What Is the Purpose of the Proposal Budget & Budget Narrative?

Receiving grant funding in the United States involves an extensive application process. Once an organization or individual receives a grant, the agency awarding the grant requires a form of oversight or reporting as proof of the appropriate expenditure of grant funds. Proposal budget and budget narrative, two terms reserved almost exclusively for the world of grant making, both play important roles in this process and help investors determine the merits of funding projects.

A proposal budget constitutes an important part of the grant application packet. Basically, a proposal budget is exactly what it sounds, a proposed budget for a project seeking funding via grants. Proposal budgets include the total of all expenditures for a project, and list individual expected expenses for all anticipated expenditures. A proposal budget can also include any revenue a project may generate. The proposal budget serves the basic purpose of showing grant providers and investors how much money a project will cost and whether those costs adhere to guidelines. This helps investors and grant providers decide whether a project merits funding.

A proposal budget serves a number of purposes in addition to its basic function, that of displaying the anticipated cost of a project. Notably, a proposal shows all the anticipated expenditures of a budget. The enumeration of proposed expenditures allows grant providers and investors to determine whether a project intends to make optimal or logical use of its funds, which reveals the mindset and aims of the project administrators. Furthermore, a proposal budget reveals the framework of a project in stark terms. According to a grant reviewer interviewed by the Foundation Center, the text of a grant proposal may use florid or misleading language to persuade a provider to award a grant, but the proposal budget, written in numbers, cannot lie. A bad, confused or inflated proposal budget can ruin an otherwise solid grant proposal.

A budget narrative, also know as a budget justification, exists as part of the proposal budget. When applying for a grant, a project includes a budget narrative as a means of explaining the reason for costs. If all costs associated with a proposal prove self-evident to the grant reviewer or investor, budget narratives prove unnecessary. A proposal item reading “researcher salary,” for instance, constitutes an explicit expenditure -- when a proposal reviewer or investor reads that item, he or she knows what it means. Budget narratives exist to explain hidden or confusing costs listed in a proposal budget.

A number of common items in grant proposals may necessitate a budget narrative. An investor, for instance, only provides funding for travel if travel relates directly to the aims, and in some way benefits the end goal, of the project. A budget narrative lists each anticipated travel expense, the reason for that expense in relation to the project goal and the actual cost of the expense. Other common grant costs necessitating budget narratives in proposals include stipends for project directors and participants, materials and equipment costs, indirect costs, fringe benefits and the rental of space. Some projects elect to create budget narratives even it not entirely necessary as a means of transparency when applying for grant funding.