Tips to Stay Ahead for Multi-Year Grant Budgets

The largest source of funding for grants is the federal government. Twenty-six federal agencies administer more than 1,000 grant programs annually, to provide funding for the arts, the sciences, educational institutions, disaster recovery initiatives, agricultural projects, and innovative research. Given the rigorous requirements of the governmentwide standard grant application (SF-424), the federal funding application process can be challenging—sound judgment and accuracy are key.

The budget section within the SF-424 presents significant applicant challenges—once funds are awarded, the grantee must ensure that funds are spent in compliance with the grant budget.

The budget life cycle of the grant includes three main phases: Preparation & Submission, Approval/Appeal, and Execution & Accountability. Below are some tips for developing and maintaining a budget throughout the budget life cycle.

Why is Grant Budget Planning so Important?

Federal grants use taxpayer dollars, which garner a high level of scrutiny over budgeting, accountability, and transparency of the grant objectives and procedures. According to Grantwatch.com, only one in 10 grant applications are approved for funding. Accurately forecasting requested funding is key to mitigate against Period of Performance (PoP) extensions or funding adjustments in the future, which is an indication of the mismanagement of funding.

Preparation & Submission Phase

The preparation and submission phase of the budget development is where you must think through your budget narrative. The narrative provides explanations, justifications, and details about line items in your budget. Depending on the reviewing agency, illustrative templates may be provided to assist with application submissions. Below are some additional considerations when preparing an “awardable” budget as an applicant:

Pay close attention to the eligibility requirements —Make sure you satisfy the requirements of the grant scope to receive funding (e.g., does my organization fit the nonprofit criteria for this grant?). This includes understanding the qualifying funding amount for your organization and the types of costs eligible within the grant program. Understanding the grant requirements enables you to develop a budget and budget narrative that appropriately aligns to your potential grant award.

Effectively articulate your funding needs in the budget narrative —When developing a budget for a multi-year grant, it is critical to understand and articulate multi-year requirements in your budget narrative to increase the likelihood of receiving the full award. This narrative should include descriptions for every line item within the budget, justifications for expenses related to the application, and details on how indirect and substantial costs were estimated.

Confirm that future years of the budget are realistic and reasonable — Future year budgets should factor in potential cost increases each year, such as: inflation, personnel expansions, or other external factors that can affect the budget. A well-planned budget includes a forecast analysis to determine funding needs for future years, taking into consideration changes of services each year. Do not overestimate, as your increases should be realistic and reasonable. Include explanations to justify the increases in the budget narrative and establish that they are in alignment with the detailed instructions. The application reviewer should be able to clearly align your budget with the grant requirements.

Strategically thinking through some questions will help you begin the process of preparing your budget for submission.

• Does my funding request, within the narrative of the grant application, align to the amount of funding my organization is requesting, based on the pool of funding available?
• If there are various grant funding levels to be awarded, which level and/or category is my organization deemed a qualified applicant?
• Does my budget justify all expenses, and is it consistent with the instructions provided?

Approval/Appeal Phase

After the grant application is submitted, the grant will either be approved for award and funds are obligated, or the application is denied. If the grant application is approved for award, the following are some tips to follow post-approval from a budget perspective:

Work with the government liaison — Confirm with your government liaison that your organization has access to the appropriate systems and accounts to receive funding. This is time-sensitive and will impact how and when you receive your funding from the award.

Confirm reporting requirements with the awarding agency — Validate the agency’s expected reporting requirements for your budget (e.g., is your Federal Financial Report (SF-425) submitted on a quarterly basis or a semiannual basis?). Understanding the reporting requirements will assist your organization with determining what processes, policies, and/or procedures need to be in place to adhere to those requirements.

Thank the awarding agency — Email or call the agency to thank them for the grant award.

In most instances, when a grant application is denied, an appeal can be submitted. The following are some tips for submitting a complete appeal:

Pay attention to the agency’s timeline to submit the appeal from the date of the denial determination letter — Every grant agency has its own grant appeal timeline, so it is important to know your intended grant agency’s corresponding timeline. Additionally, take note of the number of times an appeal is allowed.

Address every piece of documentation being requested in the denial letter — Carefully read through the denial letter to identify what was missing or incomplete about the initial grant application. When adding new documents, make sure the new information being requested aligns with the budget.

Requesting an appeal?

• Revisit the details of the grant requirement
• Check in with colleagues to see if they had a similar experience with being denied a grant, and how they resolved the denial
• Pay attention to issues raised regarding key word usage, insufficient budget requirements, or missing documentation; and rectify

Execution & Accountability Phase

Once an award is approved and funds are obligated, oversight and execution of the organization’s planned multi-year budget is critical—your organization must demonstrate efficient grant spending aligned to stated goals within the budget narrative. Below are approaches your organization can take to not only minimize fraud, waste, and abuse during execution, but also evidence accountability for funds spent:

Review your budget goal and timeline — Periodically review the budget details so they remain aligned with any internal or external changes. Check to see if the budget still aligns with your organization’s values, mission, and staff capacity.

Track the budget’s progress — Prepare a weekly, monthly, or quarterly review schedule (whichever fulfills the requirements) to confirm the budget is tracking properly, and to avoid any unnecessary changes to the budget. This includes confirming the organization is not overspending by cost type.

Implement effective internal controls — It is vital that your organization has effective internal controls in place to ensure program integrity. Organizations should confirm that they have controls in place to confirm eligible use of funds to confirm compliance with program terms.

Use accounting system to track budget spending — A sound accounting system to track all budget movements is critical. Your accounting system should be able to clearly track expenses for each line item within the grant award to clearly differentiate between direct and indirect costs. The accounting system should track expenses by grant award to ensure that expenses only correspond to the grant for which they are designated. This will help maintain compliance with grant spending in accordance with the grant issuer and minimize potential scrutiny from external auditors.

Work closely with the agency so there is consistent alignment with expectations — Keep an open line of regular communication. For example, establishing a monthly call with the agency will allow you to provide updates on status/any outstanding questions. Cultivate a communications cadence to disclose impactful results and diligence that demonstrate credibility, accountability, and transparency. By keeping an open line of communication, if there is a PoP extension and/or a funding adjustment request, the agency will be more willing to support in a timely manner.

Having your grant funded is only half the battle —federal agencies demand transparency and accountability focused on how funds are intended to be spent versus how they are spent, and there is little room for disparity. By following our tips, grantees are more likely to be successful in meeting their budget and reporting requirements, enabling them to be well-positioned for future funding opportunities.

Why Guidehouse?

Guidehouse has significant experience supporting grant-making agencies in the development of requirements for grant applications, and the subsequent monitoring of these funds for their intended purpose. Guidehouse also has experience supporting applicants with developing grant applications for multi-year and ongoing grants. We leverage best practices, lessons learned, and robust monitoring and controls processes when partnering with potential recipients in the development and execution of a grant. Specifically, with Guidehouse’s support, nearly 30 applicants have been obligated roughly $100M in healthcare grants since 2020. Through its support of both agencies and recipients, Guidehouse is uniquely suited to provide insight into successful administration of a grant throughout the grant life cycle.

Authored by: Shayna Thompson, Tim Riddlestorffer, Maurice Preston, Sarah Abdelaziz, and Eric Beitia, Jr.