1. Financial Management

2. Terms Budget ◦ Financial plan that outlines and forecasts the revenues and expenditures over a fiscal year ◦ Fiscal year ◦ Budget year Budget cycle ◦ Length of time required to prepare, administer & close out a single year budget

3. Budget Cycle Budget preparation – 6-9 months Budget in progress – fiscal year Budget close out – 2-3 months Fiscal Year 2011Fiscal Year 2012 Fiscal Year 2013

4. Compulsory Income Collected by govt. through taxing & regulatory powers at different government levels ◦ Real property tax ◦ Personal property tax ◦ Sales tax ◦ Excise tax ◦ Income tax ◦ Local option tax

5. Compulsory Income Real property taxes ◦ Land & whatever is developed or growing on the land ◦ Different rates for different levels  Personal home, business, undeveloped land, farm ◦ 96% of property taxes stay locally

6. Compulsory Income Personal Property taxes ◦ Allowed in 41 states (not IL) ◦ 1. Household tangible property  Autos, $, livestock, furniture ◦ 2. Business tangible property  Inventory, business fixtures, furniture, equip ◦ 3. Intangibles  Stocks & bonds

7. Compulsory Income Sales taxes ◦ Imposed on the sale of tangible goods  At-home food & drugs exempt  DE, MT, NH, OR – no sales tax ◦ Largest source of state tax revenue ◦ Second largest for cities ◦ Range 4-10%  1-2% stays with local government

8. Town of Normal Eg The State of Illinois collects a sales tax at a rate of 7.75%, which is distributed as follows: ◦ 5% to the State of Illinois ◦ 2.50% to the Town of Normal ◦ 0.25% to McLean County Up from 6.25% in 2010

9. Compulsory Income Excise taxes ◦ Hotel-Motel tax  Sports facilities  Spurs’ AT & T Arena (2.5%)  Comiskey Park (2%) ◦ Car Rental tax  American Airlines Center in Dallas  Atlanta Hawks Philips Arena ◦ Sin taxes  Cleveland’s Progressive Field, Quicken Loans Arena & Browns Stadium

10. Compulsory Income Income taxes ◦ Municipal, state & federal levels  IL 2011 = 5% flat tax… $50,000 = $2,500  IL 1990-10 – 3%... $50,000 = $1,500

11. Compulsory Income Local option taxes ◦ Applied at the local level ◦ Legislatively enabled at the state level ◦ Remember IL sales taxes (7.75%):  5% to the State of Illinois  0.25% to McLean County  2.5% local option tax

12. Gratuitous Income Received without expectation of return ◦ Grants  NIH ◦ Bequests  Life insurance, wills ◦ Sponsorships & donations  $$, land, stocks, bonds…

13. Earned Income Cash resources generated from fees & charges ◦ Entrance fees, admissions ◦ License & permit fees ◦ Rental fees ◦ User fees ◦ Sale of goods

14. Investment Income Invest unneeded revenue ◦ Stocks, mutual funds, money markets Chicago Metro YMCA

15. Contractual Receipts Revenue generated from contractual agreements ◦ Home health care contracts ◦ Concessions ◦ Pro shop

16. Overview by Sector Sector/ Income Compulsory (taxes) GratuitousEarnedInvestmentContractual Market Sector None Major source Can be a major source NPONoneMajor source Limited, based on available cash Growing importance Public Sector EssentialGrowing importance Major source Limited, based on available cash Growing importance

17. Operating Expenditures Regularly occurring costs ◦ Personnel  Usually the largest expenditure ◦ Supplies ◦ Equipment ◦ Utilities ◦ Services

18. Capital Expenditures Used to finance projects that are costly ◦ Major purchases lasting 10+ years ◦ Facilities, renovations, equipment ◦ Independent of operating budgets ◦ Covers 5-6 years (CIP) ◦ Priorities are reviewed & shifted annually

19. Capital Improvement Plan Land acquisition 1,000,000 Outpatient facility construction25,000,000 Subtotal – Construction26,000,000 Equipment – physical rehab 500,000 Equipment – orthopedics 100,000 Equipment – respiratory care 100,000 Subtotal - Equipment: 700,000 Total Capital26,700,000

20. Line Item Budgets Item ◦ Specific item or object for which monies will need to be allocated  Postage, equipment Line ◦ Process of placing the items in a line so that all items appear on the budget sheet

21. REVENUES Program fees$6,403 EXPENDITURES Flights$1,127 Rental Car$270 Hotel$2,700 Gas$324 Meals$540 City Walk$141 Busch Gardens$131 Titanic Exhibit$32 Arabian Nights$114 Universal Studios$160 Disney Quest$57 Walk Disney Theme Parks$380 Medieval Times$135 Sleuths Mystery Dinner$75 Kennedy Space Center$76 Wet and Wild$78 Pleasure Island$34 Ripley’s Museum$29 TOTAL:$6,403.00

22. KNR Golf Outing Activity Determine revenues & expenditures

23. KNR Golf Outing Revenues ◦ Player fees ◦ Naming sponsor ◦ Gold ◦ Silver ◦ Bronze ◦ Meals ◦ Cart sponsor ◦ Mulligans Expenditures ◦ Golf & cart fees ◦ Dinner ◦ Beverages ◦ Goodie bag ◦ Volunteer shirts ◦ Signage

24. Determining Exp/Rev 1. List all revenues 2. List all expenditures 3. Set up grid 4. Fill in information Expenditures#/hr $Total Golf & cart fees- 1 7230$2160 Dinner--9215$1380

25. Break Even Costs Break even ◦ Revenues = expenditures…no profit Subsidy ◦ Expenditures > revenues…lose money Profit ◦ Revenues > expenditures…profit

26. Break even Expenditures / # of participants = cost per person Cost per person x # of participants = revenue $5220/72 people = $72.50/person

27. Step 3: Determine Subsidy Rate User GroupSubsidy ratePrice/hr Youth lessons 35% Rink rental 0% Open skating100% Youth speed skating10% Roller derby -25%

28. Step 3: Determine Subsidy Rate Youth Lessons $45/hour X 35% subsidy = ◦ $15.75 per hour subsidy ◦ $45- $15.75 = $29.25 charge per hour Agency absorbs Individual absorbs

29. Step 3: Determine Subsidy Rate Roller Derby $45/hour X 25% profit (-25% subsidy) = ◦ $11.25 per hour profit ◦ $45+$11.25 = $56.25 charge per hour ◦ Another way…..

30. Step 3: Determine Subsidy Rate $45/hour X 35% subsidy = ◦ $45 * (1-0.35) = $29.25 charge per hour  Works because you pay only 65% of the hourly fee $45/hour X -25% subsidy (profit) ◦ $45 * (1.25) = $56.25 charge per hour  You are paying 125% of the fee

31. Step 3: Determine Subsidy Rate User GroupSubsidyPrice/hrFormula Youth lessons45% Rink rental0% Open skating100% Youth speed skating10% Roller derby-45% Per hour = $45

32. Step 3: Determine Subsidy Rate User GroupSubsidyPrice/hrFormula Youth lessons45%$24.75 $45 * (1-.65) Rink rental0%$45 $45 * (1-.00) Open skating100%0$45 * 0 Youth speed skating10%$40.50 $45 * (1-.10) Roller derby-45%$65.25 $45 * (1.45)

33. OCB Most common form of budget, similar to line item budgets Object - item for financial cost ◦ Salaries, phone bills Classification – uniform method of grouping the objects into certain categories & subcategories ◦ Personnel, Contractual services, Commodities

34. Example Classification Expenditure Classification by Object 2000: Services: Contractual 2100 Communication & Transportation 2110 Postage 2120 Telephone 2300 Printing, Binding, Advertising 2350 Advertising & Publication Notice Expenditure Classification by Object 2000: Services: Contractual 2100 Communication & Transportation 2110 Postage 2120 Telephone 2300 Printing, Binding, Advertising 2350 Advertising & Publication Notice ClassificationsSub classificationsObjects

35. Table 13.2: Sample Object Classification Categories Object total Sub- category total Category Total 1000: Personnel Services$2,037,000 1100 Salaries, Regular (Full Time)$1,500,000 1200 Salaries, Temporary (Part time)$25,000 1300 Wages, Regular (Hourly, FT)$250,000 1400 Wages, Temporary (Hourly. PT)$175,000 1500 Contractual employees$75,000 1600 Other Compensations$12,000 2000: Contractual Services$641,252 2100 Communication and Transportation$183,252 2110 Postage$5,002 2120 Telephone$23,000 2130 Freight and Express$10,000 2140 Travel & Lodging$70,000 2150 Vehicles$32,000 2160 Gasoline, Oils and Lubricants$43,250 2300 Printing, Binding and Advertising$16,475 2310 Printing/Photocopying$12,000 2320 Typewriting/Word Processing$500 2330 Binding$500 2340 Photocopying & Blueprinting$250 2350 Advertising & Publication of Notices$3,225

36. Table: 13.4: NIFS Combination of a Program Budget and OCB Object total Sub-category totalCategory Total 1000: Personnel Services$802,100.00 1100 Salaries, Regular (Full Time)$600,000.00 (12) Fitness center$160,000.00 (13) Marketing$80,000.00 (14) Nutrition & wellness$120,000.00 (15) Corporate fitness mgt$240,000.00 1200 Salaries, Temporary (Part time)$190,300.00 (12) Fitness center$50,000.00 (13) Marketing$45,000.00 (14) Nutrition & wellness$72,300.00 (15) Corporate fitness mgt$23,000.00 1300 Wages, Regular (Hourly, FT)$11,800.00 (12) Fitness center$1,200.00 (13) Marketing$2,400.00 (14) Nutrition & wellness$3,200.00 (15) Corporate fitness mgt$5,000.00

37. Zero Based Budgeting Start with no previous budget Examine effectiveness & value ◦ Objectives ◦ Outcomes Develop & rank budget packages Top x # of programs funded Used more in the commercial sector

38. Open Ended Budget No restrictions on spending Submit budget for optimum programming Later adjust the budget to meet funding capabilities of agency Seeing less of this

39. Alternative Budgets Prepare a basic budget & then alternatives to it ◦ Alternatives not shared with board or public Time consuming!

40. Historic Analysis Historical analysis ◦ Looks at past to predict future

41. Fixed Ceiling Budget Limits growth of expenditures Doesn’t see changing needs of organization Ie.1% growth, no growth budget ◦ Expenditures = 155,000 v 1% = $156,550 Can you just turn in last year’s budget?