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Organizational Budgeting

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Presentation on theme: "Organizational Budgeting"— Presentation transcript:

1 Organizational Budgeting
Budget Development at Grassroots Organizations

2 Financial Decision-making
Financial Management Planning, directing, monitoring, organizing & controlling of the monetary resources of an organization Financial Planning Financial Control Financial Decision-making

3 3 Key Elements to the Process of Financial Management
Financial Planning Ensuring that enough funding is available at the right time to meet the needs of the organization - Determine needs of organizations - Allot dollars to needs - Develop budgets Financial Control Using financial statements, primarily a budget, & other financial tools to manage finances - Accountability: Demonstrate to funders & stakeholders how each dollar is being spent - Efficiency: Money being used efficiently & according to plan - Management act in the best interest of funders/donors & in accordance with their rules Financial Decision-making Prioritizin g & Allotting “How do we use dollars to create the greatest impact to clientele, participants, funders, stakeholders & the organization itself?” - Using past experience & current context to decide how to acquire & use funds most efficiently

4 Developing a Budget What to Spend & Where to Spend It

5 Concise yet informative
Budget Basics Bear in mind HOW you will share Expenditures tracks, staff transition, etc. Concise yet informative The greater the dollar amount the more detailed the budget Broad line items with detailed lists underneath Add detail to those details!

6 Organizational Budgets
Tell a story; demonstrate your organization’s priorities Should be related to overall planning process of the organization (*Explore Board roles since budget relates to long-term strategic planning) Team Consultation: Done as a team Resource Sheet 1. Financial Management Question List

7 Steps to Building an Organizational Budget
Step 1. Make a Wish List Step 2. Cost out your List Step 3. Allocate Funds Step 4. Adjust & Balance Step 5. Budget Approval Step 6. Monitor & Amend

8 Step 1. Make a Wish List: Questions to think about
1. What should the organization be doing next year? Or for this upcoming program/project? 2. What core activities are essential? 3. What additional activities might be undertaken if cost were not an object? 4. What staff needs would be associated with these activities? 5. Are there special one-time expenditures that might be considered? Think systematically about the organization’s activities relation to Mission/Mandate/Vision

9 Based on 3 estimates for the desired camera
Step 2. Cost out your List 1. Incremental budgeting: if your organization will largely be carrying out activities it carried out in the previous year(s) Add a percentage increment to actual cost from previous year Example Item Cost 2014 Budget 2015 Program Materials Cost + 5% 2. Zero-Based Budgeting: each line item be calculated based on research, formal estimates, informal estimate, asking sources Example Usually a combination of those two processes Item Cost 2015 Digital Camera 400.00 Based on 3 estimates for the desired camera

10 Pointers to Remember! Reap the benefits of honest reporting Keep your estimates on the high side New programs, services, activities cost Tip: Report your expenditures in the right budget line even if you go over the amount you budget. That way, you will know next time to budget for that item Tip: Avoid any unpleasant surprises! Tip: Add to your core administrative/operational costs

11 Step 3. Allocate Funds Project funds (*Underestimate funds to ensure that costs can be met) *Restricted funds allotted first – These cannot be changed Use *unrestricted funds to cover most basic administrative costs Allot remaining unrestricted funds to supplement program & activity funds Remove programs, services, activities that you can’t cover with your projected funds Set priorities/Balance your budget Is this activity really central to what the organization is about? Does it help the organization achieve its long-term goals – 1 to 5 years? Is it more important to build a reserve or intro that new program/activity?

12 Definitions & Tips Restricted Funds Unrestricted Funds
Money that you have promised to use for specific purpose Example: Most grant you receive from government, foundations, and corporations are supposed to be used for specific programs, projects or events Tip: Allot this money first so you see what has to be covered by unrestricted funds Unrestricted Funds Money that hasn’t been promised to a specific purpose Example: Often this is from fundraising efforts or special gifts, although you can have other types Tip: Often it’s a good idea to use unrestricted funds for items that are hard to fund through grants, such as rent, utilities, and other administration costs

13 Step 4. Adjust & Balance Step 5. Budget Approval
All major changes need to be approved by governing body Approved by your Board prior to your fiscal year start Long, multi-month process The line item details provide flexibility One budget for all purposes Be honest to show overspending, as well as underspending This process allows you to forecast better in next year & demonstrate real needs Step 6. Monitor & Amend

14 Tips: Framework Budgets
Use previous year, current budget/actuals and if available approved budget of following year to create three year projection Analyse trends—project budgets Create conservative projection Create optimistic projection Will help in the development of long-term budgets, strategy, and direct your diversification of funding

15 Tools: Spreadsheet Central
Check out the right hand side bar of this toolkit page to find all of budget templates. Resource Sheet 2: Budget Request & Reporting Template Resource Sheet 3: Organizational Budget Template Resource Sheet 4: Program Project Budget Template

16 Program / Project Budget
Questions to think about: Take a look at your own organization’s budgets: What do they tell you about your organization? (i.e. Your grants? Your revenue/income? Your expenses/spending habits?) Does the current format work for your organization? What would you change to make the current format more accessible or applicable to your organization?

17 Budgeting Categorization
Office & Administration Rent Expense, Amenities (Telephone, Internet, Heat, Hydro), Audit/Bookkeeping, Insurance, Postage, Printing/Photocopying, Criminal Checks, Equipment Purchase, Subcontracts/Purchased Services, Miscellaneous Program Expenses Honorarium, Board/Volunteer Training, Photocopying/Promotion, Resource Development, Meeting Expenses, Special Events, Resource Materials, Program Transportation, Evaluation Staffing Salaries & Benefits (*MERC), Staff Travel, Staff Training, Extended Health Benefits

18 Quick Tips for Effective Financial Management
File each grant in a different binder for easier tracking, recording, reporting, & auditing Use simple accounting software or templates Reconcile regularly, based on funds/budget Communicate frequently with your Board of Directors& Provide monthly financial reports Resource Sheet 5: Tips from FYI’s former Financial Manager

19 Quiz: What did you learn?
How does your Mission/Mandate/Vision impact your budget? What is incremental budgeting? Zero-based budgeting? Why should you report your expenditures honestly? What’s the difference between restricted and unrestricted funds and how does it impact your budget? Who approves your organizational budget?

20 Contact Any questions, concerns, comments or feedback? Contact us at Follow us on


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