1. Hands on Budgeting Wendy Watson April 18, 2008

2. Agenda Why and when to budget? Types of budgets Revenues Expenses Cost allocation Types of budget Reports A few brief words about accounting systems Budget work session

3. Wendy’s Disclaimer

4. Why budget? Planning Track use resources over time Inform decisions Record of what an organization plans to do, and did Supports integrated funding It’s required

5. When to budget? Annually For grants or start ups In advance to allow time for approval processes Allow time for adjustments Over time to keep track of pending and secured funding

6. Types of budgets Pie in the sky budgeting Reality budget A hybrid model Single service, single source budgets Integrated, or braided or blended

7. Who should budget? Administrative staff (coordinators, directors, managers) may help prepare and implement budgets Oversight groups – boards, councils, executive committees inform, approve and monitor budgets Staff Inform, may help prepare and may implement budgets Fiscal Agent

8. Revenues Grants –Restricted –Unrestricted Donations Fundraising possibilities –Learn the rules that guide donations, fundraising, fees Public Dollars from taxes

9. Revenue considerations Cost effectiveness Audit requirements Are overhead costs allowable for the funding source

10. Expenses Expenses: Generally do not have a future value Capital Expenditures: Generally have a future value Direct and indirect expenses and grants Overhead

11. Questions to use in budget review Are the amounts realistic? Can you understand what is being funded and how the amount was determined? Are line items in appropriate categories? What does this budget tell you about priorities of this organization? Is there anything that may cause concern? Note anything else about this budget you wonder about or find intriguing? National Economic Development and Law Center

12. Budget Review: Small Group Activity

13. Common Challenges with ECC Budgets Lack of specificity Math mistakes Cost Allocations between funding sources logic Line items under wrong categories (e.g. contractors listed as staff)

14. Budget Spread Sheet Uses Establish the fiscal plan projection –Secured Funding –Pending Funding Identify gaps and needs for further fundraising Plan for in-kind and match

15. Cost Allocation Process of assigning expenses to more than one funding stream Tracking of expenses charged to more than one funding stream

16. Accounting systems Cash basis Accrual basis

17. More accounting system considerations Fund Accounting Technology Audits

18. Financial Statements Measure efficiency Track adequacy of resources Trends –% of total budget –Compare to previous periods Monitor cash flow

19. Financial Indicators Surplus, deficit Budget to actual Functional Expense Ratios –How much is administrative versus programmatic

20. Financial Indicators cont. Balance sheet –Shows resources for current expenses Secured funding versus pending request

21. Financial Reports: Balance Sheet Tracks the following: Assets Liabilities Net worth: –unrestricted assets, –temporarily restricted assets –permanently restricted

22. What to look for in the balance sheet Does it balance? Are net assets positive or negative? Do current assets exceed current liabilities? Are accounts receivable reasonable? How much of the net assts are restricted? National Economic Development and Law Center

23. Cash Flow Statement Purpose is to monitor when revenues and expenses are incurred Cash in Cash paid out, disbursed Cash Balance

24. What to look for in a Cash Flow Statement Is the cash balance positive? Is there a time a year when cash flow is a problem? Is revenue received in a timely, consistent manner? Can the timing of expenses and revenue be improved to increase the monthly cash balance? National Economic Development and Law Center

25. Financial Statements: Statement of Activities, Budget to Actual Statement of Activities Budget to actual reports –Against current years budget –Historical comparison

26. What to look for in Statement of Activities, Budget to Actual Does the organization have a surplus or deficit? Are there any actual line items that differ from the projected budget? How does this difference affect the budget? Was this difference approved? National Economic Development and Law Center

27. Budget to Actual Review: Small Group Activity

28. Common challenges in Budget to Actual ECC Reports Lack of specificity Failure to fill in all applicable columns Missing grant amendments Math errors

29. Work session on budgeting – recommended steps Establish time period Estimate revenue sources and amounts Estimate expenditures (linked to strategic plan and work plan for the year) –Fixed expenses –Salary –Program or funder requirements –Everything else