowance is and give each person the same amount.

·         Accommodations. Estimate what a hotel room will cost for one night, how many people will stay in each room, and in the calculations column, put the estimated cost of the room x number of rooms x number of nights. If you don’t know what a hotel will cost, look online or call a few hotels and ask them. Remember people may need to arrive a day early if your workshop starts in the morning. If participants want to stay longer than you have budgeted for them to stay, they will need to pay for those nights themselves. Book hotel rooms that are comfortable, but be frugal.

·         Per diems. Anyone who is traveling for a program should get a per diem allowance, or be reimbursed for items such as meals, water, internet, and taxis that they would only have to spend money on when traveling to your program.

A word about per diems, as this is often controversial for groups we work with in China. A per diem is not payment for someone’s time. The purpose of a per diem is to keep staff and participants from having to spend their own money in order to participate in your program. It is unprofessional to ask others to pay for these costs out of their own small income.

It’s best if you have a policy for your organization about how much you pay for per diems, and pay everyone the same amount. At Asia Catalyst, we have a policy that all staff and program participants are given a $50/day per diem and $80/night for hotel rooms when traveling, regardless of who they are and where they are traveling. (This is relatively low for a US organization, as you will see if you visit the US State Department’s recommended per diems by location, here: https://aoprals.state.gov/web920/per_diem.asp. In Beijing, they recommend a maximum per diem rate of US$381 per day, and a maximum hotel rate of $280. Nice!)

Once you have settled on a per diem and hotel rate policy for your organization, put the amount x the number of people in the program in the calculations column.

·         Visa, meeting rooms, group meals, coffee or tea breaks, the cost of a projector, the cost of an interpreter… Put it all in there. We also usually add in about $200 for materials/incidentals. At the last minute, you may need to buy dry erase markers or rent a projector – this will cover you for unexpected workshop expenses.

If your project is a publication, include expenditures for design, translation (if you’re publishing it in other languages), translation of drafts (because the translator needs to get paid for drafts too), printing, and be sure to put in enough to cover the cost of postage (because you’ll want to send it to donors, supporters, friends overseas, and so on).

Don’t include in your project budget: Miscellaneous expenses. In real life, we often have unexpected costs in a project. But in creating a budget, you should try to plan for everything. Donors and bookkeepers and auditors will never permit you to have a “miscellaneous” category in your budget, because that’s a red light signaling possible fraud. Another category you can’t include in your budget: bribes. (I’m serious – we’ve been asked this one.)

ADMINISTRATIVE EXPENSES

Your administrative expenses are the “overhead” costs – the cost of running the organization that is sponsoring the program.

To figure out how much admin expenses you need for each project, you should estimate what percentage of the organization’s resources the project will require. (It will be a lot easier to figure out the percentage if you have created an annual strategic plan and this program is one part of that strategic plan. But even if you don’t have such a plan, you can still develop a rough idea of what percentage of everyone’s time it will take to run the project from beginning to end.)

Let’s say you estimate the project will take about 25% of your organization’s total staff time and resources. The administrative expenses for the project can then each be broken down by 25%. In other words, if your organization’s office rent for one year is $6,000, then in the “calculations” column you can put “$6,000 x 25%” and in the needs column you can put $1,500.

Expenditure	Calculation	Need
Rent	12 months x $500/mo. = $6000 x 25%	$1500
Office supplies	$60/month x 12 mos. = $720 x 25%	$180

Other expenditures to include in the administrative expenses section: telephone, internet service, utilities, photocopies, computer hardware, computer software, payroll expenses (if you use a payroll company), and bank fees (if you’re sending or receiving money by wire transfer, you will definitely need to include a hefty sum in this category).

How about administrative staff? This may include bookkeepers, the cost of an annual audit, office assistants, and the executive director. How do you include these in the project budget?

Here’s how we do it: Individual administrative salaries are allocated based on the amount of time each individual will spend on the project (for our executive director, usually about 10%, unless she’s really involved in implementing the program). Other costs, such as audit and so forth, can be split up using same percentages that you use to budget other administrative costs.

CONCLUSION

Here’s what our sample, imaginary budget looks like, if we already have a grant from Generous Foundation for this project and are applying for additional funding from Rich Brothers Family Fund:

Administrative expenses	Calculation	Need	Generous Foundation	Request from Rich Brothers Family Fund	Balance
Executive director	$50,000/yr x 10%	$5,000	0	$5,000	0
Rent	12 months x $500/mo. = $6000 x 25%	$1,500	$500	$1,000	0
Subtotal – admin		$6,500	$500	$6,000	0
Program expenses
Program officer	$40,000/yr x 100%	$40,000	$5,000	$15,000	$20,000
Report translation	$5,000 flat fee	$5,500	0	$5,500	0
Report design	$1,000 flat fee	$1,000	$1,000	0	0
Report printing	1000 copies x $5 each	$5,000	0	$2,500	$2,500
Postage	$1000 copies x $2 each	$2,000	0	$1,000	$1,000
Subtotal – program		$53,500	$6,000	$24,000	$23,500
Total Budget		$60,000	$6,500	$30,000	$23,500

This is how our imaginary budget looks. It’s good to show your potential donor that you have some grant funds raised already, and that even if you don’t raise the balance still needed, you can proceed with the project if you just get their grant. Note also that the total admin costs in this budget are only $6,500, or less than 20% of the total project cost of $60,000.

Personally, when I’m writing a grant proposal, I usually write the budget first. The budget forces me to think through how I will actually carry out this program. When it’s done, the budget will help me plan what to write in the narrative.

An important note: before you send this off as part of a grant proposal, do some research and make sure to find out what your donor likes to see in a project budget. Unfortunately, each foundation has its own budget form. Larger foundations and government donors often have specific ways that they want you to break down costs, rules about things like per diems, and guidelines on how much you can spend on certain things. Some donors won’t cover specific categories (such as travel expenses) at all.

And while most donors have told us they will only take a proposal seriously if the costs are spelled out clearly, one donor recently turned us down because our budget was too specific. What can you do? It’s all part of the joy of fundraising…about which, more in another column.

Meg Davis is the executive director of Asia Catalyst.