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1Powerpoint Slide Prepared by : 10B A H A N A J A RAnggaran(Budgetting)Powerpoint Slide Prepared by :Dr. Dede Ruslan,M.Si
2Learning Objectives What is a budget Purpose of budgets Importance of budgetsKeys to effective budgetsBudget calendarThe budget process stepsDetermining break evenThe budget example
3BUDGETTINGBudgetting (Penganggaran) merupakan suatu kegiatan atau proses penyusunan anggaran (budget).What is a Budget?Rencana operasional yang dinyatakan secara kuantitatif dalam bentuk satuan uang yang digunakan sebagai pedoman dalam melaksanakan kegiatan-kegiatan lembaga dalam kurun waktu tertentu.
4What is a Budget?A budget is a road map of where you want to go and how you expect to get there.Budgets are used for:Board OversightGoal FocusFinancial Control
5KARAKTERISTIK DAN FUNGSI ANGGARAN Karakteristik AnggaranSisi penerimaan (debit)Penerimaan yang bersumber dari PemerintahPenerimaan yang bersumber dari masyarakat (termasuk orang tua murid)Penerimaan yang bersumber dari pihak lain.Sisi Pengeluaran (Credit)Recurrement Expenditure, yaitu pengeluaran rutin yang bersifat berulang-ulang setiap tahun, seperti gaji dllCapital Expenditure, yaitu pengeluaran untuk barang-barang yang tahan lama, seperti gedung, lab, dllFungsi Anggaran
7Function and Purpose of Budgets Function of BudgetMain Functions : Alat untuk perencanaan dan pengendalian serta alat bantu bagi manajemen dalam mengarahkan suatu lembaga menempatkan organisasi dalam posisi yang kuat atau lemahSecond Fucntions :Sebagai tolak ukur keberhasilan organisasi dalam mencapai sasaran yang telah ditetapkan.
8PURPOSE OF BUDGETS Planning Communication Motivation Control and EvaluationManfaat Budget :Sebagai alat penaksirSebagai alat otorisasi pengeluaran danaSebagai alat efisiensi
9The Importance of Budgeting The more clear, accurate, and well-thought-out budgets are in the beginning, the more likely you will be able to:Adjust plans, activities, and spending as neededSpend money cost-effectivelyReach the specific goals you have setStrengthen internal control system
11Seven Keys to Effective Budgeting Know your organization’s missionEvaluate existing and potential programsAssign responsibilitiesKeep the process simple and realisticGet your budget approvedKeep scoreReview and revise as needed
12Developing the Budgeting Calendar The Five StepsList major budget development tasksEstablish overall time frames and specific deadlinesIdentify those responsible for each taskSeek review and comment from board and staffRevise and distribute the final budgeting calendar
13Monitor and Amend Budget THE BUDGET PROCESSDetermine Programs and ActivitiesBudget ExpensesBudget RevenuesAssemble Draft BudgetReview and Modify Draft BudgetPresent Budget Draft for Board ApprovalMonitor and Amend Budget
14Step One: Determine programs and activities As beginning steps in the budget process:The board has the responsibility to review the organization’s mission statement and its specific goals and activities for achieving the mission.The board should create a statement of strategic program and service priorities to guide resource and allocation decisions during the budget process.The Executive Director should arrange and staff any early strategic planning sessions with the board.
15Step One: Determine programs and activities (cont) Once the mission statement has been reviewed and strategic direction has been developed:The ED working with the board has the responsibility for evaluating current programs, assessing needs for new programs or services, and developing long-range financial forecasts and operating plans.The Program Managers should provide information on current program needs and the costs and effects of reducing or expanding their individual operations.
16Step Two: Budget expenses & revenues After determining current program and activity needs, we are now ready to budget for the upcoming fiscal year’s revenues and expenses. The first step in this process is for the board to establish general budget policies, such as:Requirements for a balanced budget.Decisions about salary increases, hiring, layoffs, new programs, capital projects, and major fundraising efforts or capital campaigns.
17Step Two: Budget expenses & revenues (cont) Once general budget policies have been established,the ED working with the CFO should do the following:establish draft budget guidelines by setting expense and income targets for the organization as a whole or for specific departments or programsestablish guidelines or formats for the budget document itselfAdditionally, the ED should prepare options and recommendations to guide budget development and the CFO should create a budget development calendar to ensure deadlines are met
18Step Two: Budget expenses & revenues (cont) After the CFO has developed the budget calendar, he or she has the following responsibilities:communicating budgeting policy and procedures to managers and line staffestablishing the format for draft budgetscollaborating in setting expense and income targets in line with strategic plan for programs or unitsdeveloping income and expense forecasts based on reviews of external, economic and competitive trends
19Step Two: Budget expenses & revenues (cont) Once the departmental and program managers receive the budget calendar, budget policies and procedures, and draft budget format from the CFO, they can now develop draft budgets for their areas.
20Step Three: Assemble draft budget Once departmental and program manager’s draft budgets have been developed and submitted to the CFO, the CFO should evaluate draft budgets for accuracy, reasonableness, adherence to guidelines, and anticipated resources.The CFO should then assemble an organization-wide draft budget to present to Executive Director for review.
21Step Four: Review and modify draft budget Once the organization-wide draft budget has been submitted to the ED:First, the ED should review the draft budget and make resource allocation decisions.Afterwards, the CFO should discuss draft budget with the ED.Then, the CFO should write recommendations for reducing, increasing, or allocating requested resources.Lastly, the CFO should prepare the budget document once the E.D.’s budget decisions are made and may help present it to the board.
22Step Five: Present budget draft for board approval After the organization-wide draft budget has been reviewed and modified, the ED should present the recommended budget to the board, explaining its provisions and possible consequences, and answering board questions.Additionally, the ED with the help of the board should create review committees to study the budget proposed by staff and recommend modifications to the full board.Finally, the board should formally review and approve the budget.
23Step Six: Monitor and amend budget Once the budget has been approved, the ED is responsible for working with the CFO to:Communicate the approved budget to management and line staff so they clearly understand it.Regularly perform financial monitoring to compare actual income and expenses to those budgeted and determine causes for variances, if any.
24Step Six: Monitor and amend budget (cont) Additionally as part of the financial monitoring function, the departmental and program managers should monitor income and expenses, and help develop and implement corrective action plans for their specific areas of responsibility.
25Other Possible Participants Clerical support staffConsultants and outside specialistsClient surveys and volunteers
26Budgeting Do’s and Don’ts Qualities of an effective budget.Realistic – An unrealistic budget is not an effective tool.Consistent – The budget must be consistent with the organization’s long-term objective.Flexible – The budget must be monitored and amended if conditions are not as expected.
28The purposes of budgets include which of the following? ControlPlanningEvaluationMotivationAll of the aboveAnswer: E. All of the above
29True or False Specific strategies should be in place for meeting only long-range goals. Answer: False. Strategies should be in place for meeting long-range and short-range goals.
30All of the following are responsibilities of departmental managers EXCEPT: Collaborating with the CFO in reviewing draft budgetProviding information on current program costsEstablishing the format for draft budgetsDeveloping draft budgets for their departmentsAnswer: C. The CFO should establish the format for draft budgets.
31True or False In the planning phase of developing a budget, you compare results to your plan and investigate any variances.Answer: False. In the planning phase you identify goals, resources, and expected results. In the control and evaluation phase, you compare actual results with expected results and investigate variances.
32All of the following are responsibilities of the Board EXCEPT: Developing budgeting policiesCommunicating budgeting policies to line staffDeveloping the organization’s mission statementCreating a statement of strategic programAnswer: B. The CFO should communicate the budgeting policies and procedures to managers and line staff.
33In addition to presenting an organization’s annual plan presented in dollars, a budget may also be used for the following:To convey a plan to the organizationTo establish an oversight of the organization’s operationsTo ensure resources are used as intendedA and BAll of the aboveAnswer: E. All of the above
34In order for an organization to maintain its focus on its mission, its budget should have which quality?ConsistencyFlexibilityRealisticSimplicityAnswer: A. Consistency. The budget must be consistent with the organization’s long-term objective to maintain its focus on its mission.
35True or False The budget does not help control finances by setting practical limits on the amount that can be spent on specific programs and activities.Answer: False
36True or False Financial control involves ensuring that program and activity costs are consistent with revenue.Answer: True
37All of the following are responsibilities of the Executive Director in the budgeting process EXCEPT: Formally reviewing and approving the budgetPreparing recommendations to guide budget developmentArranging and staffing early strategic planning sessionsMaking resource allocation decisionsAnswer: A. The board formally reviews and approves the budget.
38Special Budgeting Considerations for Non-Profits Financial GoalsMultiple funding sources or cyclesDriving Factors – Types of BudgetsExpenditure BudgetRevenue Budget
39Determining Break-Even Fixed Costs Fixed costs, also referred to as indirect costs, do not vary in total amount as the quantity of output changes.Incremental fixed costs are caused when the output goes beyond the maximum capacity limit.
40Determining Break-Even Fixed Costs Example of fixed costs:Administrative salariesDepreciationInsuranceProperty TaxesRent
41Determining Break Even Fixed Costs 200150125100Cost $1,000755025Activity
42Determining Break-Even Variable Costs Variable costs are sometimes referred to as direct costs. Variable costs are fixed per unit of output but vary in total as output changes (i.e. 1 activity $25k, 2 activities $50k, 3 activities $75k etc.).
44Determining Break Even Variable Costs 200150125100Cost $1,000755025Activity
45Determining Break Even 100 % Capacity Determining optimum pointThe basic rule on break-even is to determine the optimum point (Minimum per unit costs at maximum capacity).
46Determining Break Even 100 % Capacity 200Total Cost.150$30,000125$31,250100Break-even = $30,000 per Activity$33,330Cost $1,00075Cost per Activity$37,50050Fixed Cost.25Optimal PointActivity
47Determining Break Even 80 % Capacity The 80% ruleA rule of thumb to guide you on the expected cost per activity is done using the 80% rule.The optimum point should be the minimum costs at 80% capacity.
48Determining Break Even 80 % Capacity Benefits to 80% capacity:Lower employee burnoutIncreased per unit revenue above 80%Reduction in expected cost overruns
49Determining Break Even 80 % Capacity 200150Total Cost.125$31,250100Break-even = $31,250 per Activity$33,330Cost $1,00075Cost per Activity$37,50050Fixed Cost.25Optimal PointActivity
50BUDGET CONSIDERATIONS Have a Revenue Contingency PlanWhat if a major revenue source is eliminated ?Be ready to cover the unexpected.Always be flexible and conservative.Budget Special EventsDetermine the reason for the event.Remember the financial goals.Remember the rules.
51REFERENCES“Budget Building for Nonprofits.” by the American Institute of Certified Public Accountants.“Planning and Budgeting.” by the Legislative Budget Board and Governor’s Office of Budget and Planning.“Basic Nonprofit Accounting.” by Mary Bird Bowman & Company.“The Budget Process” by Cheryl A. Hartfield, CPA and Winford L. Pascall, CPA.“Production/Operations Management” by William J. Stevenson
52QuestionsShould you have any questions regarding any information on this presentation, please contact the following TCADA staff atEdward Gonzales – ext. 6627Mike Kober – ext. 6994John Walker – ext. 6958Paul Harris – ext. 6978
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