In simple terms, a budget is an itemised summary of an organisation’s expected income and expenses over a specified period of time.
Budgeting forms and financial planning procedures vary widely, especially in the non-profit sector. It is nevertheless essential that financial officers comply clearly and punctually with a funding organisation’s budgeting and reporting requirements.
The two main elements of any budget are income and expenditures.
Income (sometimes referred to as revenue) is the amount of financial assets and in-kind contribution used as sources of support for the project. If the funding source is unique, the income side of the budget may not be shown. However, many projects have more than one source of support. The income side should show the share of contribution of each of these sources. Figure 11 shows a sample income form.
Expenditures (also called expenses or costs) are all the costs that are anticipated to occur during the project’s implementation. Regardless of the calculation and classification criteria used, the project costs should present a reasonable reflection of the activities presented in the project proposal.
Figure 12 gives a sample of what an expenditure form might look like. The categories presented would then be broken down into greater detail where required.
A projection of the specific amounts of time needed at different phases of project implementation, represents a basis for calculating the spending dynamics at different periods of the project.
Budget categories classify expenditures into smaller groups according to a certain criteria. This is to monitor spending and ensure compliance with the plan.
The two main costs are direct costs and operational costs. Direct costs are associated with a certain activity (e.g. organising a workshop). Operational costs are related to internal activities of an organisation and are considered fixed costs in the short term (e.g. staff salaries, rent, utilities, etc).
Units, quantity per period and estimated unit costs are the three elements that are needed to calculate costs associated with any of these categories.
Monitoring and evaluation
The basis for monitoring is set when the indicators for results are set. The project proposal should indicate:
- how and when the project management team will conduct activities to monitor the project’s progress;
- which methods will be used to monitor and evaluate; and
- who will do the evaluation.
The schedule of project progress and financial report could be set in the project proposal. Often these obligations are determined by the standard requirements of the donor agency. The project report may be compiled in different versions, with regard to the audience they are targeting.
Management and personnel
A brief description should be given of the project personnel, the individual roles each one has assumed, and the communication mechanisms that exist between them. All the additional information (such as CVs) should be attached to the annexes
The annexes should include all the information that is important, but is too large to be included in the text of the proposal. This information can be created in the identification or planning phase of the project, but often it is produced separately. The usual documentation to be annexed to the project proposal is:
- Analysis related to the general context (e.g. a civil society sector assessment);
- Policy documents and strategic papers (e.g. a local environmental action plan);
- Information on the implementing organisations (e.g. annual reports, success stories, brochures and other publications)
- Additional information on the project management structure and personnel (curriculum vitae for the members of the project team);
- Maps of the location of the target area; and
- Project management procedures and forms (organisational charts, forms, etc).