19 September Day 2: Budgeting Essential for Success and Sustainability 1. Day 2: Budgeting - Essential for Success and Sustainability

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1 FY2019 CDVSA All Grantee Meeting Victim Services, Battering Intervention & Prevention Programming September 18-20, 2018 Day 2: Budgeting - Essential for Success and Sustainability Day 2: Budgeting - Essential for Success and Sustainability Learning Objectives After completing this session, you should be able to: Explain the budget planning process. Create an organization budget with narrative. Describe the differences between restricted and unrestricted funds. Identify key elements and line items of a budget spreadsheet. Examine a cash flow statement. Identify items to include cash flow projections. Describe the financial management roles and responsibilities of the board, committees, and staff members. Describe the value of internal and external controls. Discuss best practices for internal financial controls, including policies and procedures. Describe external controls including audit, IRS Form 990, and Grant Requirements. 5 2 Day 2: Budgeting -- Essential for Success and Sustainability Sustainability 1

2 The Budget Development Process The Budget Development Process 4 Where Do We Start? Build the Budget 5 Good Budgetary Practices Be realistic. Use income-based budgeting. Estimate income on the low side. Estimate expenses on the high side. 6 Sustainability 2

3 Steps for Estimating Income Step 1: List all actual figures or estimates for what you can expect from your known funding sources. 7 Steps for Estimating Income Step 2: If your organization fundraises, estimate the amount you'll raise in the next fiscal year. 8 Steps for Estimating Income Step 3: If you charge fees or sell services, estimate the amount you'll take in from these activities. 9 Sustainability 3

4 Steps for Estimating Income Step 4: If you solicit members who pay yearly dues or fees, estimate the amount that membership will yield. 10 Steps for Estimating Income Step 5: If you sell items, estimate what these sales will bring in for your organization. 11 Steps for Estimating Income Step 6: If you sublet or rent space to others, record the estimate of what this will bring in for your organization. 12 Sustainability 4

5 Steps for Estimating Income Step 7: If you have any income from investments, estimate what you'll realize from them. 13 Steps for Estimating Income Step 8: List and estimate the amounts from any other sources that are expected to bring in some income over the coming fiscal year. 14 Steps for Estimating Income Step 9: Add up all the income items you have listed. 15 Sustainability 5

6 Budget: Income Narratives Restricted Unrestricted 16 Steps for Estimating Expenses Develop ways of estimating your expenses. 17 Steps for Estimating Expenses List the estimated yearly expense totals of the absolute necessities of the organization. 18 Sustainability 6

7 Steps for Estimating Expenses List the estimated expenses for things you'll need to actually conduct the activities of the organization. 19 Steps for Estimating Expenses List estimated expenses for anything else the organization is obligated to pay or can't do without. 20 Steps for Estimating Expenses List estimated expenses for things that you aren't sure you can afford but would like to do. 21 Sustainability 7

8 Steps for Estimating Expenses 22 Cost Estimates Utilization of Volunteers Task selection. Recruiting. Screening. Onboarding. Training. Equipment and resources. Thinkstock 23 Cost Estimates Utilization of Volunteers Office space. Office supplies. General management. Evaluations. Recognition. Exit interviews. Thinkstock 24 Sustainability 8

9 Budget: Expense Narratives 25 Filling Out the Budget Spreadsheet Funding Source (Top) Expenses (Left Side) Enter your figures into a spreadsheet. 26 Filling Out the Budget Spreadsheet Compare your total expenses to your total income. 27 Sustainability 9

10 Filling Out the Budget Spreadsheet For Balanced Budgets 28 Filling Out the Budget Spreadsheet For Budget Surpluses 29 Filling Out the Budget Spreadsheet For Budget Deficits 30 Sustainability 10

11 Budget Cutting 31 Final Budget Final! 32 Final Budget Final! Funding gaps. Closing gaps. Tracking money. 33 Sustainability 11

12 Changes to the Budget 34 Additional Budget Concepts: In-Kind Contributions 35 Additional Budget Concepts: Direct vs. Indirect Costs 36 Sustainability 12

13 Additional Budget Concepts: Depreciation 37 Additional Budget Concepts: Building Reserves 38 Cost Estimates Task selection. Recruiting. Screening. Onboarding. Training. Equipment and resources. Office space. Office supplies. General management. Evaluations. Recognition. Exit interviews. Both Photos Thinkstock 39 Sustainability 13

14 Cash Flow The money hasn't been released to the funder yet. The funds are simply late. The funding is still in process. You're on a payment schedule. You applied for payment late. You re awaiting payment for services already performed. You re waiting for revenues from a planned event. You re waiting for a fundraising appeal. 40 Cash Flow Projections Review prior/current financials. Create a spreadsheet. Find out projected cash. 41 Addressing Cash Flow Problems Create a cash reserve account. Set priorities of what is purchased or paid when cash flow is low and what can be deferred. Set up lines of credit with your bank and/or suppliers. Obtain a credit card for emergencies. 42 Sustainability 14

15 Monitoring: Who Should Review Program Managers Executive Director Board of Directors 43 Monitoring: Who Should Review Program Managers 44 Monitoring: Who Should Review Executive Director 45 Sustainability 15

16 Monitoring: Who Should Review Board of Directors 46 Governance Shutterstock 47 Governance Committee Roles Finance Audit 48 Sustainability 16

17 Governance Board Roles elearning Art 49 Governance Board Roles elearning Art 50 Governance Board Roles Shutterstock 51 Sustainability 17

18 Governance Individual Roles elearning Art 52 Governance Individual Roles elearning Art 53 Internal Controls 54 Sustainability 18

19 Items That Internal Controls Address 55 Items That Internal Controls Address Invoices Revenue Recognition Cash Receipts Deposits Revenue And Accounts Receivable Items That Internal Controls Address Expenses And Accounts Payable Payroll Timesheets Payroll Changes Purchases Invoice Approval and Processing Cash Disbursements Petty Cash Employee Expense Reimbursements Travel Expenses Credit Cards 57 Sustainability 19

20 Items That Internal Controls Address Cash Management and Investments Capital Equipment Asset Management 58 Key Financial Policies Document Retention Policy 59 Key Financial Policies Operating Reserves Policy 60 Sustainability 20

21 Key Financial Policies Operating Reserves Policy Purpose. Definitions. Assignments. Responsibilities. Specific policies. You can find sample policies at operating reserves policy examples 61 Key Financial Policies Conflict of Interest Policy 62 Key Financial Policies Whistleblower Policy Sustainability 21

22 Key Financial Policies Gift Acceptance Policy How do we handle this? 64 Key Financial Policies Variance Policy 65 External Controls 2 Sustainability 22

23 External Controls GAAP Generally Accepted Accounting Principles 67 External Controls FASB Financial Accounting Standards Board Recognize contributions in the period they are received at their fair market value. Provide a statement of financial position, a statement of activities, and statements of cash flow. Classify revenues, expenses, gains, and losses according to donor imposed restrictions and grouped into two classifications: restricted and unrestricted. 68 Audit vs. Financial Review 69 Sustainability 23

24 Audit vs. Financial Review Cover letter. Financial statements. Comparison of previous fiscal years (optional). Notes on the financial statements. Results of an investigation on whether the money is being spent exactly as specified in grants and contracts. 70 Audit vs. Financial Review Funders requests. Board reassurance on financial information accuracy. Executive director and finance staff confirmation of financial picture. Organization s new phase in maturity. 71 Audit vs. Financial Review 72 Sustainability 24

25 The Role of the IRS 73 Other IRS Tax Information 74 Grant Requirements 75 Sustainability 25

26 Grant Requirements Citation: uide.pdf 76 Sustainability -- Recommendations Build relationships with corporations to encourage funding for salaries and operating expenses. Start a conversation with corporate representatives by inviting them to visit and learn about your program. Provide tours and relay success stories to personalize your work and bring it to life. Never underestimate the value of volunteers; they may have "day jobs" working with corporations that can supplement the volunteers' contributions with financial support. When approaching potential funders or applying for grants, be prepared to document the need in your community, your program's ability to meet the need, and the ultimate benefit your program brings to the community atlarge. Leverage the resources that other organizations can provide. Differentiate the services provided by the collaborating organizations to forestall concern about duplication or overlap Sustainability -- Challenges To Consider How can the program identify potential sources of funding for salaries and operating expenses? What kind of outreach is needed to solicit monetary support for the program? Are there professional grant writers in the area who may be willing to volunteer their services? 5 78 Sustainability 26

27 Review Budgeting - Essential for Success and Sustainability Objectives After completing this session you should be able to: Explain the budget planning process. Create an organization budget with narrative. Describe the differences between restricted and unrestricted funds. Identify key elements and line items of a budget spreadsheet. Examine a cash flow statement. Identify items to include cash flow projections. Describe the financial management roles and responsibilities of the board, committees, and staff members. Describe the value of internal and external controls. Discuss best practices for internal financial controls, including policies and procedures. Describe external controls including audit, IRS Form 990, and Grant Requirements. 79 End of Budgeting Essential for Success and Sustainability Questions? Comments? End of OVC-TTAC Training Shutterstock 5 81 Sustainability 27