This document provides guidance on developing an organizational budget. It defines a budget as a numerical expression of goals that measures financial performance. Benefits include establishing goals, identifying work, projecting resources, and controlling spending. Budgets can track income/expenses, plan capital additions, monitor cash flow, and provide personnel projections. Developing a budget requires input from content experts, accountants, and those who handle finances. Key components include income from various sources and expenses like personnel, benefits, supplies, and indirect charges. The document outlines steps for estimating income and expenses to create a comprehensive budget.

1. John F.X. Prior, LCSW, ACSW
Program ImprovementTeam Leader
Harris County Protective Services for Children & Adults
GrantWriters Network of Greater Houston
June 12, 2013

2. What is a Budget?
A numerical expression of an organization’s
dreams that serves as a guide or measure
of 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 work
done
 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 financially
successful
 Tool that translate abstract goals into determinable
information; stipulates performance goals
 Budgeting process leads organization to look at itself, set
priorities, and to narrow its choices
 Facilitates coordination and cooperation between
various programs and financial department
 Periodic budget comparison to actual performance can
identify problems and allow time for a response to
changing conditions
 Measures financial performance in relation to
expectations.

6. Disadvantages
 Tendency to emphasize cost control
 Presence of controls may stifle creativity
 Budget based on historical data only can fail to
keep up with changing circumstances
 Budgets completed by only financial personnel
can result in a plan without adequate staff input
 Not easy to implement and may require
enthusiasm among management staff to be
accepted as useful

7. Roles of Staff to Create a
Budget
 Program Staff knowledgeable about the
Project (Content Experts)
 Agency Accountant, Treasurer, or Chief
Financial 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

9. Budget Components
 EXPENSES
 Personnel
 Fringe Benefits
 Travel
 Equipment
 Supplies
 Contractual
 Construction
 Indirect Charges

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 reduction
or 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 new
funding sources (proposal writing, fundraising campaigns, and
fundraising 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 a
human service organization (60% - 85%)
 Identify all positions to be budgeted, full and
part-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 rate
of pay (1.5)

13. Projecting Fringe Benefits
 Standard types of costs associated with having
employees
 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 program
activities
 Decreases due to lower utilization of programs due to reduced
staffing, funding, due to changes in program activities.
 Timing: Estimate when costs will be incurred. Large one time
expenses can create cash flow problems. Consider lump sum
payments vs. smaller periodic payments.

15. Budget Narrative
 Includes detailed calculations with
estimation methods, quantities, unit costs,
and other similar qualitative detail.
 Discusses necessity, reasonableness, and
allocation of costs.

16. Functional Expenses
 Indirect Costs
 Costs not readily identified with a particular aspect of
organizational operation (i.e.: administration,
fundraising, etc.)
 Allocation Methods
 Percentage share of the total budget or total salary
budget
 Per unit cost of an activity
 Use of Space

17. Functional Expenses
 Functional Expenses
 Administrative and Operational Costs that support more
than one function
 Costs are not directly related to specific program activities
 Using Functional Expenses helps accurately reflect
true costs of program activities
 Allocating administrative and operational costs may
increase 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