budget narrative.docx

What is a Budget Narrative?

The budget narrative explains the “what, “how” and “why” of a line item cost to carry out grant project goals and objectives. A budget narrative is a narrative explanation of each budget component which supports the costs of the proposed work. The budget narrative should focus on how each budget item is required to achieve the proposed project goals and objectives. It should also justify how budget costs were calculated.

The budget narrative should be clear, specific, detailed, and mathematically correct. The FMCSA reviews the budget narrative to confirm how costs are allowable, allocable, necessary, and reasonable. A well-developed budget narrative is also an effective management tool; a budget that doesn’t represent a project’s needs makes it difficult to recommend for funding and assess financial performance over the life of the project. The budget narrative serves a number of critical functions:

· Describes your need for or necessity of an expense;

· Documents how reasonable the request is, conveys your judgment as well as the feasibility of the project in context of available and proposed resources.

· Helps FMCSA review high-risk cost items to determine funding.

What Different Costs are in a Budget Narrative?

Personnel: Below in Appendix C is a sample of a personnel budget narrative. Personnel costs are employee salaries working directly on a grant project. Only include costs for personnel employed by your organization. Costs should be consistent with that paid for similar types of work within the organization. Individuals not employed by your organization will be classified as either a subgrant or contractor. See the contractual object class for additional information.

Fringe Benefits: Below in Appendix C is a sample of a fringe benefits budget narrative. Fringe benefits are allowances and services provided by employers to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave (vacation, family-related, sick or military), employee insurance, pensions, and unemployment benefit plans. The costs of fringe benefits are allowable provided that the benefits are reasonable and are required by law, non-Federal entity-employee agreement, or an established policy of the non-Federal entity. The FMCSA will only reimburse fringe costs for the personnel and only for the percentage of time they devote to the project. Some helpful tips:

· Include how the fringe benefit amount is calculated (e.g., actual fringe benefits, rate approved by the Health and Human Services State Wide Cost Allocation Plan or cognizant agency). Explain what is included in the benefit package.

· Do not combine the fringe benefit costs with direct salaries and wages in the personnel category.

Travel: Below in Appendix C is a sample of a travel budget narrative. Travel costs include field work activities or for travel to professional meetings. The FMCSA reviews the travel budget to ensure that amounts are reasonable based on the level of effort described in the project plan. Generally speaking, FMCSA will accept in-State travel costs for routine operations as reasonable unless there is a specific reason to question them. The FMCSA evaluates out-of-state to ensure the trips planned are necessary to complete the scope of work (usually training or meeting attendance), and that the number of travelers is consistent with the trip purpose. Some helpful tips:

· Include estimates for unforeseen travel such as possible FMCSA required meetings, with estimated costs of attendance.

· Explain the reason for travel expenses for project personnel (e.g., staff to training, field interviews, advisory group meeting, etc.) and, if known, identify the location/destination of travel.

· Do not include payroll, fringe, or other costs listed as part of the travel. For example, payroll/fringe is included in personnel and fuel costs are included in other.

Equipment: Below in Appendix C is a sample of a equipment budget narrative. Equipment costs are tangible, nonexpendable, personal property items that have a useful life of more than one year and an acquisition cost of $5,000 or more per unit. The FMCSA evaluates the need for the equipment (e.g., ration of employees to equipment) in the budget narrative and how it supports project activities. The FMCSA also evaluates the extent to which the equipment is being used to support more than one FMCSA grant. If it does, FMCSA evaluates if the cost has been prorated accurately. Additionally, the FMCSA reviews past performance information to determine if the same equipment for the project/program was purchased in previous years. A sample equipment budget narrative is below. Some helpful tips:

· Indicate in the narrative if your equipment threshold is below $5,000 so FMCSA understands why lower costs items are included in this line. Otherwise, expenses under the threshold of $5,000 per item belong in supplies or other, depending on the item.

· Explain the purpose and use of each item of equipment. Prorate the costs, if applicable.

· Common purchases like a computer system (when purchased as a package - keyboard, monitor and hard drive, etc.) are considered equipment if the total cost exceeds the threshold. If these same items are purchased individually (and not as a package) and each unit is below the threshold, list them under supplies.

· When developing your budget analyze the cost benefits of purchasing versus leasing equipment, particularly high-cost items and those subject to rapid technical advances. List rented or leased equipment costs in the contractual or the other object class, depending upon your procurement method. See the guidance under the other object class for additional information.

Supplies: Below in Appendix C is a sample of a supplies budget narrative. Supplies are tangible personal property other than equipment. The FMCSA evaluates supplies costs to ensure a sufficient level of detail that would allow an informed reader to understand that the standard office supplies are reasonable. For example, an applicant need not provide details on the number of paper clips that it will purchase. At the same time, FMCSA cannot accept an amount for office supplies that would equal, say, $8,000 a year per person without further clarification. Some helpful tips:

· A good way to document supplies is to indicate the approximate expenditure of the unit as a whole (e.g., office supplies cost $XX per month).

· Do remember to include a quantity and unit cost for larger cost supply items such as computers and printers.

Contractual: Below in Appendix C is a sample of a contract budget narrative. Contractual object class costs include the cost of any contract or subgrant agreement between the applicant and another organization (for example a vendor or local government organization). Contractual costs can be categorized two ways: contract or subgrant.

The FMCSA reviews the contractual budget narrative to ensure it contains sufficient descriptive information about what specific costs (products and/or services) would be charged to the grant, a rationale for how those costs were derived, and the applicability and necessity of each to the grant.

A helpful tip: Include the name of the vendor/subgrantee, if known. If not, indicate that the selection is pending and an estimated timeframe when the vendor/subgrantee will be selected. In the application, the most important component of the contractual budget narrative is the purpose of the contract/subgrant and how the cost was estimated/derived.

Guidance for Contract Costs: A contract means a legal instrument by which a non-Federal entity purchases services needed to carry out the project or program under a Federal award. A contractor provides the goods and services within normal business operations; provides similar goods or services to many different purchasers; normally operates in a competitive environment; provides goods or services that are ancillary (but necessary) to the operation of the Federal program. A contractor is not subject to Federal compliance requirements as a result of the grant, though similar requirements may apply for other reasons.

For example, contractual costs could include training, maintenance contracts, or other service contracts except those which belong in different object classes such as equipment or supplies (depending upon your organization’s policy). The term “procurement” is used to identify the process of acquiring goods and services from sources outside of the grantee organization. When procuring property and services under a Federal award, an organization must follow the same policies and procedures it uses for procurements for its non-Federal funds. Non-competitive procurements should only be used in limited circumstances and should be a last resort.

Guidance for Subgrant Costs: A subgrant means an award provided by the grantee (also known as a pass-through entity) to a subgrantee. A subgrantee has its performance measured in relation to whether objectives of a Federal program were met; has responsibility for programmatic decision making; is responsible for adherence to applicable Federal program requirements specified in the Federal award; and (in accordance with its agreement), uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.

A subgrant may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Federal regulations require that all subgrantees obtain and maintain a Data Universal Numbering System (DUNS) number and continue to maintain an active System for Award Management registration at all times during an active Federal award.

Sample Contractual Cost Budget Narrative

The contractual costs are for:

- Hiring a consultant to establish System requirements and develop an implementation plan. Estimated cost is $265,000.

- Hiring a vendor to develop the system, including system design and build. Estimated cost is $1,200,000.

- Having the system vendor develop system testing that is consistent with system specifications, and then working with Public Safety to perform tests to verify that the System Replacement functions as required. Estimated cost is $40,000.

- Having the system vendor perform training at multiple locations for port and mobile officers, Public Safety management and IT staff. Estimated cost is $53,000.

Other: Other costs are costs that do not fit within any of the other object class categories. Use of this category requires a full explanation. Typical costs in this category include rent for buildings used to conduct project activities, utilities, and printing costs. The FMCSA reviews other costs to determine whether these costs are consistent with the proposed work plan and are necessary to complete the approved work plan. The FMCSA also evaluates the costs to ensure that no unallowable costs, such as entertainment expenses, are included. Below is a sample other budget narrative. Some tips:

· A lease is considered an other cost when you are not the prime on the contract; rather, you are partnering with a different agency in your state or using a shared utility, facility or other services purchased through the state for one or more agencies. A lease is considered a contractual cost when you directly engage, and form a contract with, a vendor.

· Group other object class costs whenever possible (e.g., space, rental, communication, printing, maintenance) in the budget and explain how they support the grant activities.

· Ensure that other costs such as professional services, audit, postage, printing, facilities expenses are not already accounted for in either your indirect cost rate agreement or cost allocation plan.

Indirect Costs: Indirect costs are costs incurred for common or joint objectives that benefit more than one project. They may be administrative and/or programmatic. The FMCSA reviews indirect cost rates to ensure the rate is valid, calculations are correct in the budget, and that the rate is applied to the appropriate base.

Remember to include your indirect cost rate agreement with your application in Grants.gov. If your rate will not be approved by the application due date, attach the letter of renewal or letter of request that you sent to your cognizant agency. This documentation is used as a placeholder until the rate is approved. Grantees may not receive reimbursement for indirect costs until the rate is approved.

1.

Budget Narrative

Personnel Budget Narrative (SF-424A, Line 6a)

Total Cost for Personnel:

Fringe Benefits Budget Narrative (SF-424A, Line 6b)

Fringe

Total Cost for Fringe:

Travel Cost Budget Narrative (SF-424A, Line 6c)

Total Cost for Travel:

Equipment Cost Budget Narrative (SF-424A, Line 6d)

Total Cost for Equipment:

Supplies Cost Budget Narrative (SF-424A, Line 6e)

Total Cost for Supplies:

Contractual Cost Budget Narrative (SF-424A, Line 6f)

Total Cost for Contractual:

Other Cost Budget Narrative (SF-424A, Line 6h)

Total Cost for Other: