A project budget simply refers to a document which specifies how the money will be allocated to implement the activities described in the proposal. The budget gives a clear picture of all expenditures involved in carrying out a project. In short, a budget is a description of the project in numbers.
Budgets can be formatted in many different ways depending on the purpose, audience, and content. The two most common ways to sort expenses in project and program budgets: by activity and by line-item. But There are different types of costs that should be mentioned in the budget. Most donor agencies prefer to have the costs spread over different headings to get an overview of how the resources have been divided between different categories.
Types of Costs
Operational costs include those expenses that have to be met for implementing activities for a project or an organization. These are directly billed to the donor agency because they have a direct impact on the beneficiary community. Activities such as; organizing a village meeting, conducting a training workshop, running an awareness campaign etc., involve certain expenses. These expenses are listed under the Operational Costs in a budget.
Staff costs refer to the expenses used for paying salaries and consultancy fees to the staff of the organization. Staff costs include expenses right from the recruitment of the staff (interview, orientation etc.) to their salaries. Professionally speaking, it is important to mention how much time a particular staff member will provide for the project and his/her salary must be calculated accordingly. For example, the head of the organization may be able to give only 25% of the time to a particular project. Therefore, the salary will be fixed towards this time only.
Core costs are also costs incurred towards the operational expenses, but these costs are for the organization as a whole. Most donor agencies want to know how much money the NGO will spend on administration. Costs here can include; staff meetings, stationary and other office maintenance expenses. In some cases, the expenses towards hiring a receptionist or caretaker who is not directly contributing to the project can be listed here.
Although donor agencies are advising NGOs to massively cut down on capital costs, these costs continue to remain essential. These include; expenses for buying computers, office furniture, vehicles, office building etc. Some donors have even stopped funding capital costs completely. Even if you are proposing these costs in a budget, ensure that they cover less than 10% of the total budget.
(First published n FundsforNGOspro)
Also Read: Common Mistakes in a Proposal Budget