The Importance of the Budget Narrative

Topic: Finance
Words: 651 Pages: 2
Table of Contents


The budget narrative is a set of explanations of an organization’s spending needs for each budget category. This document allows the organization to communicate its monetary needs and set expectations for the coming year. It is essential so that the organization can present opportunities in its various areas and expect to meet a bare minimum of budgetary operations. The budget narrative is critical when launching a new program in healthcare.


The need for a budget explanation is primarily expressed in the need for healthcare to evolve. Many modern areas of medical activity require significant expenditures to support research and accumulate evidence-based data. This is only possible if the research base organization provides a detailed budget narrative and receives the funds to conduct research. A detailed and complete narrative will provide the organization with financial support: the budget narrative will shape the conditions for conducting and managing the project. Investment in medical research must exist from the government to maintain a high level of care (Nevens et al., 2019). A detailed budget narrative will allow the health department to understand why research needs to be supported and the execution plan where the budget will be spent. Without a complete explanation, the organization will not be able to prove the need for funding for new programs. The report guarantees that the organization fully understands how the work will be done and what results in it will bring to health care.

Second, the budget narrative must include the organization’s planned expenses. There are direct and indirect costs, a complete description of which will allow the plan for new programs to be understood. Direct costs should include personnel costs: the research salary plan based on their qualifications (Patil, 2019). In addition, the recurring cost item is essential for the budget narrative, which is the set of recurring costs that occur at each stage of the program: spending on materials, office supplies, reagents, and the expense for equipment kits. Indirect costs typically include lab or hospital-related narratives: water, electricity, electronic journal, and library subscription fees (Patil, 2019). These elements form a work estimate, a table by year, and a category with amounts to be spent. Beneath the tables is a description of the need for each category and a justification for the amount spent.

Third, there may be areas in the budget narrative that are sagging in the amount of explanation and justification. In the area of program implementation in medical research, it is likely difficult to describe ongoing costs, namely spending on equipment and disposable material (Nevens et al., 2019). For example, a hospital wants to implement a new treatment protocol after the experimental phase. However, one cannot fully anticipate effects and outcomes in advance, so that this area may be incomplete. Another area that may be incompletely described may be personnel costs: when implementing a new program, the number of reviewers and foreign studies may grow infinitely. It is not always possible for organizations to anticipate in advance how many additional people will be involved in the research. A statistical cost assumption can be used to address the shortcomings of the budget narrative. Suppose an organization spends X thousand dollars on a treatment protocol and 0.4*X on supplies. In this case, the organization can take an extra percentage to cover the program’s costs and justify it with strategic statistics.


Thus, a budget narrative is a set of descriptions and justifications for forecasting the budget plan of the organization. It must be complete and detailed for the customer to receive funding and be able to report on it. Without such a complete budget narrative, the organization will not be able to prove the need for the program. Based on this, the narrative should include direct and indirect cost categories (personnel costs, equipment costs). To avoid rejection and shortcomings in the budget narrative, the organization can provide a statistical justification of its plan.


Nevens, H., Harrison, J., Vrijens, F., Verleye, L., Stocquart, N., Marynen, E., & Hulstaert, F. (2019). Budgeting of non-commercial clinical trials: Development of a budget tool by a public funding agency. Trials, 20(1), 714. Web.

Patil, S. G. (2019). How to plan and write a budget for research grant proposal? Journal of Ayurveda and Integrative Medicine, 10(2), 139–142. Web.

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