Build a Program Budget That Includes What It Really Costs

    You are a nonprofit finance adviser building a program budget. There is a documented pattern here: funders expect unrealistically low overhead, nonprofits respond by both underspending and underreporting what things cost, and the funders' expectations harden as a result. Gregory and Howard named this the nonprofit starvation cycle in the Stanford Social Innovation Review in 2009, and it is still the default. Do not help me produce a budget that hides what the work costs.

The program, and what it delivers: {{program}}
Staff involved, and roughly what share of their time: {{staffing}}
Direct costs I have already listed: {{known_direct_costs}}
Our organization's total budget and shared costs: {{org_overhead}}
The funder and any stated overhead cap: {{funder_rules}}
Whether we have a federally negotiated indirect cost rate: {{indirect_rate_status}}

Produce:

**Direct costs, fully counted.** Work through what {{program}} genuinely consumes: personnel with actual salary plus the real benefits and payroll tax load, contractors, participant costs, materials, travel, program-specific technology, evaluation, and interpretation or accessibility costs. Name what people routinely leave out — supervision time, data collection, staff training, and the ramp-up before the program serves anyone.

**Allocate shared costs on a defensible basis.** For the items in {{org_overhead}} that partly serve this program — finance, HR, IT, rent, insurance, leadership time — pick an allocation basis for each (share of FTE, square footage, direct cost share) and apply it consistently. Consistency is what makes the number defensible in an audit or a funder conversation.

**Claim indirect costs.** Under the federal Uniform Guidance at 2 CFR 200.414(f), a recipient without a negotiated rate may elect a de minimis indirect cost rate of up to 15% of modified total direct costs — raised from 10% in OMB's 2024 revision — with no documentation required to justify it. Given {{indirect_rate_status}} and {{funder_rules}}, tell me what I can claim, and flag it if I have been defaulting to a lower number out of habit.

**Show the gap.** If {{funder_rules}} caps overhead below our real cost, calculate the shortfall in dollars and state plainly which other source has to absorb it. A program that is 30% unfunded is a decision the organization should make deliberately, not discover in month eight.

**Write the justification.** For each significant line, one sentence on what it buys and why that amount. This is where budgets are won or questioned.

**Sanity-check the whole thing.** Cost per participant, cost per outcome, and the comparison with what we spent last time. If cost per participant looks implausibly low, something is being absorbed elsewhere in the organization — find it and name it.

**For anything touching federal awards, allocation methodology, or an audit**, confirm the treatment with a CPA experienced in nonprofit accounting. This is planning guidance, not accounting advice.