1. John F.X. Prior, LCSW, ACSWProgram ImprovementTeam LeaderHarris County Protective Services for Children & AdultsGrantWriters Network of Greater HoustonJune 12, 2013
2. What is a Budget?A numerical expression of an organization’sdreams that serves as a guide or measureof acceptable financial performance.
3. Benefits of a Budget Establishes goals to be achieved Identifies work to be done Projects resources that will be needed to get workdone Establishes timetables and deadlines Assigns individuals responsible for work Provides a tool to control spending Serves as a basis for evaluation
4. Ways to Use a Budget Track Income & Expenses Agency, projects, departments, or programs Plan Capital Additions Track Investment Income Monitor Cash Flow Plan Fundraising events Manage Income Generating Activities Provide Personnel Projections
5. Advantages Enhances likelihood that organization will be financiallysuccessful Tool that translate abstract goals into determinableinformation; stipulates performance goals Budgeting process leads organization to look at itself, setpriorities, and to narrow its choices Facilitates coordination and cooperation betweenvarious programs and financial department Periodic budget comparison to actual performance canidentify problems and allow time for a response tochanging conditions Measures financial performance in relation toexpectations.
6. Disadvantages Tendency to emphasize cost control Presence of controls may stifle creativity Budget based on historical data only can fail tokeep up with changing circumstances Budgets completed by only financial personnelcan result in a plan without adequate staff input Not easy to implement and may requireenthusiasm among management staff to beaccepted as useful
7. Roles of Staff to Create aBudget Program Staff knowledgeable about theProject (Content Experts) Agency Accountant, Treasurer, or ChiefFinancial Officer IF NOT: Someone knowledgeable about the project& organization Person who regularly handles finance
8. Budget Components INCOME Donations & Memberships Service Delivery Fees Grants and Contracts Investment Income
10. Annual Policy Decisions Speculative Income Changes in Service Fees Income that is expected but not yet committed (pending grants,pledges, income from new programs/services, fundraising) Risk Assessment: Are there funding sources that are at risk of reductionor elimination Cost Increases Anticipated increases to salaries, wages, or operating expenses Include increases for contracted services Cost of Generating Future Income: Costs associated in seeking newfunding sources (proposal writing, fundraising campaigns, andfundraising events)
11. Estimating Projected Income Project Grants or Contract Income Actual income and estimates from funding sources Funding Source Payment Schedules Status of negotiations for new contracts or grants Ongoing or Special Fundraising Campaigns Past year’s experience Current pledge collection rates Net income from fundraising events Economy Fees and Services Past year’s experience Adjustments to fee amounts Projected service levels or caseloads
12. Personnel Budgeting Typically the largest portion of a budget for ahuman service organization (60% - 85%) Identify all positions to be budgeted, full andpart-time employees For each position, identify Hourly Rate, Total number of Work hours for each position, and Total Wages Account for Salary Increases Budget for Overtime on a separate line item Calculate Overtime at one and one-half of hourly rateof pay (1.5)
13. Projecting Fringe Benefits Standard types of costs associated with havingemployees Social Security (FICA); 7.65% Medical/Health Insurance Unemployment Insurance Workers Compensation Retirement Calculate at: A percentage of total Wages and Salaries, or Based on Actual Costs
14. Operating Budgets Identify Projected Cost Evaluate trends for past costs by reviewing previous budgets Consider Rate of Inflation Contact vendors or providers and ask for estimates Identify Changes in Usage or Volume Increases in staff size, and impact on use of facilities, supplies,travel, training, etc. Increases in Program Costs resulting from increased programactivities Decreases due to lower utilization of programs due to reducedstaffing, funding, due to changes in program activities. Timing: Estimate when costs will be incurred. Large one timeexpenses can create cash flow problems. Consider lump sumpayments vs. smaller periodic payments.
15. Budget Narrative Includes detailed calculations withestimation methods, quantities, unit costs,and other similar qualitative detail. Discusses necessity, reasonableness, andallocation of costs.
16. Functional Expenses Indirect Costs Costs not readily identified with a particular aspect oforganizational operation (i.e.: administration,fundraising, etc.) Allocation Methods Percentage share of the total budget or total salarybudget Per unit cost of an activity Use of Space
17. Functional Expenses Functional Expenses Administrative and Operational Costs that support morethan one function Costs are not directly related to specific program activities Using Functional Expenses helps accurately reflecttrue costs of program activities Allocating administrative and operational costs mayincrease reimbursement from funding sources Functional Categories Management & Administration Fundraising Programs
18. Budgeting Do’s Budget for the life of the grant Allowable costs Indirect Cost Rate Agreement Cost of living increases Address matching requirements Focus on sustainability