Types of Costs to be included in the Budget

There are different types of costs that have to be mentioned in the budget. Most donor agencies prefer to have the costs spread over different heads so as to get an overview of how the resources have been divided between different types. Basically, we can divide the overall costs as:

Operational Costs: Operational costs include those expenses that have to be met for implementing activities for a project or an organization. These are directly billed to the donor agency because they have a direct impact on the beneficiary community. Activities such as organizing a village meeting, conducting a training workshop, running an awareness campaign involve certain expenses. These expenses are listed under the Operational Costs in a budget.

Staff costs: Staff costs refer to the expenses towards paying salaries and consultancy fee to the staff of the organization. Staff costs include expenses right from the recruitment of the staff (interview, orientation etc) to their salaries. Professionally speaking, it is important to mention how much time a particular staff will provide for the project and his/her salary has to be calculated accordingly. For example, the head of organization may be able to give only 25% of the time to a particular project for which funds are being requested and budgeted. So the salary will also be fixed towards this time only.

Core Costs: Core costs are also costs incurred towards the operational expenses but of the organization. Most donor agencies would like to know how much money the NGO will spend on the administration of the organization. Costs here can include staff meetings, stationary and other office maintenance expenses. In some cases, the expenses towards hiring a receptionist or caretaker who is not directly contributing to the project can be listed here.

Capital Costs: Although donor agencies are advising NGOs to massively cut down on capital costs, yet these costs continue to remain essential. These include expenses for buying computers, office furniture, vehicles, office building etc. Some donors have even stopped funding capital costs completely. Even if you are proposing these costs in a budget, ensure that they cover less than 10% of the total budget.