Grant Writing Grant Budget Formulation 5 — Questions and Answers
Question 1: A program officer tells you the budget cap is $500,000 but your detailed costs total $520,000. The best approach is to:
- Submit the $520,000 budget and hope for a waiver
- Cut lower-priority line items, adjust scope, and resubmit at or under $500,000 (Correct answer)
- Omit indirect costs entirely without disclosure
- Submit two separate proposals each at $260,000
Correct answer: Cut lower-priority line items, adjust scope, and resubmit at or under $500,000
When costs exceed the cap, grantees must reduce scope or prioritize activities to align the budget with the funder's limit while maintaining project integrity.
Question 2: Which of the following describes 'period of performance' in a grant context?
- The time frame the funder evaluates applications
- The approved start and end dates during which grant funds may be obligated and expended (Correct answer)
- The reporting schedule for financial statements
- The evaluation period for measuring program outcomes
Correct answer: The approved start and end dates during which grant funds may be obligated and expended
The period of performance defines the grant's active window; costs incurred outside this period are generally unallowable.
Question 3: An organization's indirect cost rate is 45% MTDC. Direct salaries total $100,000 and fringe is $25,000. If no other MTDC-eligible costs exist, what are the indirect costs?
- $45,000
- $56,250 (Correct answer)
- $56,250 minus equipment
- $101,250
Correct answer: $56,250
MTDC = $100,000 (salaries) + $25,000 (fringe) = $125,000; indirect costs = 45% × $125,000 = $56,250.
Question 4: Why should grant budgets avoid 'padding' (inflating cost estimates)?
- Funders reward higher budgets with bonus points
- Padding is standard practice and expected by reviewers
- Inflated budgets undermine credibility, may violate cost principles, and can trigger audits (Correct answer)
- Padding ensures no cost overruns occur
Correct answer: Inflated budgets undermine credibility, may violate cost principles, and can trigger audits
Intentionally inflating costs violates the reasonableness standard under 2 CFR 200 and can damage the organization's reputation and compliance standing.
Question 5: Which statement about equipment purchases in a grant budget is most accurate?
- Equipment is always reimbursed at full purchase price with no depreciation
- Equipment costing above the organization's capitalization threshold often requires prior funder approval (Correct answer)
- Equipment costs are never allowable on federal grants
- Equipment must be purchased in the first month of the award
Correct answer: Equipment costing above the organization's capitalization threshold often requires prior funder approval
Many federal awards require prior approval for equipment purchases above certain thresholds to ensure the purchase is necessary and reasonable for the project.
Question 6: What is the significance of a 'budget period' vs. a 'project period' in multi-year grants?
- They are always identical and interchangeable terms
- The project period is the overall grant timeline; budget periods are incremental funding intervals within it (Correct answer)
- Budget periods can exceed the project period
- Only budget periods require financial reporting
Correct answer: The project period is the overall grant timeline; budget periods are incremental funding intervals within it
A multi-year grant may have a 3-year project period broken into annual budget periods, with funds released and accounted for separately each year.
Question 7: When must a grantee use 'competitive procurement' for purchasing goods or services under a federal award?
- Only for purchases over $10 million
- When purchases exceed the simplified acquisition threshold or micro-purchase threshold as specified in 2 CFR 200 (Correct answer)
- Competitive procurement is optional for nonprofits
- Only when purchasing from foreign vendors
Correct answer: When purchases exceed the simplified acquisition threshold or micro-purchase threshold as specified in 2 CFR 200
Under 2 CFR 200.320, grantees must follow procurement standards including competition requirements based on dollar thresholds to ensure fair and open competition.
Grant Writing Grant Budget Formulation 5
A program officer tells you the budget cap is $500,000 but your detailed costs total $520,000.
The best approach is to: