Grant Writing Budget and Financial Planning Questions and Answers — Questions and Answers
Question 1: An organization is preparing a budget for a federal grant and plans to use the de minimis indirect cost rate. According to 2 CFR 200, what is the standard de minimis rate and to what cost base is it applied?
- 15% of the total grant amount requested.
- 10% of total direct and indirect costs.
- 10% of Modified Total Direct Costs (MTDC). (Correct answer)
- 15% of personnel salaries and fringe benefits only.
Correct answer: 10% of Modified Total Direct Costs (MTDC).
According to 2 CFR 200.414(f), organizations that have never had a federally negotiated indirect cost rate can elect to use a de minimis rate of 10% of Modified Total Direct Costs (MTDC). MTDC is a specific base that excludes certain large costs like equipment, capital expenditures, and the portion of subawards over $25,000 (note: this threshold can vary, but the base is still MTDC).
Question 2: A grant proposal budget includes a line item for 'Personnel' totaling $50,000. What is the primary function of the corresponding section in the budget justification narrative?
- To list the names and contact information for all project staff.
- To provide a detailed calculation showing each person's role, level of effort (e.g., % FTE), and salary breakdown. (Correct answer)
- To attach the official HR job descriptions for each position.
- To confirm that all personnel have passed a background check.
Correct answer: To provide a detailed calculation showing each person's role, level of effort (e.g., % FTE), and salary breakdown.
The budget justification's purpose is to explain the 'why' behind the numbers. For personnel, this means detailing who will work on the project, what their role is, how much of their time the project requires (often as a percentage of full-time employment), and how their salary cost was calculated. This connects the cost directly to the project activities.
Question 3: A local business has agreed to provide free printing services, valued at $2,000, for a nonprofit's new community program. In the grant proposal budget, how should this contribution be categorized?
- As a cash match from a corporate partner.
- As program income.
- As an in-kind contribution. (Correct answer)
- As a reduction to the project's direct costs.
Correct answer: As an in-kind contribution.
An in-kind contribution is a non-cash donation of goods or services. Since the printing services are being provided for free rather than as a cash grant, they are properly classified as in-kind support, demonstrating community investment in the project.
Question 4: A university submits a budget for a federal grant that includes a line item for 'Lobbying expenses to advocate for future program funding.' According to the cost principles in 2 CFR 200 (Uniform Guidance), how would this cost MOST likely be treated?
- Allowable, because it ensures project sustainability.
- Reasonable, if the amount is not excessive.
- Allocable, as it directly relates to the project's future.
- Unallowable, as lobbying costs are generally prohibited. (Correct answer)
Correct answer: Unallowable, as lobbying costs are generally prohibited.
The Uniform Guidance (2 CFR 200) explicitly lists costs incurred for lobbying and other fundraising activities as unallowable costs that cannot be charged to a federal award. Even if the intent is to sustain the project, this type of expense is not permitted.
Question 5: A funder requires a 1:1 match for their $50,000 grant award. Which of the following scenarios fulfills this requirement?
- The organization secures $25,000 in cash and documents $25,000 in volunteer time. (Correct answer)
- The organization budgets to use $50,000 from another federal grant.
- The organization shows that the total project cost is $50,000.
- The organization promises to raise $50,000 after the grant is awarded.
Correct answer: The organization secures $25,000 in cash and documents $25,000 in volunteer time.
A 1:1 match means the organization must contribute resources equal in value to the grant award. This can be a combination of cash (money spent directly on the project) and in-kind contributions (like the value of volunteer time). Using another federal grant as a match is typically not allowed unless explicitly permitted by statute. The total project cost would be $100,000 ($50k grant + $50k match), and the match must be secured and committed, not just promised for the future.
Question 6: In a grant proposal, which of the following BEST demonstrates a project's long-term financial sustainability?
- A budget that is fully spent down to a zero balance at the end of the grant period.
- A detailed list of the one-time equipment needed to start the project.
- A narrative describing a diversified funding plan that includes earned income, individual donor cultivation, and other grants being sought. (Correct answer)
- A letter of support from a board member promising to help fundraise.
Correct answer: A narrative describing a diversified funding plan that includes earned income, individual donor cultivation, and other grants being sought.
Funders want to know that their investment will have a lasting impact. A sustainability plan that shows multiple potential funding streams—such as fees for service (earned income), a plan to engage individual donors, and a strategy for seeking other grants—is the most convincing evidence that the organization is thinking strategically about the project's future beyond the current grant.
Grant Writing Budget and Financial Planning Questions and Answers
An organization is preparing a budget for a federal grant and plans to use the de minimis indirect cost rate.
According to 2 CFR 200, what is the standard de minimis rate and to what cost base is it applied?