Grant Budget Template: How to Build a Compliant Federal Budget

Why Your Budget Can Make or Break a Federal Grant Proposal

Your budget is not an afterthought or an administrative formality. It is a narrative in numbers, and federal reviewers read it just as carefully as your project description. A well-constructed budget demonstrates that you understand what your program actually costs, that you have thought through implementation logistics, and that you can be trusted to manage public funds responsibly.

Conversely, a budget with errors, unallowable costs, or a disconnect from the narrative is one of the fastest ways to lose reviewer confidence and points. Understanding how to structure a compliant federal budget is a foundational skill that every grant writer must master.

The Foundation: 2 CFR 200 (Uniform Guidance)

All federal grant budgets are governed by 2 CFR Part 200, commonly known as the Uniform Guidance or the "Super Circular." This regulation establishes the cost principles that determine whether an expense can be charged to a federal award. To be allowable, every cost must meet four tests:

• Reasonable: A prudent person would agree the cost is necessary and the price is appropriate for the goods or services acquired.
• Allocable: The cost directly benefits the grant-funded project and can be assigned to it in a fair proportion.
• Consistent: The cost is treated the same way across all of the organization's funding sources and activities.
• Conforming: The cost complies with the specific terms and conditions of the award, as well as applicable federal regulations.

If a cost fails any of these four tests, it is unallowable and cannot be charged to the grant. Familiarizing yourself with these principles before you begin building your budget will save significant revision time later. For a thorough introduction, see our guide on grant budget fundamentals and federal cost principles.

Standard Federal Budget Categories

Most federal grant applications use a standard set of budget categories, typically aligned with the SF-424A budget form. Understanding what belongs in each category is essential for compliance.

Personnel

This category covers salaries and wages for employees who will work on the grant-funded project. For each position, you should list the job title, annual salary, the percentage of time dedicated to the project (often expressed as Full-Time Equivalent or FTE), and the total cost. For example, a Project Director earning $70,000 annually at 50% FTE would be listed at $35,000.

Fringe Benefits

Fringe benefits include employer-paid taxes and benefits such as FICA, health insurance, retirement contributions, and workers' compensation. Calculate fringe as a percentage of each salary using your organization's actual fringe rate. This rate varies by organization and must be supportable by documentation.

Travel

Include all project-related travel for staff. Break this down into local travel (mileage reimbursement at the federal or organizational rate) and out-of-town travel (airfare, hotel, per diem, and ground transportation). Use the federal per diem rates from the General Services Administration as your benchmark for out-of-town expenses.

Equipment

Equipment is defined as tangible personal property with a useful life of more than one year and an acquisition cost at or above the organization's capitalization threshold, or $5,000 if the organization does not have a capitalization policy. Items below this threshold go in the Supplies category. List each piece of equipment separately with its estimated cost and purpose.

Supplies

Supplies are consumable items and tangible property that fall below the equipment threshold. This includes office supplies, training materials, software licenses under a year, lab consumables, and similar items. Group related supplies into logical subcategories rather than listing every individual item.

Contractual

This category covers the costs of hiring external consultants, evaluators, or subcontractors. For each contractual expense, include the scope of work, estimated hours or deliverables, and the rate. If you are hiring an external evaluator, describe their qualifications and the evaluation activities they will perform. Procurement of contractual services must follow your organization's policies and applicable federal requirements.

Other Direct Costs

Costs that do not fit neatly into the categories above go here. Common examples include participant stipends, printing and publication costs, postage, conference registration fees, and subaward costs to partner organizations. Each item needs a clear description and justification.

Indirect Costs

Indirect costs are the shared operational expenses that support your organization's overall functioning but cannot be directly attributed to a single project: rent, utilities, accounting, human resources, and general administration. If your organization has a federally negotiated indirect cost rate agreement (NICRA), apply that rate to your modified total direct costs. If you do not have a NICRA, you may use the de minimis rate of 10% of modified total direct costs. For more advanced budgeting strategies including cost sharing and multi-year projections, explore our post on advanced grant budgeting strategies.

The Budget Justification: Explaining Every Dollar

The budget justification, sometimes called the budget narrative, is a companion document that explains and defends every line item in your budget. Each entry should describe what the cost is, how it was calculated, and why it is necessary for the project. Strong budget justifications connect costs directly to program activities described in the narrative.

For example, rather than simply listing "Travel: $3,200," your justification should read: "Travel funds support the Project Coordinator's monthly site visits to four partner schools (8 trips at 120 miles round-trip at $0.67/mile = $642.24, plus 2 overnight trips to the annual grantee meeting in Washington, DC at an estimated $1,278.88 each including airfare, hotel, and per diem)."

Common Budget Errors to Avoid

Certain budget mistakes appear in federal proposals with remarkable frequency. Guard against these specifically:

• Arithmetic errors: Always double-check that line items sum correctly to category totals and that category totals sum to the overall total. Spreadsheet formulas are your best defense.
• Including unallowable costs: Entertainment, alcoholic beverages, lobbying, fines, and bad debt are explicitly prohibited under 2 CFR 200. Review the list of unallowable costs before finalizing your budget.
• Narrative-budget misalignment: If your narrative describes a training program with three instructors, your budget must include compensation for three instructors. Reviewers compare these documents carefully.
• Inflated or unsupported costs: Cost estimates should reflect current market rates and be supported by quotes, salary surveys, or documented organizational policies.
• Forgetting cost escalation: Multi-year budgets should account for annual salary increases and inflation. A three-year budget with identical personnel costs each year is not realistic.

Understanding post-award financial management expectations can also help you build a more realistic budget from the start. Our guide on post-award grant management and compliance explains the reporting and documentation requirements that come with federal funding.

Build Budgets That Win and Withstand Scrutiny

A compliant, well-justified budget communicates professionalism, attention to detail, and fiscal responsibility. These are qualities that federal reviewers and program officers value highly, and they can be the deciding factor when two proposals have similar program designs. Investing time in your budget is one of the highest-return activities in the entire grant writing process.

The Complete Grant Architect course devotes multiple weeks to federal budgeting, from foundational cost principles to advanced strategies including cost sharing, multi-year forecasting, and indirect cost rate negotiation. If you want to build budgets that withstand the toughest reviewer scrutiny, enroll in the course and gain the financial skills that set top grant writers apart.