John F.X. Prior, LCSW, ACSWProgram Improvement Team LeaderHarris County Protective Services for Children & Adults

Grant Writers Network of Greater HoustonJune 12, 2013

What is a Budget?

A numerical expression of an organization’s dreams that serves

as a guide or measure of acceptable financial performance.

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

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

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.

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

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

Budget Components

INCOME Donations & Memberships Service Delivery Fees Grants and Contracts Investment Income

Budget Components

EXPENSES Personnel Fringe Benefits Travel Equipment Supplies Contractual Construction Indirect Charges

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)

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

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)

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

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.

Budget Narrative

Includes detailed calculations with estimation methods, quantities, unit costs, and other similar qualitative detail.

Discusses necessity, reasonableness, and allocation of costs.

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

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

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