Budgeting and the preparation of financial projections are critical activities for any given nonprofit organization. Briefly explain at least three of the problems that may be faced during the preparation of the budget. Solution Answer : Budgeting plays an important role for Non profit organization, soa s to achieve the cost reduction for attaining the desired goals. Following problems may arise ; 1) Inaccurate past data Budgeting is generally caried out on the basis of past data so that general level of expenses as opposed to inflow is clearly understood. Apart fromm any specific grants or expenses , expenses & earnings remain at similar levels.But inaccurate fnancial records often mislead the fiscal picture therby distorting the true financial picture .This often leads to inaccurate budgeting. 2) lack of finacial background It is one of problems faced by Non profit organizations that it can seldom afford the separate accounts department or even an accountant for that matter. this is beacause of unstable earnings & voluntary working by employees.this may result into very ugly picture thereby landing the clueless members having misleading numbers on their hands. 3)Funding or earnings As the name suggests this type of organization often works without any consideration & survives mostly on grants r donations.This makes it very difficult to plan the future expenditure as the earning side cant be predicted with accuracy at any given point of time..

1. Budgeting and the preparation of financial projections are critical activities for any given
nonprofit organization. Briefly explain at least three of the problems that may be faced during the
preparation of the budget.
Solution
Answer :
Budgeting plays an important role for Non profit organization, soa s to achieve the cost reduction
for attaining the desired goals.
Following problems may arise ;
1) Inaccurate past data
Budgeting is generally caried out on the basis of past data so that general level of expenses as
opposed to inflow is clearly understood. Apart fromm any specific grants or expenses , expenses
& earnings remain at similar levels.But inaccurate fnancial records often mislead the fiscal
picture therby distorting the true financial picture .This often leads to inaccurate budgeting.
2) lack of finacial background
It is one of problems faced by Non profit organizations that it can seldom afford the separate
accounts department or even an accountant for that matter. this is beacause of unstable earnings
& voluntary working by employees.this may result into very ugly picture thereby landing the
clueless members having misleading numbers on their hands.
3)Funding or earnings
As the name suggests this type of organization often works without any consideration & survives
mostly on grants r donations.This makes it very difficult to plan the future expenditure as the
earning side cant be predicted with accuracy at any given point of time.