The budget narrative should explain how each budget component supports the cost of the proposed work. The budget narrative should focus on how each budget item will achieve the proposed project goals and objectives. It should also justify how budget costs were calculated. Using the object class categories found on the SF-424A, explain why the amount is needed for each category in the project narrative.

Grant Funds, Sources, and Uses of Project Funds – Project budgets should show how different funding sources will share in each activity and present the data in dollars and percentages. The budget should identify other Federal funds the applicant is applying for, has been awarded, or intends to use. Funding sources should be grouped into three categories: non-Federal, current Assistance for Local Emergency Response Training application, and other Federal with specific amounts for each funding source.

The budget narrative should be clear, specific, detailed, mathematically correct, and correspond to the SF-424A line-item categories.

A well-developed budget narrative is an effective monitoring tool for both the awarding agency and the grant recipient. However, a budget narrative that does not represent a project’s needs makes it difficult for PHMSA to recommend full funding and to assess financial performance over the life of the project. A description of the object class categories is provided below:

1.    Personnel costs are the employee salaries for those working directly on the grant project. Include the number, type of personnel, the percentage of time dedicated to the project, hourly wage (or salary), and total cost to the grant.

2.    Fringe Benefit costs are the allowances and services provided by employers to their employees as compensation in addition to regular salaries and wages. Fringe costs are benefits paid to employees, including the cost of employer’s share of FICA, health insurance, workers’ compensation, and vacation. Include how the fringe benefit amount is calculated (i.e., actual fringe benefits estimate, approved rate, etc.). Include a description of specific benefits charged to a project and the benefit percentage.

Additional considerations:

• The personnel salaries should have corresponding fringe and vice versa.  PHMSA cannot pay fringe benefits for a position that is not listed in the Personnel section.
• Explain what is included in the benefit package and at what percentage.
• Fringe benefits are only for the percentage of time devoted to the grant project.
• The applicant must not combine the fringe benefit costs with direct salaries and wages in the personnel category.

3.    Travel costs are those costs requested for field work or for travel to professional meetings associated with grant activities. Provide the purpose, method of travel, number of persons traveling, number of days, and estimated cost for each trip. If the details of each trip are not known at the time of application submission, provide the basis for determining the amount requested.

4.    Equipment costs include those items that are tangible, nonexpendable, personal property having a useful life of more than one year and an acquisition cost of $10,000 or more per unit, unless the applicant has a clear and consistent written policy that determines a different threshold.  Include a description, quantity, and unit price for all equipment.

• Purchases of less than $10,000 should be listed under “Supplies” or “Other.”
• Each item of equipment must be identified with the corresponding cost.  General-purpose equipment must be justified as to how it will be used on the project.
• Analyze the cost benefits of purchasing versus leasing equipment, particularly high-cost items and those subject to rapid technical advances.  List rented or leased equipment costs in the “Contractual” or “Other” category, depending upon the procurement method.
• Equipment purchased with ALERT grant funds can only be used for training activities.

5.    Supplies are tangible personal property other than equipment.  Include the types of property in general terms.  It is not necessary to document office supplies in detail (for example:  reams of paper, boxes of paperclips, etc.).  However, applicants should include a quantity and unit cost for larger cost supply items such as computers and printers.

6.    Contractual costs are those services carried out by an individual or organization, other than the applicant, in the form of a procurement relationship.   

7.    Other costs that do not fit any of the categories include rent for buildings used to conduct project activities, utilities, leased equipment, employee training tuition, etc.  “Other” direct costs must be itemized.

8.    Indirect Costs, are allowable under the ALERT grant and if applicable, must include IDC agreement or statement claiming a 15 percent de minimis rate.  Indirect costs are incurred for common or joint objectives that benefit more than one project.  The applicant must include a current and fully executed indirect cost rate agreement in the application if claiming indirect costs.  The rate must be applied to the appropriate base in the approved agreement.  If the rate will not be approved by the application due date, attach the letter of renewal or letter of request that you sent to your cognizant agency to your application.  If the applicant has never received or has an expired indirect cost rate agreement, the applicant may be eligible for the 15 percent de minimis rate provided by 2 CFR § 200.414.  A nonprofit entity that has never received a negotiated indirect cost rate may elect to charge a de minimis rate of 15 percent of modified total direct costs, per 2 CFR § 200.414, which may be used indefinitely.  Applicants intending to charge the de minimis rate must include a statement verifying that the organization has never received a negotiated indirect cost rate and that the organization has elected to charge the de minimis rate.