Preparing a Budget

SECURING FUNDING WORKSHOP

Cairns, 15–16 May 2008

PREPARING A BUDGET

Debra Beattie

Business Manager

Museum & Gallery Services Queensland

The budget is one of the most difficult components of any grant application.

It is important to get it right or it could undermine the competitiveness of your

application, or even make your application ineligible.

Give yourself plenty of time to do the application and the budget.

You may have to spend time getting estimates and quotes.

You may find that the grant and other earned income doesn’t cover the project costs. If this is the case, you will need to make adjustments to the project (and therefore rework the budget and the written application).

Check whether the funding guidelines require your organisation to be

legally incorporated (e.g. incorporated association, company

limited by guarantee).

If your organisation is not eligible, you may be able to arrange for an

incorporated organisation to auspice your grant.

The budget must reflect what you have said in the written part of your

application.

If you have stated that you will undertake certain things in the project, there must

be evidence of any income or expenditure associated with that activity

in the budget.

Most funding agencies are unlikely to fund 100% of the costs of your project.

Some funding guidelines will state this.

They will expect to see some contribution from the organisation.

This could be in the form of: an ‘in-kind’ contribution (e.g. volunteer

hours) sponsorship earned income (e.g. sales of goods or

services) a cash contribution

Be realistic.

Don’t include outrageous amounts of earned income or sponsorship if there is little chance that you can

actually raise it.

If you can’t cover the costs of the project, you may have to downscale what you

are proposing to do.

TIPS

Read instructions very carefully.

If in doubt, phone or email the

funding agency staff.

You will need to be clear about

what you are asking them.

Different funding agencies may include different types of items

under each budget line.

Check the list carefully.

Do they want totals for groups of expenditure?

Or do they want detailed breakdowns?

Look at the budget form carefully.

If they only want totals, keep a

detailed breakdown for your own records. You will need to know how you arrived

at those figures.

It’s a good idea to sit quietly with a notebook and pen and imagine that you are carrying out all the steps in your project.

Write down all the things you will need to spend money on as you go along.

Don’t send extra material such as written quotes unless you are

asked to do so.

It’s useful to get quotes so that you have an accurate costing on major items, but keep them for your own

records.

If the project is happening in the following year, allow for some inflation on expenditure items.

For example: Printing Travel Anything that will be affected by

rising fuel costs (almost everything)

If the grant amount is large,

you may have to account for

interest on the income.

If the grant amount is over a certain limit, some funding agencies require a qualified auditor’s report on your

acquittal budget.

Are you registered for GST and do you have an ABN?

If you do not know the answers to these questions, you need to talk to your

accountant.

Are you registered for GST?

To be registered for GST, you will have completed a form for the Tax Office, and

you will be lodging Business Activity Statements (BAS) on a regular basis.

Do you have an ABN

(Australian Business Number)?

You can have an ABN without being registered for GST.

If you do not have an ABN, the funding agency may have to withhold 46.5% of your grant and pay it to

the Taxation Office on your behalf.

More information on ‘No ABN Withholding’ is available on the Australian Taxation Office website in the section for

Non-Profit Organisations.

Decide whether the income and expenditure included in your budget

includes GST or excludes GST – and specify this clearly.

Check the guidelines to see if they require GST-inclusive or GST-exclusive amounts.

If the funding guidelines don’t specify, you need to choose one method.

The best choice might be the one that’s most compatible with your bookkeeping

system.

If you are registered for GST, checkwhether the funding agency

“tops up” for GST or whether GST comes out of the grant amount.

If the funding body “tops up”, this means they will pay 10% on top of the approved grant amount to

cover the GST component for registered organisations.

(e.g. You applied for $30,000. They will pay you $33,000 –

the $30,000 grant plus $3,000 for GST.)

If the funding body does not “top up”, you will have to pay the GST out of the grant amount. You need to allow for this, otherwise it could leave you several

thousand dollars short on your project.

(e.g. on a $30,000 grant you will have to pay $2,727 in GST).

If you or your colleagues are working on the project, remember to pay

yourselves –

at a proper rate.

If the project budget can’t afford to pay the full amount at the recommended

rate, you might choose to provide some of your services ‘in-kind’.

If you are employing people on the project, there may be associated costs such as superannuation, workers’ compensation, leave

loading.

You also will be responsible for any taxation liabilities that may be associated with the project

(e.g. Pay As You Go payroll tax, GST)

… FINALLY

Include all of the costs of the project in your budget , not just the items you

want the grant to cover.

The funding agency will want to see how the grant amount fits into the overall budget.

It is usually a good idea to identify which components of the budget will be covered

by the grant.

Make sure you keep notes of your budget calculations.

When you have to acquit the grant, you will need to know what you originally

included in each budget line.

It’s a good idea to keep a worksheet with a running total of your income and

expenditure against each budget line.

This will make the grant acquittal much easier, and it also allows you to see if

you have shortfalls or excesses against each budget item.

MAKE SURE YOUR BUDGET

ADDS UP!!

The funding agency will have no confidence in your ability to manage the project if you can’t balance the budget.

GET SOMEONE ELSE TO CHECK YOUR CALCULATIONS.

EVERY TIME YOU MAKE A CHANGE TO THE BUDGET

– EVEN A MINOR ONE –

ADD IT UP AGAIN.

GET SOMEONE ELSE TO CHECK YOUR CALCULATIONS.

OTHER USEFUL INFORMATION

The Australian Taxation Officewww.ato.gov.au

Go to the home page and follow the menus to the Non-Profit Organisations home page.

There are also numerous fact sheets to download, including those that explain the ABN and the basics of

GST. The ATO also has a range of hard copy publications you can order.

Phone 1300 130 248For non-profit enquiries, including income tax, Australian

business number (ABN), goods and services tax (GST) and fringe benefits tax (FBT).

Deductible gift recipients

Only certain types of organisations can receive tax deductible gifts. They are

called deductible gift recipients (DGRs).

Deductions for gifts are claimed by the person or organisation that makes the

gift (the donor).

Deductible gift recipients (DGR)

There are two types of DGR endorsement: where an organisation is endorsed as a

whole, for example, public hospitals and public universities, and

where an organisation is endorsed for the operation of a fund, authority or institution that it owns or includes, for example, school building funds and council libraries.

Organisations that meet the requirements for endorsement can apply to the Tax Office using

Application for endorsement as a deductible gift recipient

(NAT 2948)

Go to the Non-Profit Organisations home page on the Australian Taxation Office website. On the left hand panel, in Tax Topics Explained, click on ‘Deductible Gift Recipient’ for more

information.

www.ato.gov.au