Lesson 

1 of 21
What will I learn?

Financial planning...

...is the second of the four building blocks of financial management. 

Financial planning is essential for organizations to achieve both their longer-term

strategic goals and shorter-term project objectives.

In this module you will learn...

 ...why financial planning matters, including where your project budgets
fit into the financial planning hierarchy of your organization.  
 ...to use an income and expenditure budget, including the steps in
creating an activity-based budget, the use of a budget worksheet, and how
to deal with indirect costs and shared costs.  
 ...to use a cash flow forecast to anticipate and manage cash management
challenges.
 ...to use other forms of budgets, including phased budgets, funding
grids, consolidated budgets, and more.  

FMD Pro Advisory Board

These modules are made possible as a result of the leadership of the FMD Pro

Advisory Group, including Mango, LINGOs, Inside NGO and the Humanitarian

Leadership Academy.
Financial support is provided by Mango, APM Group, LINGOs, World Vision

International, Inside NGO, Cornerstone on Demand Foundation, Humanitarian

Leadership Academy, FHI360, Mercy Corps, and Catholic Relief Services.

Ready to begin?

Continue to the next lesson by clicking the link below: "Lesson 2 - Why do
budgets matter?"

Lesson 1 of 21
What will I learn?

Financial planning...

...is the second of the four building blocks of financial management. 

Financial planning is essential for organizations to achieve both their longer-term

strategic goals and shorter-term project objectives.

In this module you will learn...

 ...why financial planning matters, including where your project budgets
fit into the financial planning hierarchy of your organization.  
 ...to use an income and expenditure budget, including the steps in
creating an activity-based budget, the use of a budget worksheet, and how
to deal with indirect costs and shared costs.  
 ...to use a cash flow forecast to anticipate and manage cash management
challenges.
 ...to use other forms of budgets, including phased budgets, funding
grids, consolidated budgets, and more.  
FMD Pro Advisory Board

These modules are made possible as a result of the leadership of the FMD Pro

Advisory Group, including Mango, LINGOs, Inside NGO and the Humanitarian

Leadership Academy.

Financial support is provided by Mango, APM Group, LINGOs, World Vision

International, Inside NGO, Cornerstone on Demand Foundation, Humanitarian

Leadership Academy, FHI360, Mercy Corps, and Catholic Relief Services.

Ready to begin?

Continue to the next lesson by clicking the link below: "Lesson 2 - Why do
budgets matter?"

Lesson 2 of 21

Why do budgets matter?

A budget describes an amount of money that an organization plans to raise and

spend for a set purpose over a given period of time.
–Guide to the FMD Pro

Financial planning lies at the heart of financial

management for three reasons.
Budgets are key to each of the four financial
management activities.
Do you remember the definition of financial management?  

Financial management involves planning, organizing, monitoring, and

controlling the financial resources of an organization to achieve its objectives.

Budgets are key at every stage of the project financial planning cycle. Click on the
boxes below to learn more.
Planning

Click to flip
Budgets are used to build an accurate picture of what a new project will cost to run,
and they help to raise funds.

Organizing

We use the budgets and associated codes when we spend and raise money,
organizing them as we record them in our books of account.

Monitoring

Budgets help assess performance compared to the project financial plan, evaluating
if the project achieved what it set out to achieve.

Controlling

Budgets help teams control the use of financial and other resources, ensuring that
they are used efficiently and effectively

Financial planning is a key aspect of successful long-

term and short-term programming
Strategic planning has a long-term view to ensure the financial continuity and
security of all operations, to achieve an organization’s mission and objectives, now
and in the future. This is a key concern of senior managers and the board, and is
captured in a financing strategy and associated policies.
Operational planning has a short-term view aimed at effective program and project
implementation. This includes preparing program and project budgets and forecasts,
based on specific and measurable activity plans. This is the main focus for this
module.

Budgets are used at all levels of an organization.

Hierarchy of budgets in an organization.

Budgets are used at all levels of an organization. From the master budget for the

whole organization used by the board, to the individual project budgets for

project managers, and at all levels in between. 

While each budget has its own purpose, structure, and audience, they all need to link

to each other through a process called "consolidation" so that the master budget of the

organization reflects all the operational and programmatic activities taking place.
Let's dive in by looking at some of the many types of budgets used in an organization
and how your project budgets fit into an organization's wider budget hierarchy.  
Budgets are key at every stage of the project financial planning cycle. Click on the
boxes below to learn more.
Planning
Click to flip
Budgets are used to build an accurate picture of what a new project will cost
to run, and they help to raise funds.
Organizing
We use the budgets and associated codes when we spend and raise money,
organizing them as we record them in our books of account.
Monitoring
Budgets help assess performance compared to the project financial plan,
evaluating if the project achieved what it set out to achieve.
Controlling
Budgets help teams control the use of financial and other resources, ensuring
that they are used efficiently and effectively

Project Team
Responsibility: produce accurate and complete budgets for their projects

The project team is in the best position to produce detailed budgets for a project's
activities because they are the closest to the project context, understand the operations
and have the most experience with stakeholders. Project staff are responsible to
develop accurate and complete project budgets on time, with technical support and
data from the finance team, and following guidelines from senior managers. 

What is a project budget?

This is a trick question. Most people think of the project budget as a single document
(and often it is) that describes the amount of money that a project raises and spends to
deliver its objectives over a set period of time.

However, many projects use a collection of budgets to provide the information needed
by its team and the many stakeholders they work with. The interactive image below
identifies some of the many financial planning documents project and program teams
could use to effectively manage their work.  

We will explore a number of these tools in the next two sections of this module. For
now, however, take some time to explore the different financial planning tools by
clicking on the buttons placed in the image below.
 Lesson  5  of  21

Where do I start?

Imagine you are creating a project budget. Where will you start? What is the
first question you need to answer?
Importantly, you first need to decide on the budgeting approach. The first question
you need to answer is, "Do you need to create the budget from scratch or will you
start with an existing budget?"
I need to start from scratch.

Click to flip

This approach is called zero-based budgeting. This type of budgeting is best for new

and one-off projects, or projects where things change a lot each year. It starts with a
clean sheet (or zero base) and builds the budget according to planned activities and
targets using up to date costs. The resources are listed, quantified, and individually
costed. 

I will start with an existing budget.

This approach is called incremental budgeting. This type of budgeting is best for

projects with activity and resource levels that change little from year to year. The new
budget is based on the previous year's actual, or sometimes budgeted, figures with an
allowance for inflation and known changes in activity levels.

Which approach is better?

There is no right or wrong approach, it all depends on your situation. Sometimes
incremental budgeting is appropriate, and even preferable. This may be the case if you
have existing projects that are truly comparable to your future activities and you don't
expect things to change a lot, or if you are extending an existing set of activities into a
new time period. Nevertheless, you need to carefully confirm the quality of the budget
you are using as a starting point, because you don't want to carry over historical errors
or omissions into your new budget. This approach may also reduce innovation, as
project teams use the same plan and resources year after year.

In this module, we will be focusing on creating budgets from scratch using the zero
based approach. Although zero-based budgeting takes more time to prepare, zero-
based budgets generally have the following advantages:
 more accurate
 costs are easy to justify
 easy to update with new information
 favored by many funders

Activity-based budgeting is a form of zero-based budgeting widely used in the

 ====development and humanitarian sector. Activity-based
budgets systematically list, quantify and cost financial resources for each
activity in the project plan.

Lesson  5  of  21

Where do I start?

Imagine you are creating a project budget. Where will you start? What is the
first question you need to answer?
Importantly, you first need to decide on the budgeting approach. The first question
you need to answer is, "Do you need to create the budget from scratch or will you
start with an existing budget?"
I need to start from scratch.

Click to flip

This approach is called zero-based budgeting. This type of budgeting is best for new

and one-off projects, or projects where things change a lot each year. It starts with a
clean sheet (or zero base) and builds the budget according to planned activities and
targets using up to date costs. The resources are listed, quantified, and individually
costed. 

I will start with an existing budget.

This approach is called incremental budgeting. This type of budgeting is best for

projects with activity and resource levels that change little from year to year. The new
budget is based on the previous year's actual, or sometimes budgeted, figures with an
allowance for inflation and known changes in activity levels.

Which approach is better?

There is no right or wrong approach, it all depends on your situation. Sometimes
incremental budgeting is appropriate, and even preferable. This may be the case if you
have existing projects that are truly comparable to your future activities and you don't
expect things to change a lot, or if you are extending an existing set of activities into a
new time period. Nevertheless, you need to carefully confirm the quality of the budget
you are using as a starting point, because you don't want to carry over historical errors
or omissions into your new budget. This approach may also reduce innovation, as
project teams use the same plan and resources year after year.

In this module, we will be focusing on creating budgets from scratch using the zero
based approach. Although zero-based budgeting takes more time to prepare, zero-
based budgets generally have the following advantages:
 more accurate
 costs are easy to justify
 easy to update with new information
 favored by many funders
Activity-based budgeting is a form of zero-based budgeting widely used in the
development and humanitarian sector. Activity-based budgets systematically
list,

quantify and cost financial resources for each activity in the project plan.

Lesson 7 of 21
Overview

If there is one budget you'll use,this is it.

As you learned in the previous section, an organization uses a range of budgets to
manage project finances. They come in different formats and serve a variety of
purposes and users.  

The income and expenditure budget is the most common format used to plan,
manage, and monitor project finances. The content of this budget is explained by its
name. Working within a defined period of time,
 first, it summarizes all of the INCOME for the project, and
 then, it summarizes its EXPENDITURE.
Check out the detail below. In the following section, you’ll see an example of an
income and expenditure budget.
WHAT IS IT?WHAT IS ITS PURPOSE?HOW IS IT COMPILED?
WHY IS IT IMPORTANT?
Income and expenditure budgets are critical during all phases of the project life cycle.

PLANNING: They are used for fundraising so that sufficient funds are secured to
match budget expenditure and to meet project objectives. 

IMPLEMENTATION: The budget is broken down into monthly or quarterly phases

so that income targets and limits on spending are clear.

MONITORING: The budget is compared to actual income and spending to ensure

the project is on track, and monitor project performance.

Note: Some organizations manage their projects using an "expenses only"

budget format and do not include an income section in their budgets. When
using an expense-only budget, the total budget of a project is based on an
amount authorized for the project. This authorized total corresponds to the
income section of an income and expenditure budget. This approach is
sometimes used by international organizations with country programs or
offices.
In the next section, we will review a sample income and expenditure budget. As you
read through the example, look for the following elements.
 Time frame: What period does the budget cover? Look for the date
ranges shown in the budget.
 Account codes: What do the codes represent and where do they come
from? Have you seen them before?
 Budget position or status: What is the overall status shown by the
bottom line? Is the budget in surplus (more income than expenditure), in
deficit (less income than expenditure), or balanced (income is equal to
expenditure)?
 Detail: How much detail is shown in the budget? Could this be
summarized or more detail provided?
 Lesson 8 of 21
 Explore: income and expenditure budget
 Here is an example of an income and expenditure budget for MTTI. Take
some time to review the budget and then answer the questions below.


 What is the time frame of the budget?–

 A start and end date should be included in all budgets to be clear what time
period the budget covers. In this example, the time frame is 12 months, or one
year.
 Where did the account codes come from?–

 The account codes and descriptions come from an organization's chart of

accounts. Account codes are important in budgeting because they are used to
summarize budgets using standard and consistent descriptions and help make
the consolidation process simpler.
 What is the budget status?–

 There are three alternatives for the overall position or status of an income and
expenditure budget.

 •   a balanced budget - where income equals expenditure
 •   a deficit budget - where income is less than expenditure
 •   a surplus budget - where income is more than expenditure

 This is the “bottom line” status of the budget, referring to the figures, which
are usually shown at the bottom of a budget, i.e., the overall difference
between income and expenditure plans.


 This budget is in surplus by $5,508.

 How much detail is shown?–

 Budgets include different levels of detail depending on the user.

  This budget is in a (relatively) detailed format. It could also be summarized so
that it just shows the total amounts for each family group: Funder income,
General income, Admin, Personnel, Vehicle running, Project inputs.
 We'll get into more detail on this budget in the next section of this co

Explore: income and expenditure budget

Here is an example of an income and expenditure budget for MTTI. Take some time
to review the budget and then answer the questions below.

What is the time frame of the budget?–

A start and end date should be included in all budgets to be clear what time period the
budget covers. In this example, the time frame is 12 months, or one year.
Where did the account codes come from?–

The account codes and descriptions come from an organization's chart of accounts.
Account codes are important in budgeting because they are used to summarize
budgets using standard and consistent descriptions and help make the consolidation
process simpler.
What is the budget status?–

There are three alternatives for the overall position or status of an income and
expenditure budget.

•   a balanced budget - where income equals expenditure

•   a deficit budget - where income is less than expenditure
•   a surplus budget - where income is more than expenditure

This is the “bottom line” status of the budget, referring to the figures, which are
usually shown at the bottom of a budget, i.e., the overall difference between income
and expenditure plans.

This budget is in surplus by $5,508.

How much detail is shown?–

Budgets include different levels of detail depending on the user.

This budget is in a (relatively) detailed format. It could also be summarized so that it
just shows the total amounts for each family group: Funder income, General
income, Admin, Personnel, Vehicle running, Project inputs.
We'll get into more detail on this budget in the next section of this course.

Lesson 9 of 21
Activity-based budgeting
In this module, we are going to focus on activity-based budgeting, an approach that
creates a budget from scratch by systematically listing the quantity and cost of all
resources (e.g., people, materials, and equipment) that are needed to run the activities
described in a project plan.

Activity-based budgeting is a form of zero-based budgeting.

The resources, quantities, and calculations are captured in a detailed table called a
budget worksheet, usually stored as a computer spreadsheet.

The following eight-step process helps teams create activity-based budgets that are
detailed, accurate, and comprehensive.
Identify the project OBJECTIVES
The project objective(s) are set out in the project design documents. Usually, you will
create a budget for each project objective, but sometimes a budget needs to cover
more than one objective.
List the ACTIVITIES
The project activities (for each separate objective) will also be found in the project
design documents and should have clear and quantifiable indicators. 
Identify and quantify RESOURCES
This is a key step in creating an activity-based budget.

Each project activity will need to be unpacked, with all the tasks and deliverables
listed so that you can identify the resources needed to run it.

Identify any shared resources which are needed such as vehicles or shared program
staff. Part of the cost for any shared resources should be allocated to the project based
on an estimate of usage.

It is helpful to list all the resources and quantities needed for each activity in a
separate document. We call this the activity or project breakdown sheet. (We will
explore an example of this in the next lesson).

Note the date or month, when the resources will be used, as this will be needed to
create phased budgets and forecasts.

Research the COST of resources

Using your project breakdown sheet, find out how much each resource will cost at the
time when a project will be implemented. Wherever possible, get a unit price or base
cost for one item.

Don’t be tempted to guess the price! Although budgets are a best estimate of costs,
they must be based on reliable evidence, not on invented amounts.

If you get your unit prices wrong, you will over- or underestimate the costs, which
can affect the integrity of your budget.
Identify known INCOME
Make a list of any known income sources that will be used to support the project.  

Do not include income that is not yet negotiated.

Compile the BUDGET WORKSHEET
Now you are ready to complete the budget worksheet. 

Each activity will be described in a separate section, including its required resources,
quantities, and unit costs. 

Each budget line item is assigned a budget code from the chart of accounts and, where
relevant, a funder budget code.

Review the RESULTS

Review the final draft budget to check that it is realistic and complete. 

If possible, get someone else (a budget buddy) to check it:

• are quantities and costs reasonable?

• are costs properly justified?
• are any resources missing?
• are the calculations correct?

SUMMARIZE the budget

When the budget worksheet is ready, summarize the data in whatever format you need
for internal or external use. 

Project implementation may need a phased or summary budget format. A funder

budget format may be needed for fundraising.

Example: Project Breakdown Sheet

At step three of the process to prepare an activity-based budget, when identifying
resources, it is helpful to use a project or activity breakdown sheet to list all the
resources and quantities needed for each project activity. 

Below is an example project breakdown sheet for MTTI, it unpacks the project
objective into activities and tasks.

MTTI runs a project that aims to equip young people with metalwork skills to
improve employment opportunities. It has identified two activities so far:

A. Recruit and train a metalwork skills trainer and

B. Deliver four metalwork skills workshops in regional locations, with 18 trainees in
each session.

The project breakdown sheet below, shows the detail for Activity A only.

Use the buttons to see additional information and help you understand this format 
esson 11 of 21
Budget worksheet
As you saw in step six of the activity-based budgeting process, a budget worksheet is
a key input into the creation of a budget.

A budget worksheet is a table with preset headings and rows or lines for each item in
the budget. It is usually set up in a computer spreadsheet (such as Excel) with
formulas to automatically calculate each line and column total.

Each project activity area has its own section in the worksheet, with a list of all the
resources needed, and in what quantities, to calculate the cost of each item needed.
This makes it possible to see how much each activity area would cost to deliver.

Explore the example budget worksheet below to learn more about its structure and
purpose.

Things to consider when budgeting

As you develop the income and expenditure budget, there are several other
considerations that you should always keep in mind in order to ensure that your
budgets are detailed and comprehensive.

These include:
Restricted Funds–

Income from funding agencies or donors may come with conditions about what the
funds may or may not be spent on. This kind of funding is referred to as restricted
funding. 
Examples of restricted funding include grants from funding agencies, donations for a
specific project, location, or theme, and donations in-kind (gifts in-kind).
Unrestricted funds–

Unrestricted funds are exactly what they sound like: funds that come to the
organization without any restriction on what they are used for, provided they are used
to fulfil the organization’s mission. This money is not tied down, brings greater
autonomy, flexibility, and security for an organization, and is critical to financial
sustainability.
Direct and indirect costs–

Direct costs are expenses that are incurred as a direct result of delivering a project or
activity. They can be directly connected to a specific cost center or project or
department. This includes things like salary of a project officer, project equipment,
and materials for a training workshop.

Indirect costs are the general, shared expenses that support the organization's
operations. They include the salary of the chief executive, the main office rent and
accountancy costs. These are sometimes called overhead costs, central support or core
costs. It is important to include a contribution towards indirect costs when creating a
project budget, because projects cannot operate without central support services.
Apportionment–

Refers to the process of sharing indirect costs between two or more cost centers in
proportion to the estimated benefit received. An example of this is splitting the cost of
head office rent on the basis of physical space used by different project teams working
in the office.

This will be explored further when we examine consolidated budgets.

Currency–

The currency you choose for a budget depends on several factors, including your main
source of income, the stability of the home economy, and funder requirements.

If your budget is prepared in a currency, which is different to the currency you will
use for project expenditure, be sure to agree assumptions on exchange rates and revisit
them regularly. Your finance team can help you do this to minimize risk.

Generally, when setting your budgets, your finance team can support you with
guidance on these additional things to consider. For example, they can give
you advice on:

• What to include in your budget to cover indirect costs. Some organizations

and funders add a bottom-line percentage, e.g., 7% of the total direct project
costs. 

• How to apportion the costs of shared resources in a budget.

• Policies and best practices for managing exchange rates.

Capital budget
Imagine that you are starting a project that requires the purchase of a
substantial amount of equipment, for example, an infrastructure project that
needs a fleet of vehicles, construction equipment, and will build a network of
warehouses to hold tools and machines.  

How might your project team budget for a project of this kind differently than
they might for other projects?

The answer is...

...the capital budget.

It is similar in format and complements the income and expenditure budget. But (as
its name suggests), it is used only for capital projects. The term capital refers to
equipment and investments that will be used over several years. For example: 
 Construction of buildings and infrastructure
 Major renovation works
 Vehicles
 Office furniture and equipment
 Computer equipment
 Medical equipment
 Water and sanitation equipment

Note: If your project only needs a few items of equipment, it is not be

necessary to create a separate capital budget. You can instead include these
capital items as a separate section in your income and expenditure budget. 

Learn more about capital budgets below.

What is it?–

A budget that lists one-off expenditures for expensive items, such as equipment and
construction works, which will be used over several years and form part of the
organization’s fixed assets.
What is its purpose?–

It allows you to separately list, and monitor, the major investment and one-off costs
involved in capital projects.
How is it compiled?–

As the capital budget includes one-off expenditures, it is best to use the zero-based
budgeting approach to create it. You may include a contingency line for unpredictable
variations to the budget, such as exchange rate fluctuations that will affect the price of
imported equipment. It is also important to reflect any related costs in the income and
expenditure budget, such as vehicle running costs, and insurance and storage costs for
valuable equipment.
Why is it important for project planning?–
 Capital projects represent a higher risk to an organization due to the significant sums
of money and valuable assets involved, so it is important to list and monitor them
separately.
Cash flow forecast

Imagine that your project is facing a cash flow challenge. You have a training
event planned for the next month, and you need to hire a trainer, pay to hire the
room, and purchase training materials for the session. There is a problem,
though, as you have no more cash in the bank, and the next tranche of money
from the funder won't be in the bank for another two months. 

How can your project team avoid a problem like this? 

The answer is...

...the cash flow forecast (or cash

budget).
While having cash reserves is always pretty important for an organization, there are
times when operations are  highly dependent on cash on hand. A cash flow forecast
helps staff predict any periods when cash balances are especially critical and this
might impact on project implementation plans.

The cash flow forecast shows when project payments and receipts are expected in
order to make sure an organization has money when it's needed.

Read a little more about the cashflow forecast below.

WHAT IS IT?WHAT IS ITS PURPOSE?HOW IS IT COMPILED?WHY
IS IT IMPORTANT?

A cash flow forecast is a financial planning tool that shows the predicted flow of cash
in and out of a project or an organization each month, showing periods of cash
shortage or surplus.

It usually covers a period of one year or 12 months.

An example of a cash flow forecast for MTTI

What are some options for dealing with the cash flow
problems identified in the cash flow forecast?
 Review grant schedules and negotiate with funders to pay in advance rather
than in arrears
 Discuss with funders to receive grant installments early or phased to match the
activity plan
 Get funder reports in on time to avoid delays in grant payments
 Bank all cash received within two days or daily, if large sums are received
 Request special payment terms from major suppliers (and stick to them)
 Negotiate to pay large expenses by installment, e.g., insurance premiums
 Negotiate with suppliers to delay payments of invoices
 Delay non-urgent actions that will lead to additional expenditure, e.g.,
recruitment, taking on leases, and purchasing equipment
 Negotiate a loan facility as a short-term (but expensive) remedy.
To predict any months where there may not be enough cash available to pay for
.planned activities, so that corrective action can be taken

The cash flow forecast uses the income and expenditure budget, project
activity plans, and schedules of anticipated income to predict when cash
transactions will take place month by month.

All anticipated cash payments and receipts are recorded in the month when
the money will leave or arrive in the bank (or cash account). Some payments
are regular, such as salaries, while others are irregular (e.g., training
costs), reflecting the timing according to the activity plans. Funder
contracts usually include a plan for when installments will be paid. 

The forecast includes an estimate of cash available in the bank at the start of
the period. The total cash available at the end of each month is the amount
of cash available at the start of the next month.
Project teams need to be confident they have sufficient cash to buy goods and
services when needed to implement activities. This is especially relevant when
funders choose to pay grants in arrears and require an organization to prefinance
.project activities (i.e., pay for project activities up-front and get reimbursed later)

Phased budget

A phased budget breaks down the project budget into time periods (i.e., phases),
usually monthly or quarterly, to show when the budget will be used up during project
implementation, according to the activity plan.
There are two key purposes of a phased budget.
1. To compare the plan with the actual performance of a project during
implementation and to check progress (and take action if it is not on target).
2. To advise a funder how you expect to utilize their grant during project
implementation.

Remember: A phased budget is NOT the total budget divided by 12 months or

four quarters. It must mirror the activity plans.

To create a phased budget...

...you need to go back to your project budget worksheet and project activity plans.
This will help you determine how to allocate the budget according to the plans. You
 are looking at when the budget is needed, not when the cash transactions will take
place.

Sample phased budget

Here is a sample phased budget for the MTTI Metalwork Skills Rural Training project

expenditure. Notice that it is summarized by budget heading into the four quarters of

the year. In this summary format, it is ready to be used in an internal budget

monitoring report once the project is underway. 

Funding grid

Imagine that your project receives income from multiple funding sources. How
can you know which funder is paying for which activity? How do you know
which funder to charge when expenditure is made? How do you know if
activities are double-funded or under-funded? 

The answer is...

...the funding grid.

The funding grid is an internal planning tool that can help overcome most of these
challenges. It provides an overview of who is funding what at project, program, or
organization levels, depending on the level of detail in the grid. It is presented in table
format and matches each anticipated source of income with budgeted expenditure.
This reveals where there are gaps in funding, and also any double funding, by budget
line.

When a program or project has more than one source

of income, it can present a number of planning
challenges.
 Funders have different budget formats and pay grants in different currencies.
 Budget line items and descriptions vary, so it is not always clear exactly what
activity each category includes or excludes, e.g., transportation, travel, and vehicle
running costs.
 It is not always clear which funder is paying for what within a project
supported by multiple funding agencies.
 Funders have different policies for financing overheads, and it is not always
clear if a project’s obligation to cover indirect costs is met.
 Within the same project or program, it is possible that some budget lines can
be double-funded (i.e., money for the same activity from two or more funders), while
others can be under-funded, but this will not be obvious.

Tips for building a funding grid

Here are some tips for building a funding grid, which are particuarly useful for large
and complex programs:
 Use exchange rates that correspond to a specified date. The funding grid
can be in local currency, but it is also common to select the currency of the main
source of income.
 Make sure the budgeted expenditure and anticipated income cover the
same time period. As funder agreements can start at different times, it is important to
match the income to the time frame covered by the funding grid.  Funding grids can
cover any period from a few months to several years.
 Map expenditure to internal account codes. Include the funder codes, as
well as the internal chart of accounts codes, so that you can see which line items are
under- or overfunded.
 Remember to regularly update the funding grid as the fundraising situation
changes.
Are you wondering what this funding grid looks like? Click or tap below to explore
an example!