Grant Writing Budget and Financial Planning 3 — Questions and Answers
Question 1: Under the Uniform Guidance (2 CFR 200), which of the following costs is generally considered UNALLOWABLE for federal grants?
- Audit costs required by the Single Audit Act
- Salaries of employees working on the project
- Alcoholic beverages purchased for a project celebration (Correct answer)
- Travel costs for staff attending a project-related conference
Correct answer: Alcoholic beverages purchased for a project celebration
Alcoholic beverages are explicitly listed as unallowable costs under the Uniform Guidance and may not be charged to federal awards.
Question 2: Which financial document provides a snapshot of an organization's assets, liabilities, and net assets at a specific point in time?
- Statement of activities
- Cash flow statement
- Statement of financial position (balance sheet) (Correct answer)
- Budget vs. actual report
Correct answer: Statement of financial position (balance sheet)
The statement of financial position (balance sheet) shows what an organization owns (assets), owes (liabilities), and the difference (net assets) at a single date.
Question 3: A grant applicant calculates fringe benefits at 28% of salaries. If a project director earns $60,000 and is budgeted at 50% effort, what is the correct fringe benefit amount to include?
- $8,400 (Correct answer)
- $16,800
- $30,000
- $4,200
Correct answer: $8,400
50% effort on $60,000 salary = $30,000; fringe at 28% of $30,000 = $8,400.
Question 4: What is the primary risk of underestimating project costs in a grant budget?
- The funder may award a higher amount than requested
- The organization may need to use unrestricted funds to cover project shortfalls (Correct answer)
- The budget narrative will automatically be rejected
- Indirect costs will increase proportionally
Correct answer: The organization may need to use unrestricted funds to cover project shortfalls
If actual costs exceed the awarded budget, the grantee organization typically must cover the gap with its own unrestricted funds, creating financial strain.
Question 5: Which principle requires that costs charged to a grant must benefit the project they are charged to?
- Consistency
- Allocability (Correct answer)
- Reasonableness
- Transparency
Correct answer: Allocability
Allocability means a cost is assignable to a grant in proportion to the benefit the grant receives—costs must be directly connected to project activities.
Question 6: A nonprofit receives a $200,000 grant with a 15% indirect cost rate applied to direct costs. What is the maximum indirect cost amount?
- $26,087 (Correct answer)
- $30,000
- $34,500
- $23,529
Correct answer: $26,087
If indirect costs = 15% of direct costs and total = $200,000: direct + 0.15×direct = $200,000, so direct = $173,913 and indirect = $26,087.
Question 7: What document do federal grantees use to formally request permission to re-budget funds between approved cost categories?
- A continuation application
- A budget modification or prior approval request (Correct answer)
- A final financial report
- A performance progress report
Correct answer: A budget modification or prior approval request
When a grantee needs to move funds between budget categories beyond the allowed threshold (often 10%), a prior approval request or budget modification must be submitted to and approved by the awarding agency.
Grant Writing Budget and Financial Planning 3
Under the Uniform Guidance (2 CFR 200), which of the following costs is generally considered UNALLOWABLE for federal grants?