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Mano 7 7-11 budgeting basics
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Mano 7 7-11 budgeting basics

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Transcript

  • 1. Budgeting Basics
    Maryland Association of Nonprofit Organizations
    July 7, 2011
  • 2. About the Instructor
    Ernie Paszkiewicz, CPA
    Gross, Mendelsohn & Associates
    36 S. Charles Street, 18th Floor
    Baltimore, MD 21201
    epaszkiewicz@gma-cpa.com
    office: 410.685.5512 | direct: 410.900.1339
    www.gma-cpa.com
    Feel free to contact me anytime with questions.
  • 3. Goals for the Session
    • Have fun
    • 4. Have interaction
    • 5. No tests or practice sets
    • 6. Customize the session to answer your specific questions while discussing some common issues
  • Budgeting Basics
    • Budgeting doesn’t start with numbers or spreadsheets
    • 7. How do you manage the organization? (balance sheet and income statement)
    • 8. What are your external needs?
    • 9. What are your in-house capabilities?
    • 10. Simple or complex budgets
  • Major Considerations
    • Cash or accrual basis
    • 11. GAAP or non-GAAP items
    • 12. Level of detail … account, programs, grant-specific
    • 13. Fixed and variable costs
    • 14. Compliance issues
  • Cash vs. Accrual
    • Many organizations and people run organizations on a cash basis and it works fine for them
    • 15. 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
    • 16. Trying to force them to manage on accrual basis can actually be a mistake since it can confuse them
    • 17. Major difference is concept of receivables and payables
    • 18. What’s your level of knowledge of cash vs. accrual?
  • GAAP vs. Non-GAAP
    • Contributions vs. exchanges
    • 19. When to record pledges
    • 20. Restrictions placed by donors
    • 21. Depreciation of fixed assets
    • 22. In-kind contributions – goods and services
    • 23. Dues
  • GAAP vs. Non-GAAP
    • Program vs. management and general vs. fundraising (SOP 98-2)
    • 24. What is permanently restricted asset vs. an “endowment”?
    • 25. Income vs. agency transactions
    • 26. Incurred vs. encumbered
  • Level of Detail
    • Program vs. management and general vs. fundraising again
    • 27. Within program how many different programs?
    • 28. Within a program how many different funding sources or individual grants?
    • 29. Natural classification (salaries, rent, etc.)
  • Fixed and Variable Costs
    • Fixed costs don’t decrease if a program goes away
    • 30. Variable costs increase or decrease with number of participants
    • 31. 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
    • 32. Funding of the costs (use of restricted funds for unrestricted expenses)
  • Compliance Issues
    • Must make sure costs are allocated to proper grants
    • 33. Must make sure costs are allowable under grants, particularly with federal fundings
    • 34. Actual allocations must be on real level of effort, not budgeted level of effort
    • 35. 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?
    • 36. Do you opt for Excel or other spreadsheets for budgeting?
    • 37. What are some tricks to spreadsheet formats?
    • 38. Monthly vs. quarterly
  • Mechanical Aspects of Budgets
    • Importing from accounting systems
    • 39. Segregating input areas from calculation areas
    • 40. Even vs. seasonal estimates
    • 41. Over/under budget at a point in time vs. remaining budget approach
  • Mechanical Aspects of Budgets
    • Budget to actual comparisons
    • 42. A budget is a guide, so what about unbudgeted items? When do you change the budget?
    • 43. 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
    • 44. Property purchases, debt payments, receivable collections, deferring payables
    • 45. 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!