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Mano 7 7-11 budgeting basics

Mano 7 7-11 budgeting basics






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    Mano 7 7-11 budgeting basics Mano 7 7-11 budgeting basics Presentation Transcript

    • Budgeting Basics
      Maryland Association of Nonprofit Organizations
      July 7, 2011
    • About the Instructor
      Ernie Paszkiewicz, CPA
      Gross, Mendelsohn & Associates
      36 S. Charles Street, 18th Floor
      Baltimore, MD 21201
      office: 410.685.5512 | direct: 410.900.1339
      Feel free to contact me anytime with questions.
    • Goals for the Session
      • Have fun
      • Have interaction
      • No tests or practice sets
      • Customize the session to answer your specific questions while discussing some common issues
    • Budgeting Basics
      • Budgeting doesn’t start with numbers or spreadsheets
      • How do you manage the organization? (balance sheet and income statement)
      • What are your external needs?
      • What are your in-house capabilities?
      • Simple or complex budgets
    • Major Considerations
      • Cash or accrual basis
      • GAAP or non-GAAP items
      • Level of detail … account, programs, grant-specific
      • Fixed and variable costs
      • Compliance issues
    • Cash vs. Accrual
      • Many organizations and people run organizations on a cash basis and it works fine for them
      • Accrual basis and its specific oddities are more for external reporting, but some people also like it for internal reporting
    • Cash vs. Accrual
      • People without a strong financial background understand cash basis better
      • Trying to force them to manage on accrual basis can actually be a mistake since it can confuse them
      • Major difference is concept of receivables and payables
      • What’s your level of knowledge of cash vs. accrual?
    • GAAP vs. Non-GAAP
      • Contributions vs. exchanges
      • When to record pledges
      • Restrictions placed by donors
      • Depreciation of fixed assets
      • In-kind contributions – goods and services
      • Dues
    • GAAP vs. Non-GAAP
      • Program vs. management and general vs. fundraising (SOP 98-2)
      • What is permanently restricted asset vs. an “endowment”?
      • Income vs. agency transactions
      • Incurred vs. encumbered
    • Level of Detail
      • Program vs. management and general vs. fundraising again
      • Within program how many different programs?
      • Within a program how many different funding sources or individual grants?
      • Natural classification (salaries, rent, etc.)
    • Fixed and Variable Costs
      • Fixed costs don’t decrease if a program goes away
      • Variable costs increase or decrease with number of participants
      • Some costs are a combination (i.e., one additional teacher for every ten new kids)
    • Fixed and Variable Costs
      • Very important when budgets are tight and you evaluate cuts in programs
      • Funding of the costs (use of restricted funds for unrestricted expenses)
    • Compliance Issues
      • Must make sure costs are allocated to proper grants
      • Must make sure costs are allowable under grants, particularly with federal fundings
      • Actual allocations must be on real level of effort, not budgeted level of effort
      • What is tolerance for over/under budget situations, and can budgets be modified?
    • Mechanical Aspects of Budgets
      • Can your accounting package be used to its fullest to budget?
      • Do you opt for Excel or other spreadsheets for budgeting?
      • What are some tricks to spreadsheet formats?
      • Monthly vs. quarterly
    • Mechanical Aspects of Budgets
      • Importing from accounting systems
      • Segregating input areas from calculation areas
      • Even vs. seasonal estimates
      • Over/under budget at a point in time vs. remaining budget approach
    • Mechanical Aspects of Budgets
      • Budget to actual comparisons
      • A budget is a guide, so what about unbudgeted items? When do you change the budget?
      • Use the prior actual as a starting point and modify for changes
    • Managing Cash Flow
      • You might budget income and expense, but need to watch the cash flow
      • Property purchases, debt payments, receivable collections, deferring payables
      • What’s a good target cash reserve level? Will funders think you aren’t worthy if you have too much cash? The penalty for fiscal responsibility.
    • Conclusion
      In the words of the King of Rock and Roll ………
      Thank you, thank you very much!