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Welcome to the first part of the new NCVO website. While we finish building it, you will find the rest of our help and guidance on our existing site.

Almost all funders will want to see a budget. Usually this will be a budget for your project not your organisation as a whole.

What will your project cost?

To prepare a budget for funders you'll need to work out what your project will cost. You do this by asking yourself three questions about the project.

  • What are we planning to do?
  • What do we need to make that possible?
  • How much will those things cost?

Here’s a starter list of the things you might need to consider.

  • Venue fees.
  • Specialist worker fees.
  • Salaries including National Insurance (NI) and pension contributions.
  • Cost of planning time and co-design time with your participants.
  • Cost of office space, internet and phone provision.
  • Insurance.
  • Refreshments costs.
  • Travel costs for staff and volunteers.
  • Materials and equipment costs.
  • Key training costs including safeguarding training.
  • Marketing costs including websites.
  • Evaluation and monitoring costs.

How do you work out what your costs will be? There is no perfect way and it's ok to estimate. But you need to base your estimates on something solid so you can be confident. You can ask to change the budget later if something unexpected happens. You don't want to have to change because of bad estimates.

Here are some methods people often use.

  • Get no-obligation quotes.
  • Take a similar project budget and use the costs in it to predict. (don’t forget to add a little for inflation)
  • Ask advice organisations, networks or membership organisations if they have any common costs guides.

Budget lines, categories or cost centres

Once you have your costs you need to group them. If your organisation already has groupings in its accounts start by using those. But for many application forms you'll need to group your costs by the categories the funder uses. If you're a new organisation, start by using the groupings your first application needs.

Core costs

You can skip this section if:

  • you're a new group and the project you're trying to get funded will be your only costs to start with
  • you're applying to a programme that is specifically for core costs.

Core costs are the running costs of your organisation. This is the money you need to make its work happen. These are also called overheads, running costs or operating costs. Most organisations need to try and bring some money in from project grants to cover core costs or overheads. But you're not always free to do that. You must follow the rules and you must be clear about it in your budget.

  • Check whether the grant allows you to ask for funding for core costs or overheads (sometimes called full cost recovery).
  • Use the National Lottery Community Foundation guidance on recovering overheads. It's useful for bids to them and any other funder that allows full cost recovery.
  • When funders don't allow full cost recovery look carefully at what you can include in direct project costs.

Example

New Lives is a charity that helps women move on after experiencing abuse. They want to start a support group for survivors of same-sex relationships. One of their existing part-time staff will run this project. The funder only allows 10% of core costs included in the budget. New Lives worry because the cost of staffing these sessions is 80% of their budget. Then they realise they are extending the staff member’s hours to take on the new project. This counts as a direct project cost.

Capital costs or revenue costs

Revenue costs are the costs of making things happen. They occur during the project, for that project. Capital costs are for items which last beyond the project. There are more technical definitions used in accounting.

This simpler distinction is important in two ways in grant funding.

  • Some grants fund ONLY capital costs. This is common in very large grants designed for building or heritage improvements. For those projects, you'll need specialist budget advice. It also happens with some small grants that fund equipment and not projects.
  • Many project grants allow you to spend only a limited sum on capital costs. You need to check how much that is. They may also want to see three quotes for the item you want to buy.

Example

Leap Forward is running a digital skills project for teenagers. They want to inspire them to develop coding skills. They need to buy some VR headsets and laptops that they can teach coding on as well as funding the sessions. They discover a small local fund that supports small capital bids for equipment. This pays for the headsets and laptops. They raise the rest of the money from another funder.

Predicting your income

When you submit your budget you have to show how you expect to raise the money you need to match your expenditure. The funder will often give you different categories of funding to use. Use their categories or this list which many funders use.

  • Public funding. This includes grants from the national lottery and grants from local or central government.
  • Other grants. Mostly from trusts and foundations.
  • Donations. These can be from individuals OR from companies IF it isn’t a grant or a sponsorship.
  • Earned income. This covers a wide range of things from participants fees to corporate sponsorship.
  • Your own funds.

You don’t need to have income in all the categories. Most grant funders will want you to have some income from at least one other source.

You need to estimate as you do with expenditure. Once again you want those estimates to be good enough to count on.

  • Best guess calculations (we expect to sell X tickets at X price) can be very useful.

It's always better to predict low rather than high on the income side of a budget. Often grant funders will ask to see proof that you've raised the other income that you predicted. They won’t mind if you've raised too much.

Restricted vs unrestricted funds

You can only spend restricted funds on the activity that you agreed with the funder. Most public funding, other grants and most sponsorships are restricted funds. Earned income and donations are usually unrestricted.

This means that if you raise more earned income or donations than you planned, you don’t need to tell anyone.

If you raise extra restricted funds, you may need to have a conversation with the people you raised it from. But this should not stop you applying for more grant funding than you need. Remember success rates are low. If you raise extra funding you'll have options.

First you can reduce the amount of earned income and donations that you put towards the project. Then you can use more of the restricted funds towards the total. Check that the funder doesn't need to see a certain percentage of earned income before you do this.

If you do have to keep a certain percentage of earned income, you may end up with more income than expenditure. In that situation:

  • you might agree with one of the funders offering restricted funds to divert their funding to another similar project you want to run
  • you might agree with all the funders offering restricted funds that you're going to help more people

Example

‘Hear us’ is an organisation run by people with disabilities. They earn income by training companies in disability rights. They need £6,000 to help them move their activities online. They apply to three emergency funds and run an open-ended crowdfunding campaign. They raise £7,000 restricted funds from grants and £2,000 unrestricted from donations. One of the grant funders agrees their money can go towards extra marketing of the new training offer. Together with the donations, this creates a new part-time paid role.

Match funding

Most grant funders will expect you to raise some funding from other sources. This is often called match funding. You should follow each grant’s rules.

  • Is there a minimum percentage you need to meet from other sources?
  • Are there any sources you can’t use? For example, you can’t match funding for one lottery grant with another lottery grant.
  • Can you include in-kind funding in your total?

Thinking about match funding for one grant can help you get started thinking about your whole funding mix. How do you plan to make your activities sustainable over time?

In-kind funding

In-kind funding is the phrase the grant sector uses for non-monetary contributions. It covers support from other sources and contributions your organisation makes.

Sometimes you include in-kind funding on both sides of your budget. Sometimes you provide information about it separately to the budget.

Some examples of in kind funding:

  • volunteer time
  • staff time paid for from other budgets
  • free or discounted use of space
  • donations of materials
  • free advertising.

Different grant funds have different rules about what you can count and how you count it.

Cash flow and reserves

Your cash flow is your forecast of when you will receive money into your organisation. Your reserves are the money that you have that can be freely spent on your charitable purposes.

Grant funders will often want to know about your reserves policy. For larger grants they will sometimes ask you to provide a cash flow.

Next steps

This page was last reviewed for accuracy on 18 November 2020

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