SECURING FUNDINGWORKSHOP

Brisbane30 April and 6 May 2009

PREPARING A BUDGET

Debra Beattie

General ManagerMuseum & Gallery Services Queensland

The budget is one of the most difficultcomponents of any grant application.

It is important to get it right or it couldundermine the competitiveness of your

application, or even make yourapplication ineligible.

Give yourself plenty of time to do theapplication and the budget.

You may have to spend timegetting estimates and quotes.

You may also find that the grantand other earned income doesn’t coverthe project costs. If this is the case, youwill need to make adjustments to theproject (and therefore rework the budgetand the written application).

Check whether the funding guidelinesrequire your organisation to be

legally incorporated

(e.g. incorporated association, companylimited by guarantee)

If your organisation is not eligible, youmay be able to arrange for an

incorporated organisation to auspiceyour grant.

WHAT ARE YOUAPPLYING FOR?

The budget must reflect what you havesaid in the written part of your

application.

If you have stated that you will undertakecertain things in the project, there must

be evidence of any income orexpenditure associated with that activity

in the budget.

Most funding agencies are unlikely to fund100% of the costs of your project.

Some funding guidelines will state this.

They will expect to see some contributionfrom the organisation.

This could be in the form of: an ‘in-kind’ contribution (e.g. volunteer

hours) sponsorship earned income (e.g. sales of goods or

services) a cash contribution

Be realistic.Don’t include outrageous amounts of

earned income or sponsorship ifthere is little chance that you can

actually raise it.

If you can’t cover the costs of the project,you may have to downscale what you

are proposing to do.

WHAT DO I INCLUDE?

Read instructions very carefully.

If in doubt, phone or email thefunding agency staff.

You will need to be clear aboutwhat you are asking them.

Different funding agencies mayinclude different types of items

under each budget line.

Check the list carefully.

For example, do they want totals forgroups of expenditure?

Or do they want detailed breakdowns?

Look at the budget form carefully.

If they only want totals, keep adetailed breakdown for your own records.

You will need to know how you arrivedat those figures.

It’s a good idea to sit quietly at your computer orwith a notebook and pen and imagine that youare carrying out all the steps in your project.

Write down all thethings you will needto spend money onas you go along.

You can also look at the “Howto complete a RADF BudgetSheet” in your resource folder– it gives you a checklist ofincome and expenditure.

Include all of the costs of the project in yourbudget, not just the items you want the grant

to cover.

The funding agency will want to see how the grantamount fits into the overall budget.

Some applications will ask you to identify whichcomponents of the budget will be covered by the

grant. Even if they don’t it is a good idea tospecify what the grant will be used for.

Don’t send extra material such aswritten quotes unless you are

asked to do so.

It’s useful to get quotes so that youhave an accurate costing on majoritems, but keep them for your own

records.

WHAT DO I NEED TOCONSIDER?

If the project is happening in thefollowing year, allow for someinflation on expenditure items.

For example: Printing Travel Anything that will be affected byrising fuel costs (almost everything)

If the grant amount is large,you may have to account for

interest on the income.

The grant guidelines usually tell you if this is required.

If the grant amount is over a certain limit,some funding agencies require aqualified auditor’s report on your

acquittal budget.

WHAT ELSE MIGHTI NEED?

Do you have an ABN(Australian Business Number)?

You can have an ABN without beingregistered for GST.

If you do not have an ABN, the funding agency mayhave to withhold 46.5% of your grant and pay it to

the Taxation Office on your behalf.

More information on ‘No ABN Withholding’ is available onthe Australian Taxation Office website in the section for

Non-Profit Organisations.

WHAT ABOUT GST?

Are you registered for GST?

If you do not know the answer to thisquestion, you need to talk to your

accountant.

To be registered for GST, you will have lodged a form withthe Tax Office (or registered online) and you will be

lodging Business Activity Statements (BAS) on aregular basis.

Decide whether the income and expenditureincluded in your budget includes GST or

excludes GST –and specify this clearly.

Check the guidelines to see if they requireGST-inclusive or GST-exclusive amounts.

For example, look at the RADF application budget, page 8.It gives very clear instructions on what to do if you are

GST REGISTERED and what to do if you areNOT GST REGISTERED.

If the funding guidelines don’t specify, youneed to choose one method.

The best choice might be the one that’smost compatible with your bookkeeping

system.

How to work out the GST-EXCLUSIVE cost?

An item costs $100.If this item has GST in the cost,

divide by 1.1 to get the GST-exclusive cost.$100 ÷ 1.1 = $90.91

This means that $90.91 is the cost of the itemexclusive of GST.

This also means that the balance ($9.09) is the amount ofGST included in the cost.

$90.91 + $9.09 GST = $100.

How to work out the GST-INCLUSIVE cost?

An item costs $200.If this item does NOT have GST in the cost,multiply by 1.1 to get the GST-inclusive cost.

$200 x 1.1 = $220

This means that $220 is the cost of the iteminclusive of GST.

The extra 10% ($20) is the amount of GST.

$200.00 + $20.00 GST = $220.

If you are registered for GST, checkwhether the funding agency

“tops up” for GST or whetherGST comes out of the grant amount.

If the funding body “tops up”, this means they willpay 10% on top of the approved grant amount to

cover the GST component for registeredorganisations.

e.g. You applied for $30,000 –they will pay you $33,000.

$30,000 grant + $3,000 GST = $33,000.

If the funding body does not “top up”, you will haveto pay the GST out of the grant amount. You

need to allow for this, otherwise it could leave youseveral thousand dollars short on your project.

e.g. on a $30,000 grantyou will have to pay $2,727.27 in GST.

$30,000 ÷ 1.1 = $27,272.73

WHAT ABOUT PEOPLEWORKING ON THE

PROJECT?

If you or your colleagues are workingon the project, remember to pay

yourselves –at a proper rate.

Refer to your resource folder forrecommended rates of pay.

If the project budget can’t afford to paythe full amount at the recommended

rate, you might choose to provide someof your services ‘in-kind’.

Refer to page 4 of the “How to complete a RADFBudget Sheet” in your resource folder for examples of

in-kind contributions.

If you are employing people on the project ona salary basis, there may be associated ‘on-

costs’ such as superannuation, workers’compensation, leave loading.

If you are employing people on the project whoare consultants, they usually cover these

on-costs themselves out of their consultancy fee.

You need to check with each person you engageand determine who is responsible for covering

on-costs.

Some examples of ‘on-costs’:

Taxation, e.g. Pay As You Go (PAYG) withholdingIf you have employees, you need to withhold amounts from their pay andsend the withheld amounts to the Tax Office. This is called PAYGwithholding.You must register for PAYG withholding before you withholdany amounts. All amounts your business withholds must be paid andreported to the Tax Office. How often you pay and report withholdings tothe Tax Office will depend on whether you are a small, medium or largewithholder.How much you withhold depends on the amount you are paying youremployee, as well as the employee’s individual tax circumstances.Employees should notify you of their tax circumstances on a Tax FileNumber (TFN) Declaration and/or a Withholding Declaration form.

For more information on PAYG go to the Australian Taxation Officewebsite, http://www.ato.gov.au/businesses/ and click on ‘Pay Staff’. Youcan try the Tax Withheld Calculator or Tax Tables online for help incalculating amounts to withhold.

Some examples of ‘on-costs’:

SuperannuationAs an employer you have an obligation to pay super contributions onbehalf of all your eligible employees. These contributions are in additionto your employees’ salaries and wages.This compulsory contribution iscalled the superannuation guarantee and it requires you to:･pay super for your eligible employees･contribute to the correct super funds, and･pay contributions by the cut off date each quarter.

The minimum super amount you have to pay is 9% of each eligibleemployee’s earning base.

For more information on the superannuation guarantee go to theAustralian Taxation Office website, http://www.ato.gov.au/super/ andclick on Businesses for ‘employer super essentials’.

Some examples of ‘on-costs’:

Workers’ CompensationWorkers’ compensation insurance covers you for the costs associatedwith compensating your workers who sustain a work-related injury orillness. The policy is compulsory if you employ workers in Queenslandand is available through WorkCover Queensland.

WorkCover Queensland calculates the amount of the premium bymultiplying the total wages by your organisation’s premium rate. Yourpremium rate is influenced by your claims history, your industry andyour business size.

For more information on workers’ compensation insurance go to theWorkcover Queensland website, http://www.workcoverqld.com.au andclick on ‘Employers’.

Some examples of ‘on-costs’:

Leave loadingAn award or agreement may provide for an extra payment by wayof a loading that is to be added to an employees’ ordinary currentrate of pay during annual leave.

This is usually around 17.5% of the gross wages paid for the periodof leave.

For example, an employee is paid gross wages of $700 a week for fourweeks’ annual leave, plus 17.5% leave loading.

$700 x 4 weeks = $2,800 gross wages

17.5% of $2,800 = $490 leave loading

Total leave payment = $2,800 + $490 = $3,290

For more information on leave entitlements and leave loading, go tothe Queensland Government Wageline websitewww.wageline.qld.gov.au/leaveentitlements/annual_leave.html

…FINALLY

Make sure you keep notes of yourbudget calculations.

When you have to acquit the grant, youwill need to know what you originally

included in each budget line.

It’s a good idea to keep aworksheet with a running totalof your income andexpenditure against eachbudget line.

This will make the grantacquittal much easier, and italso allows you to see if youhave shortfalls or excessesagainst each budget item.

MAKE SURE YOUR BUDGETADDS UP!!

The funding agency will have noconfidence in your ability to manage theproject if you can’t balance the budget.

GET SOMEONE ELSE TO CHECKYOUR CALCULATIONS.

EVERY TIME YOU MAKE ACHANGE TO THE BUDGET– EVEN A MINOR ONE –

ADD IT UP AGAIN.

GET SOMEONE ELSE TO CHECKYOUR CALCULATIONS.

OTHER USEFULINFORMATION

Deductible gift recipients (DGR)To receive tax deductible gifts, an organisation must be a deductiblegift recipient (DGR).

To determine whether your organisation can receive tax deductiblegifts, you must:• Check whether your organisation falls within a general DGRcategory and can be endorsed by the Tax Office.• Check the other conditions for DGRs. Your organisation may have tomeet some or all of these conditions to be a DGR – including possiblechanges to your organisation’s constitution, e.g. ‘winding up’ clause.

Public art galleries, museums and libraries are approved by theAustralian Taxation Office under another Deductible Gift Recipientcategory (Cultural Gifts Program).More information on Deductible Gift Recipients can be found in your resourcefolder or go to the Australian Taxation Office website,www.ato.gov.au/nonprofit/ and click on “Find out about tax concessions &endorsements”.

Register of Cultural Organisations(ROCO)

Cultural organisations receive DGR status by applying to theRegister of Cultural Organisations (ROCO).

ROCO assists qualifying cultural bodies to attract support byenabling them to offer donors the incentive of a tax deduction.

Cultural bodies listed on the Register are able to receive taxdeductible donations to assist them with a wide range ofactivities, such as the creation of a new theatrical work, thepublication of a literary magazine or the building of acommunity arts centre.

Cultural bodies eligible for listing on the Register are thosewhose main purpose is the promotion of a cultural activitysuch as: literature; visual, community, performing orAboriginal and Torres Strait Islander arts; music; crafts;design; television; video; radio; film; or movable culturalheritage.

Refer to the information about the Register of CulturalOrganisations in your resource folder or go to the AustralianTaxation Office website (same as DGR).

Cultural Gifts ProgramThe Cultural Gifts Program provides tax incentives toencourage gifts of culturally significant items fromprivate collections to public art galleries, museums,libraries and archives.Gifts can range from paintings, books, sculptures,manuscripts and personal papers to jewellery,ceramics, technological, mechanical, scientific andsocial history collections.The Department of the Environment, Water, Heritageand the Arts (DEWHA) administers the program.

For more information on the Cultural Gifts Program go to the DEWHAwebsite, www.arts.gov.au/tax_incentives

The Australian Taxation Officewww.ato.gov.au

Go to the home page and follow the menus to theNon-Profit Organisations home page.

There are numerous fact sheets to download, includingthose that explain the ABN and the basics of GST.

The ATO also has a range of hard copypublications you can order.

Phone 1300 130 248For non-profit enquiries including income tax, Australian

business number (ABN), goods and services tax(GST) and fringe benefits tax (FBT).