How to Build a Grant Budget and Budget Justification

The form

SF-424A (non-construction) or SF-424C (construction)

Indirect rate without an agreement

15% of modified total direct costs (de minimis)

Equipment

$10,000 or more per item

Cost sharing

Only when the notice requires it, unless you choose to

The cost principles

2 CFR 200 Subpart E

The categories

Federal budgets use fixed categories: personnel (salaries for people on your payroll), fringe benefits, travel, equipment (items of $10,000 or more with a useful life over a year), supplies, contractual (consultants and sub-awards), construction where allowed, other, and indirect costs. Put each cost in the right box; moving a consultant into personnel or a laptop into equipment draws questions.

The justification: every number explained

The budget justification is a narrative that explains each line: 'Project coordinator, 1.0 FTE at $58,000 per year, 100% on this project, 24 months, $116,000.' 'Mileage, 2,400 miles per year at the federal rate.' Reviewers check that the numbers are reasonable, that they match the work plan, and that the math adds up. A justification that tracks the narrative line for line is one of the strongest signals of a well-run project.

Indirect costs

Indirect costs are the overhead a project uses but can't bill directly: rent, utilities, accounting, leadership. If your organization has a negotiated indirect cost rate agreement with a federal agency, use that rate. If not, you may charge the de minimis rate of 15% of modified total direct costs (direct costs leaving out equipment, capital, and the part of each sub-award above $50,000). You do not need anyone's approval to use the de minimis rate, and a funder cannot make you take less unless a law sets a lower cap for that program.

Cost sharing and matching

Some programs require you to put in money or in-kind effort, say 25% of the federal amount. The notice says whether it's required and how much. Match can be cash, staff time, donated space or volunteer hours valued at a fair rate, but it must be real, documented and not already paid for by another federal grant. If the notice doesn't require a match, don't offer one unless the criteria reward it; voluntary match becomes a binding commitment you'll have to document.

Costs the rules don't allow

The cost principles list what federal money can't pay for: alcohol, entertainment, lobbying, fundraising, bad debts, fines and penalties, most advertising, and contributions. Federal grants also can't pay for work done before the award unless pre-award costs are approved. When in doubt, look it up in 2 CFR 200 Subpart E or ask the program contact before you include it.

Construction and equipment

Construction budgets use their own form and come with extra rules: Davis-Bacon wages, environmental review, and property that stays in use for the funded purpose. Equipment bought with federal funds must be inventoried, used for the project and disposed of by the rules.

Sources

2 CFR 200 Subpart E, Cost Principles, and 200.414 (indirect costs; 15% de minimis, 2024 revision)
2 CFR 200.306, Cost sharing
Grants.gov, SF-424A and SF-424C forms and instructions

Checked October 2026. Thresholds and rules change; each source above is the official page.