Super Secret Grant Budgeting Hack: Braid $5K into Millions

Braided Funding Example: $5K Simple Budget for Project Over $5K

This blog post will help you understand how to create a grant budget for $5,000 that is part of a larger project budget with additional funding sources. This scenario can happen when a funder is offering a small amount of money to cover costs on a project they are not committed to fully funding. Small grants can be braided with other funding streams to promote the overall sustainability of the project. This article will help you create a grant budget for a small grant to support a specific aspect of your goal.

In this blog post you’ll learn:

• How to braid multiple funding streams of different sizes
• How to prioritize budget line items
• How to account for indirect cost

Basics of Braiding Funding

As I explained in a prior post about nonprofit funding, braiding funding is a sustainable way to fund multi-million dollar initiatives. A program, product, or service, can have multiple funding streams that contribute towards its success. This is very common in the public sector where state, local, and federal money often interact to serve the community.

In social business, braiding funding can be a way for a business to contribute to community causes and match money leveraged by other funding sources. For nonprofits, braiding funding is a common way of operating the organization’s budget, however, at times this can get tricky.

As opposed to blending funding, braiding funding requires that organizations track how money is spent. That should be possible to use the tracking to match the funding to the outcomes achieved. Blending funding, on the other hand, uses multiple funding sources contributing to the same budget but does not tie the funds to any particular outcome or service. The funding simply contributes to the overall budget with no accountability mechanisms for any individual funding stream.

When funders share grant opportunities, they create Funding Opportunity Announcements (FOA) or other notifications that the money is available. Most funders will say if they require you to track any outcomes or metrics related to the funding they are sharing.

The graphic above demonstrates the difference between braided, blended and coordinated funding. You can learn more about it in this blog post on Essential Nonprofit Funding Streams.

Addressing Funder’s Requirements

The first set of information to find out is the requirements for funding. Every funder has different requirements. These requirements will determine key elements of your budget.

Budget Example: Capital Expenditures

Super Awesome Funder only has $5K to contribute towards cool projects for kids. Capital expenditures are not allowed in the funding opportunity announcement. Their definition of capital expenditures includes anything with a per-item cost of $5,000 or above. They also include website development and anything with a lifetime beyond purchase of 3 years or more.

Why would this funder say such things?

In this example, Super Awesome Funder only has $20,000 total to give to 4 groups who apply. The assumption is more value for each grant will be produced if the organization applying does not use it on one thing or something that benefits the organization overall vs. a specific project that aligns with their mission/values/priority.

For Super Awesome Funder, it doesn’t make any sense for them to completely invest everything in your business. If you’re going to use it for other purposes or other programs. The funder may want to make sure you’re spreading capital investments around to multiple funding sources or you have an unrestricted funding stream for this purpose.

Understanding Grant Funding Requirements is Simple

Do not make funding requirements hard for yourself. Many can seem confusing or even contradictory. The truth is, as a funder, writing an FOA can be a stressful activity and sometimes things get lost in the editing sauce.

If something seems confusing, reach out to the funder, and ask about the requirements. Many funders have webinars you can attend or email addresses for questions.

Stressing yourself out over understanding the requirements can make a grant seem too difficult. It’s better to take the time to ask questions and try to understand than to give up and assume something is too difficult. You’ll never get a grant that way!

The best way to understand funding requirements is to pull up the funding announcement and highlight all the requirements. You can make a table or spreadsheet to ensure you know them all and can address them in your application.

Next Steps After Requirements

After you learn the requirements of your grant you can determine if they cause budget parameters. When you are creating your linen item budget, knowing the requirements helps you avoid errors and miscalculations.

Many funders place limitations on how funding can be spent or on split. Funders sometimes require money to be matched or for other financial sources to be identified.

Funding Requirements Example:

Super Awesome Funder adds to the FOA requirements – grantees must have at least 3 other secured funding sources to ensure the success of the project.

What is the purpose of this?

Most likely, Super Awesome Funder knows that a project aligned with its mission/vision/priorities cannot be completed for under $5K. For the sustainability and success of the project, they are requiring you to prove you’ve secured enough funding to be successful.

Calculating the $5K Budget

The total cost of a program, project, or service can exceed the amount of funding from any particular funder. If you are braiding funding, you need to know the total cost for the overall initiative. From there, you can allocate specific line-item costs to a funding source.

Line-Item Budget

Developing a line-item budget means you have each expenditure for your program, product, or service listed on a separate line item. The total of all the line items is the total cost of your program, project, or service.

Cost Category Budget

A cost category budget separates the line items into groups of costs that are in a similar category of spending. Federal funding opportunities often request budgets to be in cost category format. Cost categories include salaries, fringe benefits, travel, supplies, contracts, other costs, and equipment.

Annual Budget

The annual budget reflects your operating costs for one year. That can be one calendar year or one grant year or one fiscal year. Most funders will tell you what timeframe to use.

Preparing Your Total Grant Budget

The total budget for your program, project, or service must reflect all costs that will make your initiative successful and sustainable. When you are preparing your total budget, you are considering all the needs for your success and sustainability across the number of years you anticipate needing funding or for the duration of the grant you are applying to.

This reflects your budget as a new project just starting out as well as a project that is growing and will need different levels of support in later years. You might also consider how the funding streams you are braiding together will change over time when preparing the total budget for your initiative.

How Much Grant Funding Do You Need For a Total Project?

That Depends upon what you’re trying to do. Your budget fuels the outcomes you intend to achieve. Demonstrating to funders that your idea is feasible is important. The best way to do that is to show both your plan and your budget will lead to success.

In our current example, the total budget is more than the grant we are applying for. We’ll estimate our total budget at $40K. Each year for 4 years we’ll need $10K. If the current grant application is for $5K, we need $35K in other sources of funding to braid together to equal success in 4 years.

When you have a budget larger than your grant, you must determine how to split up the total cost so it can be allocated to the right funding source. This is a very simple process that I share in this video.

Basically, you determine what source of funding can work together to make up the total budget. You then find the restrictions for each and use the most restrictive funding to decide what to do with the rest.

By doing it this way, you’re ensuring you don’t leave money on the table. If you simply start using any funding without analyzing the opportunities first, you could end up with a funding source you can’t use simply because you can’t meet the requirements.

Budgeting For Outcomes

Developing a budget that reflects your outcomes can be simple. We need to know a few key pieces of information first:

• What services do you provide?
• Who do you serve?
• What does it cost to serve each person/unit?
• How many people/units are you budgeting to serve?

If you were to imagine your budget like a simple math equation it would look like this:

(cost per service) x (number of units served) x (duration of time)

Where units or services could be people or other things like dogs or acres of land, etc. Your budget reflects how your initiative is implemented.

For example, if a supply is only needed in the first 6 months of the first year of your project. You will not budget for it every year in your annual budget. You’ll only put it in the first year’s budget for 6 months. The rest of the years you can use that money for something else.

Another very simple but effective formula to understand your budget better is:

Program Outcomes = Program Activities = Program Budget = Program Evaluation

You can expect your outcomes to reflect three inputs: your activities, budget, and evaluation. Your activities and budget move you forward in implementation, your evaluation steers your effort and helps you refine. If you’re using a continuous quality improvement cycle, your outcomes inform the next iteration of your activities and budget. That’s why having an evaluation of your efforts is extremely important.

Allocating Costs Within Your Grant Budget for Successful Outcomes

The funder’s requirements and a few basic pieces of information are the backbones of your grant budget. What activities do you want to complete, how much it will cost to do them successfully, and the amount of time it will take to be successful?

All this information will tell you how to build your budget for successful outcomes and sustainability. In our example with our $5K budget where Super Awesome Funder is looking for 3 other funding sources to braid together with our grant application. We will need to secure those funding streams and determine which activities are directly tied to each of our 4 funding sources.

As mentioned above, we can split the costs into our line items according to the funder’s requirements, preferences, and unallowable costs. If all line items, we need to be successful are in our total budget and are allocated to some funding source- we should have the entire budget covered.

How Do You Determine What Makes it Into the Grant Budget or Not?

If there is not enough funding in your grant budget for everything you’d like to do, sometimes you need to prioritize what will get done. Listing all the activities required for success and then reviewing the list several times is the best way to approach cutting items from a draft budget.

If you find that the cuts mean your program is no longer feasible, finding additional funding sources may be necessary. Otherwise, you might start a program and not successfully reach the outcomes you intend.

How to Calculate Indirect Costs Across Multiple Funding Streams

Calculating indirect costs on one funding stream can be tricky. Indirect costs are allowed on some grants as a way for organizations to recoup costs that cannot directly be allocated to any particular program or service but might benefit them in some way. For example, office rental costs or fees for snow removal in the parking lot. While the organization might benefit, the cost is not easily attributed to only one beneficiary.

Indirect costs with multiple braided funding streams are a very tricky affair and should be handled by experienced business officials. Each funder will have its own requirements for indirect costs and how they can be applied. Some will accept an existing negotiated rate; others will only accept up to a certain percentage of the total award.

In our example, Indirect costs cannot exceed 15% of the total award of $5K. After indirect costs, we can budget $4,250 for our total activities under this grant. The other three funding sources may have different requirements so it will be important for the success of our project to make sure all the costs for the organization are split properly.

Budgeting for Your Own Time

If you are the grant writer, and the person who will be doing the work you can only write yourself in most grant budgets for the work done after the grant is awarded. That means you cannot add your own time to write the grant into the budget unless the grant says that is OK to do so. (Most grants will not allow this so it’s better to think of grant writing costs as sunk costs in case you don’t get the award you aren’t expecting remuneration for that time.)

If you are the service provider within the grant and the administrator of the organization, you can list yourself in the budget for both activities. You may charge different rates for each service but you cannot say that you will be doing both services 100% of the time. For every individual listed in the budget, you cannot include more than 100% of the time. Most grants will not allow you to say that you will work 40 hours a week as a service provider and work 20 hours on the weekend as an administrator and charge the grant for 60 hours per week. Many expect that the role will be done within 1 Full-Time Equivalent which equals a 40-hour work week.

This is a great question to ask funders if you are confused about how to allocate your own time within the grant application.

Final Thoughts on Braiding Funding

Braiding smaller and larger pots of funding can be a great way to build a sustainable organization. Especially for small organizations or community-based partnerships. Braided funding is a sustainable practice but can require more planning, effort, and coordination across funders.

Braided funding is not the key to success for every project, program, or service. Coordinating funding by braiding is especially helpful when there are multiple small pots of money with few restrictions. This allows synergy between the funding while still tracking outcomes.

The reason blending small pots of funding is not recommended is because that eliminates the ability to account for how funding was spent and what outcomes it contributed to. However, braiding them allows for each funding stream to support a specific activity or cost that contributes to overall success.

Sustainability and funding are often used interchangeably. However, they are interrelated and separate things. Coordinated funding is a key part of sustainability. You can learn more about multi-dimensional sustainability here.