1. Basic Budgeting Last Updated: 07/15/2013
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5/20/2019
Basic Budgeting

3. Introduction
Thank you for your participation in the Basic Budgeting training. This session contains 22 pages, and will take approximately 30 minutes to complete. This presentation contains sound. Please be sure your computer is not on the mute setting.
If you have not already done so, please click this link to complete the General Ledger (GL) Coding session before continuing with Basic Budgeting training.
Welcome!
5/20/2019
Basic Budgeting

4. Session Goals After completing this session, you should be able to:
Prepare an operating budget for your Pioneers Unit.
5/20/2019
Basic Budgeting

5. Lesson 1: Objectives
After completing this lesson, you should be able to:
Explain the purpose of a budget.
Describe how to use a budget.
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Basic Budgeting

6. Lesson 1: What is a Budget?
A forecast of the Unit’s expenses and revenues associated with the Pioneers annual goals.
No budget estimate is ever 100% accurate; which is why a budget should be flexible enough to accommodate changes.
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Basic Budgeting

7. Lesson 1: Why Budget? Budgeting is a standard method to:
Identify how money is currently spent.
Plan and set financial goals.
Some of the Pioneers objectives are:
 Increase charitable project/program efforts in local communities.
 Increase membership recruitment/retention.
 Decrease fundraising costs.
 Decrease administrative costs.
5/20/2019
Basic Budgeting

8. Lesson 1: Why Budget?
A budget is a guideline that enables the Pioneers Unit to track spending against the Unit’s goals.
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Basic Budgeting

9. Lesson 1: Budget Considerations
In order to conform to acceptable financial standards for public charities, Pioneers has adopted the formulas prescribed by the Better Business Bureau Wise Giving Alliance.
These formulas relate to expenses for projects/programs (P&P), fundraising and reserve funds.
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Basic Budgeting

10. Lesson 1: 65% Rule
These standards require that Pioneers Units spend at least 65% of their total expenses on project, program (P&P) and charitable activities .
Budget Considerations:
For every $100 spent, at least $65 must be used on P&P.
No more than the remaining $35 may be used for fundraising or administrative costs.
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Basic Budgeting

11. Lesson 1: 35% Rule
Pioneers Units should spend no more than 35% of income received from related contributions on fundraising expenses.
Budget Considerations:
If fundraising expenses are estimated to cost $1,000 to conduct the fundraisers then plans should be made to ensure these activities produce at least $2, in revenue.
The proceeds of $ should be used on charitable projects/programs.
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Basic Budgeting

12. Lesson 1: Reserve Funds
In addition to both the 65% Rule and 35% Rule, Pioneers Units should limit the accumulation of reserve funds to a maximum of three times their average annual expenditures.
Budget Considerations:
Units may set money aside for future activities within this limit.
“Not-for-profit” means that the purpose of our business is not to produce money for owners, but rather to use money received towards the organization’s goals.
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Basic Budgeting

13. Lesson 1: Conclusion
A budget is a prediction to assist in planning goals.
A budget should be followed to ensure goals are achieved.
One Last Consideration:
Changes in the economy, membership, and other variable factors can affect revenue and spending.
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Basic Budgeting

14. Lesson 2: Objectives
After completing this lesson you should be able to:
Create a budget.
Monitor a budget.
Amend a budget.
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Basic Budgeting

15. Lesson 2: Create a Budget
Review the previous year’s budget and financial reports:
Income and Expense Statement
Pioneers Budget Worksheet
Quarterly Percentage Reports
Has the Unit met the goals for the Pioneers or Unit?
If not, what can the Unit change to help meet the organization’s goals?
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Basic Budgeting

16. Lesson 2: Create a Budget
2. Average the Unit’s Income Statements from the past two to three years to determine a reasonable approximation for possible income and expenses in the upcoming year.
Example:
2011: Postage/Shipping - $422.52
2012: Postage/Shipping - $535.81
Average: $479.17
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Basic Budgeting

17. Lesson 2: Create a Budget
3. Identify projects or events with income or expense sources that the Pioneers Unit will continue to incur in the upcoming year.
4. Identify potential new sources for income or expense that were not incurred or identified in the previous year; such as new projects, fundraising opportunities, grants, etc.
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Basic Budgeting

18. Lesson 2: Create a Budget
5. Plan financial goals that are realistic and achievable.
Use averages and assumptions to determine these amounts.
6. Cushion the amounts where appropriate to cover any unknown or unforeseen changes. Don’t assume all prices, rates or sources are fixed.
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Basic Budgeting

19. Lesson 2: Create a Budget
7. Complete the Pioneers Budget Worksheet by using the General Ledger Account Codes and 990 classifications.
Calculate the budgeted totals to ensure they will meet the 65% Rule, 35% Rule and Reserve Funds goals.
8. Submit the Pioneers Budget Worksheet to the Unit Executive Board for approval.
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Basic Budgeting

20. Lesson 2: Monitor a Budget
9. Submit the approved Pioneers Budget Worksheet to the PAC.
Pioneers Units must submit annual budgets for their Units by February 28, or the Unit's TPF1 vouchers will be held until a budget is received.
10. Compare the monthly Income Statement Report, and Quarterly Percentage Reports to the Budget Worksheet to ensure the Unit is in compliance with the budget.
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Basic Budgeting

21. Repeat Steps 1-9 to amend a budget.
Lesson 2: Amend a Budget
If the Pioneers Unit goes over budget during the year, then an amended budget is required.
Repeat Steps 1-9 to amend a budget.
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Basic Budgeting

22. Lesson 2: Successful Budget Worksheet Example
5/20/2019
Basic Budgeting