# Budget Narrative and Justification

Turns a budget table into a line-by-line narrative that explains each cost and ties it to the project. Use it when the funder requires a written budget justification alongside the budget spreadsheet.

## Prompt

## Context
You are helping a nonprofit grant writer draft a budget narrative for a grant proposal. The organization is [ORGANIZATION NAME]. The funder is [FUNDER NAME] and the grant program is [GRANT PROGRAM NAME]. The total grant amount requested is [GRANT AMOUNT]. The project period is [PROJECT PERIOD].

Budget table (paste the full line-item budget here):
[BUDGET TABLE]

For each budget line, the grant writer's explanation of how the cost was calculated:
[COST CALCULATION NOTES]

The portion of each line funded by this grant versus other sources:
[GRANT VS OTHER SOURCES]

Any funder restrictions or requirements for the budget narrative:
[FUNDER BUDGET REQUIREMENTS]

## Task
Draft a budget narrative that justifies each line item. For each line: state the cost, explain how it was calculated, name the connection to the project activities, and note whether the cost is fully grant-funded or shared with other sources. Group personnel costs first, then non-personnel.

## Standards
- Use only the figures in the budget table provided. Do not add, remove, or recalculate any line.
- Calculation methods come from the cost calculation notes. Where no note is provided, write [CALCULATION NOTE NEEDED] rather than inventing a method.
- Do not invent salary figures, fringe benefit rates, indirect cost rates, or market comparisons not in the inputs.
- Tie every line to the project. "Computers are needed" is not a justification. "The program coordinator will use two laptops to manage participant enrollment and prepare monthly reports" is.
- Flag any funder restriction from the budget requirements that a line might not meet: write [FUNDER RESTRICTION CHECK NEEDED].
- Ask before drafting if the budget table or calculation notes are not provided.

## Variables

- ORGANIZATION NAME
- FUNDER NAME
- GRANT PROGRAM NAME
- GRANT AMOUNT
- PROJECT PERIOD
- BUDGET TABLE
- COST CALCULATION NOTES
- GRANT VS OTHER SOURCES
- FUNDER BUDGET REQUIREMENTS

## Input checklist

- [ ] Final budget table in a format that can be pasted as text (copy from spreadsheet and paste)
- [ ] Notes on how each line was calculated (rate x time, quotes, actual costs, organizational policy rates)
- [ ] The source for each line: grant funds, organizational match, other grants, or earned revenue
- [ ] The funder's RFP budget requirements, including any restricted or allowable cost rules
- [ ] Confirm the budget does not include identifiable salary or personal financial data, or that your AI tool is approved under your organization's data policy

## Verification checklist

- [ ] Recalculate every line in the narrative against the budget table and the calculation notes to confirm they match
- [ ] Verify fringe benefit rates and indirect cost rates against the organization's approved rates or documented calculation
- [ ] Check that the grant-funded portion and other-source portion add up correctly for each line and in total
- [ ] Confirm no salary figures appear that were not in the budget table the grant writer provided
- [ ] Resolve all [CALCULATION NOTE NEEDED] and [FUNDER RESTRICTION CHECK NEEDED] flags before submission
- [ ] Check that personnel percentages of time add up to a plausible allocation given the project scope
- [ ] Verify the narrative does not describe any costs as allowable or unallowable without checking the funder's actual guidelines

## Sample output

Sample output. Generated by AI from sample inputs:

Budget Narrative
Riverside Youth Coalition - After-School Literacy Program
Hartfield Foundation Community Learning Grant
Project Period: September 1, 2026 to August 31, 2027

Personnel

Program Director (0.25 FTE): $17,500
The Program Director will devote 25% of her time to this project, overseeing curriculum implementation, supervising site coordinators, managing the evaluation plan, and preparing funder reports. The annual salary of $70,000 reflects the current organizational salary schedule for this position. The Hartfield Foundation grant funds 100% of this allocation.

Site Coordinators (2.0 FTE, 2 positions at 1.0 FTE each): $88,000
Two full-time Site Coordinators will staff the program's two after-school locations, delivering daily literacy instruction and managing student attendance. Each position carries an annual salary of $44,000 per the organizational salary schedule. Both positions are funded 100% by this grant.

Fringe Benefits (28% of personnel): $29,540
Fringe benefits are calculated at 28% of salary costs, reflecting the organization's actual fringe rate for full-time positions, which includes FICA, health insurance, and retirement contributions. Documentation of the fringe rate is available upon request.

Non-Personnel

Curriculum Materials: $6,200
Literacy curriculum workbooks and supplemental materials for approximately 80 enrolled students at two sites. Unit cost of $77.50 per student is based on the publisher's current catalog price and a quote received in May 2026. Grant-funded 100%.

Indirect Costs (10% of direct costs): $14,124
Indirect costs are calculated at 10% of direct costs per the organization's current negotiated indirect cost rate agreement with the County Department of Education.

## Customization notes

Federal grants often require fringe benefit rates to be documented and negotiated. For federal proposals, include the source of the rate in the cost calculation notes. If the funder has a cap on indirect costs or does not allow them, flag that before running the prompt. For multi-year grants, structure the budget table by year and note the year in the task field so the narrative organizes accordingly.

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From The Nonprofit Grant & Fundraising Library at vetslearn.com/libraries/nonprofit