Defining certain terms in a budget

Here we discuss some commonly used terms in a budget and try to define them:

Contingency Amount: Contingency amount refers to the money set aside to cover any unforeseen expenses of the organization or the project. Contingency expenses are required because any organization or a project can face an uncertainty because of which certain costs are incurred. As a standard practice, the contingency amount is usually 10% of the total budget.

Monitoring & Evaluation Costs: Some budget formats seek specific information about costs proposed by NGOs for monitoring and evaluation of the project.

Overhead Costs: Overhead costs are expenses that are required for running the organization. These expenses may not be directly contributing towards implementing a project but they are still essential to maintain the office and manage the day-to-day affairs of the organization. Usually, these costs should not exceed more than 10% of the total budget in any good proposal.

R&D expenses: R&D or Research and Development expenses refer to those expenses required by the organization or a project to undertake research, assessment and consultation for the intervention. In some projects, it could be just be part of the initial work or in some others, it could remain a continuous activity.

Start-up Costs: Start-up costs relate to the expenses incurred by the organization initially for launching a project or developing the organization. For new projects or organizations, activities such as office set-up, staff recruitment, orientation, pre-feasibility studies etc all fall under the Start-up Costs.