Welcome to our three-part series on federal grants. From application and matching to reporting, we’ll walk you through what you need to know about your grant.
- Part 1: Understanding Your Federal Award Requirements
- Part 2: (You are here!) How to Build Your Federal Award Budget
- Part 3: Reporting on Your Federal Award
First Time Budgeting?
We recommend this primer to get started with grant budget basics.
When you’re applying for a federal grant, there are some specific requirements that make the process a little different. The big things to learn are what expenses are considered allowable, and how much your organization needs to contribute—or “match”—alongside the federal funds.
Let’s dive in!
Disclaimer: This is not legal advice, and uniform compliance guidelines for federal grants are subject to change. Be sure to consult your attorney for the most up-to-date interpretation of federal law.
What’s Allowable
There are lots of “allowable” expenses you can cover with federal grant money. Some examples include artists’ fees, accommodation, and domestic travel; venue rental; cost of marketing materials; and related items, like books or props.
Then there are the “unallowable” expenses. As we learned in Understanding Your Federal Award Requirements, federal grant money is governed by federal law, which means there are costs that the money can’t be spent on. These are subject to change, so it’s important to keep up to date with the guidelines and to check with your attorney for clarification. But a few common unallowable costs include:
- Food (except in an artist’s per diem)
- Alcohol
- Concessions or merchandise
- Prizes, gifts, or awards
- Vehicle purchases like cars, vans, buses, or trucks
- Fundraising activities (e.g., receptions or galas)
How Do I Know How Much to Apply For?
When applying for a federal grant, you’ll need to decide how much money to ask for. Two factors inform that number: the cost of your project, and how much you’re able to match. This is what makes a federal grant budget a “matching budget.”
What Is a Matching Budget?
Some federal grants require grantees to match, dollar for dollar, all funds they receive from that grant. For example: if your organization receives a $5,000 federal grant to spend on an arts project, you’ll have to show that you spent an additional $5,000 (or more) from other sources on that project, too.
Your matching budget is your opportunity to show how you plan to cover the costs of your project using both the grant money and the money you’ll use to match it. Within your application, our form will help guide you to clearly break down which funding sources will cover which expenses.
Predicting expenses can feel daunting, but don’t worry: it’s perfectly normal for costs to shift a bit over the course of your project.
There’s another tricky part: unallowable costs also cannot be covered by your match. Those “unallowables” can still be part of your project, but you’ll need to find additional funds—apart from the grant or your match—to pay for them.
How to Meet Your Match(ing Budget)
Federal grants can’t be used to match other federal grants. Other than that, you’ve got options . . . so get creative!
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Other Non-Federal Grants
You’ll want to check the grant’s funding source and requirements, but if you’ve got grant money to spend on a project from a non-federal source, like a private foundation, it’s eligible for your match.
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Donations
Donations, including anticipated ones, are eligible for your match. (Just note that you cannot use federal grant money to pay for a fundraising event.)
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In-Kind Gifts
Non-monetary contributions like a donated venue or equipment can be great additions to your matching budget. You can contact your local chamber of commerce for help figuring out the cash value of an in-kind gift in your area.
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Wages/Salaries
If you’ll be relying on paid staff to help manage your project, you can include their pay as part of the matching budget.
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Cash On Hand
You’re welcome to use whatever cash reserves your organization wants to contribute as part of your matching budget.
So, for example, if you add up all your possible funding sources and determine that your organization can cover $10,000 of allowable expenses, the most you can ask for in federal grant money is $10,000. (And you can always ask for less than your match.)
You’ll want to make sure you can spend all the grant money you receive, with every dollar matched. So it’s wise to make sure you have a buffer built into the matching budget in case your cost predictions end up being a little more or less than expected.
Example Matching Budget
| Expense Description | Paid by Grant | Paid by Applicant | Paid by 3rd Party | In-kind | Total Match |
| Musician Fee | $8,000 | $3,000 | $3,000 | ||
| Musician Travel | $2,000 | $500 | $500 | ||
| Musician Lodging (3 rooms, 3 nights) | $1,600 | $1,600 | |||
| Venue Rental | $3,000 | $3,000 | |||
| Backline Rental | $1,500 | $1,500 | |||
| Event Production Staff | $600 | $600 | |||
| Administrative Support | $1,000 | $1,000 | |||
| Workshop Materials | $600 | $600 | |||
| Program Printing | $500 | $500 | |||
| Total Project Expenses: | $10,000 | $3,600 | $4,600 | $4,100 | $12,300 |
Indirect Operating Costs
Federal grants are meant to support direct expenses for a specific project rather than an organization’s general operating expenses (i.e., overhead costs like electricity, rent, paper, phone bills, etc.). However, you can spend a portion of your grant on indirect expenses like this. There are two ways to determine how much you can allocate toward those costs:
- If your organization has negotiated with the federal government for an indirect cost rate already, then we’ll honor that pre-existing allowance, and you can include it in your matching budget. (This is less common.)
- If you have not gotten your own indirect cost rate from the federal government, you can spend up to a flat rate of 15% of your budget on indirect operating costs. (This is quite common.)
One More Thing . . . Bidding
If you’re asking for a grant of $15,000 or less, you don’t need to worry about bidding. If you’re asking for $15,001 or more, this is an important piece to consider while building your budget.
If any single item or service in your budget costs more than $15,000, federal law requires a bidding process for it. Basically, the grant requires you to shop around for any big-ticket item or expense and receive a reasonable number of “bids” before choosing the best option.
For example, if you’re thinking you may have to drop more than $15,000 on the venue alone for your arts project, you’ll need to demonstrate that you reached out to several different venues and received their estimates before deciding on the right one.
These bids can be more or less formal (even a phone call to check rates will do). And price doesn’t have to be the deciding factor; you won’t be legally obligated to choose the least expensive option. But you’ll want to keep good records of your bidding process—who you received bids from, what the different offerings were—so you can prove you put in the effort required.
Learn more about the “procurement and bidding” process in this guide.
Using Your Budget
Making a clear and accurate budget is important for the application review panel, but it’s also a great way to lay out the nuts and bolts of what your arts project will entail and prepare for how you’ll cover costs. Plus, it provides a useful blueprint for reporting your expenses as a grantee.
With care and confidence, you’ll be a better budget builder in no time!
Next up in this series: Reporting on Your Federal Award, where we’ll walk through what to track during your award period and how to make your final report painless.