The Budget Narrative is an explanation of each budget component, which supports the cost of the proposed work. The Budget Narrative should focus on how each budget item is required to achieve the proposed project goals and objectives. It should also justify how budget costs were calculated. The Budget Narrative should be clear, specific, detailed, and mathematically correct.
A well-developed Budget Narrative is an effective monitoring tool for both the awarding agency and the grant recipient. 

In the HMEP Grant Application Template provide a Budget Narrative justification for all proposed activities in the Project Narrative under each object class category found on the SF-424A. The Budget Narrative must correlate with the costs identified in the SF-424A line-item budget. A description of the object class categories is provided below.
 

PART C: BUDGET NARRATIVE

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

• This category is limited to persons employed by your organization. Those not employed by your agency shall be classified as sub-recipients or contractors and should be listed under the Contractual object class.
• Only include compensation paid for employees engaged in grant activities.
• Costs should be consistent with that paid for similar types of work within the organization.

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. Describe how the fringe benefit amount is calculated (i.e., actual fringe benefits estimate, approved rate, etc.). Additional considerations:

• PHMSA cannot pay fringe benefits for a position that is not listed in the Personnel section.
• Fringe benefits are only for the percentage of time devoted to the grant project.
• The applicant should 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 travel purpose, a cost breakdown (e.g., number of persons travelling, airfare, lodging, local transportation, per diem, etc.) 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 which 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.

• 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.
• Purchases of less than $10,000 should be listed under “Supplies” or “Other.”
• Rented or leased equipment costs should be listed under Contractual or Other, depending upon the procurement method.
• Equipment must be justified as to how it will be used on the project.

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.  There are two ways to capture costs in this category: subgrants and contracts.

• A Subgrant is an award provided to a sub-recipient by the Prime Recipient. The sub-recipient carries out part of a program for which the applicant received Federal assistance. A sub-recipient is responsible for adherence to the applicable Federal program requirements specified in the Federal award and uses the Federal funds to carry out part of a program for a public purpose specified in authorizing statute.
• A Contract is a legal instrument by which a Prime Recipient purchases property or services needed to carry out the project or program under an award. A contract/contractor provides the goods and services within normal business operations; provides similar goods or services to many different purchasers; normally operates in a competitive environment; and provides goods or services that are ancillary to the operation of the Federal program.

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 HMEP grant. 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. Applicants intending to charge the de minimis rate must certify that the organization has never received a negotiated indirect cost rate and that the organization has elected to charge the de minimis rate.