1. 1 August 25, 2015 YWCA USA Financial Leadership & Management Program The Art & Science of Budgeting & Dashboard Driving for every woman 1 Join us on Twitter: @SpectrumSteve

2. 2 WELCOME

3. 3 Financial Leadership Model

4. 4 Today’s Conversation Budgeting in Context –Roles –Timeline –Bridging the Gap –Presenting the budget Dashboard Driving –Styles and Metrics

5. 5 Which is a better budget? ProgramBudgetActual A$850$900 B$1000$900 It depends! PlanningMonitoring

6. 6 Putting Budgeting into Context Planning Define organizational goals Tie into strategic plan Online resource needs and uses to accomplish goals Monitoring Monitor progress throughout the time period Show differences between plans or goals and actual use Take corrective action as problems arise.

7. 7 Budgeting: A Holistic Process What is the problem that needs solving? What will you do about it? –Theory of Change, Mission Impact. What will that cost you? Who would and why should someone pay? –Marketing, Fundraising

8. 8 Who is Involved? Everyone

9. 9 Roles in Budgeting DescriptionCEO/CFODevel. Staff Program Staff Finance Committee Program Committee Development Committee Full Board Set Goals        Estimate Costs    Forecast Revenue     Bridge the Gap    Approve    Implement       

10. 10 But, Who is In-Charge? Typically the Director of Finance or Bookkeeper will be the budget keeper, in-charge of the spreadsheet. If you contract out services, the Executive Director may keep the spreadsheet. The ED as the FINANCIAL LEADER is responsible for keeping the time table and momentum.

11. 11 When do we budget? Budgeting takes time – make sure you allot enough of it.

12. 12 Sample Budget Calendar June 30 th Year End MarchRetreat - review performance; set goals AprilProgram plans; direct cost estimates MayIncome plans; capital budget; first draft JuneCash flow; alignment, approval JulyBegin implementation October1st quarter review JanuaryMid-year review (and revision, if needed) OngoingMonthly review of budget vs. actual

13. 13 6 Stages of Budgeting Setting Goals and Context Estimate Costs Forecast Income Bridging the Gap Approve the Budget Implement and Monitor

14. 14 6 Stages of Budgeting Setting Goals and Context Estimate Costs Forecast Income Bridging the Gap Approve the Budget Implement and Monitor

15. 15 Setting Context and Goals Review past performance –Financial metrics: What is our reserve? What do we want our reserve to be? –Program metrics How many people did you serve? How are our impact measures?

16. 16 Setting Context and Goals Review past performance Review strategic or business plan –What are your goals? –Where should you be on goals? –Were any assumptions incorrect?

17. 17 Setting Context and Goals Review past performance Review strategic or business plan Review your market –Are constituent needs changing? –Are funders or revenue streams changing? –Is there new competition?

18. 18 Setting Context and Goals Exploration AreaWho Strategic ObjectivesCEO / Staff / Board Impact / Program ObjectivesProgram Committee Market AnalysisCEO / Staff / Board Financial Goals / ReserveFinance Committee Revenue / Development PlanDevelopment Committee

19. 19 2016 Budget Goals

20. 20 A note on structure Your chart of accounts: –Does it easily show how your programs are performing? –Do your expense categories make sense?

21. 21 6 Stages of Budgeting Setting Goals and Context Estimate Costs Forecast Income Bridging the Gap Approve the Budget Implement and Monitor

22. 22 Estimate Costs What are the costs for accomplishing our goals?

23. 23 Estimate Costs Personnel Costs Create a staffing plan. Not based on who is currently working there and how they are funded, but rather how many people you need to cover your goals.

24. 24 Staffing Plan For the Nine Months Ending 9/30/14 Program Activities Supporting Activities Position Employment / Economic Development Domestic Violence Prevention & Intervention Childcare / Youth Development Admin Fund- raising Shared Costs Executive Director100%5%10%15% 35% Admin Asst.100%15%5% 45%30% Finance Director100% Development Director100% Director of Counseling100% Director of Education100% Counselors400% Teachers150% Director of Technology100% Receptionist100% Custodian20% Bookkeeper50% Development Coordinator50% Total FTE's 14.702.705.150.202.302.152.20 Total FTE's w/o Shared 12.50 Shared Allocation %22%41%2%18%17%

25. 25 Know your expenses Direct Program Shared Costs AdministrationFundraising Not budgeting in the correct category can lead to a high overhead rate. Understand the relationship between growing one category and the other.

26. 26 Estimate Costs: Questions to Ask Think about what is new and what is the core of your program? Can we realistically just keep adding services or tasks? Who will pay for new services? Are there new technologies or theories that will help us deliver on our mission?

27. 27 6 stages of budgeting Setting Goals and Context Estimate Costs Forecast Income Bridging the Gap Approve the Budget Implement and Monitor

28. 28 Forecast Income Contributed SupportEarned Revenue

29. 29 Forecast Income Sources of Support Individuals Foundations / grants Corporations Special events Planned giving

30. 30 Forecast Income What is happening with the economy? Are we cultivating donors? What is the timing for foundations? Are we building up restricted grants? Can we deliver on restricted grants?

31. 31 Forecast Income Understand the true costs of delivering programs including shared and administrative costs. Are we competitive?

32. 32 Forecast Income Contributed SupportEarned Revenue

33. 33 Setting Goals and Context Estimate Costs Forecast Income Bridging the Gap Approve the Budget Implement and Monitor 6 stages of budgeting

34. 34 Bridging the Gap How much do you have in reserves? Do you need to build a reserve? Can you use a reserve?

35. 35 Bridging the Gap Go back to the priorities that were set in Step 1. What is a high priority for the organization to accomplish this year?

36. 36 Bridging the Gap Cash flow projections: –Does the cash flow work for this budget? –Do you need to move income or expenses around?

37. 37 Bridging the Gap Questions to Ask Are we putting our money where our mission is? Does the budget support financial health? Are we making effective, efficient use of funds?

38. 38 6 stages of budgeting Setting Goals and Context Estimate Costs Forecast Income Bridging the Gap Approve the Budget Implement and Monitor

39. 39 Approving the Budget Presentation is important. –A key opportunity to focus the board on how to read and understand the financial statements. Drive the conversation with functional statements.

40. 40 Summarized Statement of Functional Income & Expenses For the Nine Months Ending September 30, 2014 Program Activities Supporting Activities Employment / Economic Development Domestic Violence Prevention & Intervention Childcare / Youth Development AdminFund- raising Shared CostsTOTAL Contributions 90,000 Foundation grants 25,000 Fundraising events, net 76,300 Total Support - - - - 191,300 - Government contracts 340,000 Fee For Service 4,700 Investment Income 3,965 Total Revenue - 340,000 4,700 3,965 - - 348,665 Net Assets Released from Restriction 144,080 25,000 35,500 204,580 Total Income $ 144,080 $ 365,000 $ 40,200 $ 3,965 $ 191,300 $ - $ 744,545 Personnel Expense 96,370 224,020 21,045 34,960 37,950 51,750 466,095 Non-Personnel Expenses 31,300 157,400 6,780 13,000 3,900 54,200 266,580 Total Specific Costs 127,670 381,420 27,825 47,960 41,850 105,950 732,675 Shared Costs Allocation %22%41%2%18%17%100% Allocation of Shared Costs 23,309 43,440 2,119 19,071 18,012 (105,950) - Expense without Admin. 150,979 424,860 29,944 67,031 59,862 - 732,675 Admin Allocation %23%64%4%-100%9% Admin. Allocation 15,204 42,784 3,015 (67,031) 6,028 Total expenses after allocations $ 166,183 $ 467,643 $ 32,959 $ - $ 65,890 $ 732,675 Change in Net assets $ (22,103) $ (102,643) $ 7,241 $ 3,965 $ 125,410 $ 11,870 Base for Admin Allocation $ 732,675 $ (67,031) $ 665,644

41. 41 Numbers to Look at Money / Mission Expense Budget, By Program Area % Expense Budget, By Program Area “Investment” (Subsidy) By Program Area Live Within Means Total Revenue –Total Expense Revenue - This year, Last year Expenses This Year, Last Year Effective/ Efficient Use of Funds Cost Per Client Served/ Per Outcome Cost Per Service Unit % of Capacity met Scale % Need Met; Cost Efficiency Reasonable Admin Support % Overhead Rate Key Admin Skills Available Community Support # Donors # Major Donors Total Raised # Volunteers, Hrs. of service Trends Any significant trends, shifts in areas above

42. 42 Setting Goals and Context Estimate Costs Forecast Income Bridging the Gap Approve the Budget Implement and Monitor 6 Stages of Budgeting

43. 43 Monitoring Your Budget: Key Questions Is our budget performance on target? –Have you budgeted by month? –Projections? If not, what are our corrective action plans?

44. 44 Budget to actual report Balance Sheet?

45. 45

46. 46 As a Dashboard IndicatorTarget6 months ago3 months ago This Month Days of cash on hand60254857 Net surplus or deficit YTD compared with YTD budget. 0.0$10,450 better$2,500 worse $5,400 better Individual Contributions100,00050,25075,00098,290 Total expensesOn budget$2,500 worse$760 worseOn budget Days from end of month to financial statement completion 45 days655240 46

47. 47 A dashboard’s purpose

48. 48 Agreement ahead of time on what matters

49. 49 –Agreement ahead of time on what matters –Agreement ahead of time on targets

50. 50 Agreement ahead of time on what matters Agreement ahead of time on targets Agreement ahead of time on when action is needed

51. 51 Styles of Dashboards Most are 1 page Charts, graphs, icons, colors...

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55. 55 Dashboard Dials 1.Finance 2.Program objectives and impact 3.Human resources 4.Compliance & risk management 5.Board of Directors and governance 6.Fundraising

56. 56 Starting Points Key Questions: –What is the organization focused on this year? –What are the key drivers that will bring success?

57. 57 Performance IndicatorsTargets Current Indicator Trend Comments Ranges 6 mos ago1 yr ago 1.5 yrs agoCelebrateMonitorAct Now Fundraising New major donors5 or more32 Mesaured against how many we want for the year. Donors who give more than $1,000 5 or more32 Major donors introduced by a board member 5 or more55 Measured against how many we want for the year. Not necessairly an "ask" - may be an introduction. 5 or more32 Donors who gave over $100 last year, repeating this year 56% or more53%60% Dones as a % of total donors who gave $100 in time period last year. > 56%40-55%< 30% Fundraising event revenue - net> $20,000 $ 23,000 $ 20,250 Proportionately to time of year - desired event revenue for 06-07 is $20,000 net > $20,000 $18,000- 20,000 < = $15,000 Finance CelebrateMonitorAct Now Surplus / deficit compared to budgetwithin 3%5%8% Measured as % vs. % of year elapsed w/in 3%3-10%>10% Unrestricted liquidity> 1.00.81.2 Ratio = Current assets (Cash & Investments + Accounts Receivable - Restricted cash) / current liabilities > 1.01< 1.0 Unrestricted contributions (funding diversity) 20% or more22%19% % of individual, corporate & other contributed support to total revenue (excludes foundations) >= 20%10-20%< 10% Human Resources CelebrateMonitorAct Now Staff retention80%100% % of staff with at least 1 year over total staff 80%70%60% Compensation study7-FebNot DoneN/A next steps by 2/07 Feb-07 Before Feb-07 After Feb-07 Board Governance CelebrateMonitorAct Now Attendance at board meetings90%100% % of board at last 4 meetings 90%80%70% New nominees meeting criteria80%75%N/A % of new nominees meeting at least 6 of 9 established criteria 80%70%60% Focus on strategy and generative issues75%80%60% % of meeting time during last 2 meetings spent on these issues 75%60%< 50% Programs CelebrateMonitorAct Now # of outreach presentations35 37Count each session regardless of topic 35< 3020 Program Y Activity500420390 Based on previous years' numbers and the strong emphasis on increasing #s 500375-500<= 375 Program X Activity506052 Based on previous years' numbers with some anticipated growth built in. 50< 4535 Average client satifisfaction4.84.94.8 Out of 1-5 scale. Don't have mechanism in place for averaging all evals. Need to work on consistency between program areas. 4.84.3 - 4.0< 4.0

58. 58 Library of Possible Metrics www.compasspoint.org Click on Resources

59. 59 OTHER BUDGETING TECHNIQUES Budgeting

60. 60 Avoiding Budget Disasters Contingency Planning Identify key revenue drivers and expense assumptions Rate the stability/volatility/risk of each For high risk: Can we reduce it? What if it is eliminated? Rolling Budgeting On a quarterly basis: Review current budget and assumptions Always have a 4 quarter budget Easier for grant funding Keeps budget front and center

61. 61 Your Questions

62. 62 Recap Estimate your costs, know your expenses Have a plan to bridge the gap and monitor progress over time Agree ahead of time on what matters, know when action is needed Build your budget with context and goals

63. 63 YWCA FLM: Discussion Site http://ywcaflm.ning.com/

64. 64 Next Webinar: September 22 Revenue Strategy Finding the “right revenue” for your association Tools and questions for analyzing revenue streams

65. 65 Steve Zimmerman Spectrum Nonprofit Services www.spectrumnonprofit.com stevez@spectrumnonprofit.com 414-727-1029